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FINANCIAL STATEMENTS OF MANUFACTURING CONCERN

In this lecture, we will discuss financial statements of manufacturing concern. In manufacturing concern, cost of goods sold statement is also prepared.

Illustration #1

Following trial balance has been extracted from the books of Hassan Manufacturing Concern on June 30, 2002.

Hassan Manufacturing Concern
Trial balance As on June 30, 2002
Particulars	Amount Dr. (Rs.)	Amount Cr. (Rs.)
Raw Material stock Jul. 01, 2001	35,500
Work in process Jul. 01, 2001	42,000
Finished goods stock Jul. 01, 2001	85,000
Raw material purchased	250,000
Wages	180,000
Freight inward	12,000
Plant and machinery	400,000
Office equipment	45,000
Vehicles	200,000
Acc. depreciation Plant		195,200
Acc. depreciation Office equipment		12,195
Acc. depreciation Vehicles		97,600
Factory overheads	125,000
Electricity	80,000
Salaries	140,000
Salesman commission	120,000
Rent	200,000
Insurance	150,000
General Expense	60,000
Bank Charges	8,500
Discounts Allowed	20,000
Carriage outward	35,000
Sales		1,500,000
Trade Debtors	250,000
Trade Creditors		220,000
Bank	165,000
Cash	110,000
Drawings	175,000
Capital July 01, 2001		863,005
Total	2,888,000	2,888,000

Notes:

• Stock on June 30, 2002.
  o Raw Material 42,000
  o Work in Process 56,500
  o Finished Goods 60,000
• 50% of electricity, insurance and salaries are charged to factory and balance to office.
• Depreciation to be charged on Plant & Machinery at 20%, Office Equipment at 10% and Vehicles at 20%on WDV.
• Write off bad debts Rs. 30,000.
• All the wages are direct expense.

Required:

You are required to prepare profit and loss account for the year and balance sheet as on june30, 2002.

Solution

Profit & Loss Account

Hassan Manufacturer Concern
Profit and Loss Account For the Year Ending June 30, 2002
Particulars Note	Amount Rs.
Sales Less: Cost of Goods Sold 1	1,500,000 796,960
Gross Profit Less: Administrative Expenses 2 Less: Selling Expenses 3	703,040 518,761 155,000
Operating Profit	29,279
Less: Bank Charges	8,500
Net Profit Before Tax	20,779

Balance Sheet

Hassan Manufacturer Concern
Profit and Loss Account For the Year Ending June 30, 2002
Particulars	Note	Amount Rs.
Fixed Assets at WDV	4	275,284
Current AssetsCurrent Liabilities	5 6	653,500 (220,000)
Working Capital Total Assets Employed Financed by: Capital Add: Profit for the year Less: Drawings Total Liabilities		433,500 708,784 863,005 20,779 (175,000) 708,784

Notes to the Accounts

Note # 1 Cost of Goods Sold

Stock of Raw Material Jul 01, 2001

35,500 Add. Purchases 250,000 Add. Freight Inward 12,000 297,500 Less: Closing Stock of Raw Material (42,000) Raw Material Consumed 255,500 Direct labor 180,000 Factory Overheads
Factory Overheads 125,000 Electricity (50% of 80,000) 40,000
Salaries (50% of 140,000) 70,000 Insurance (50% of 150,000) 75,000 Plant Depreciation (Note 5) 40,960
350,960 Total Factory Cost 786,460 Add: Work in Process Jul 01, 2001 42,000 Less: Work in Process Jun 30, 2002 (56,500) Cost of Goods Manufactured 771,960 Add: Finished Goods Stock Jul 01, 2001 85,000 Less: Finished Goods Stock Jun 30, 2002 ( (60,000) Cost of Goods Sold 796,960

Note # 2 Administrative Expenses

Salaries (50% of 140,000)

70,000 General Expenses 60,000 Rent 200,000 Insurance (50% of 150,000) 75,000 Discount Allowed 20,000 Bad Debts 30,000 Office Electricity (50% of 80,000) 40,000 Depreciation Vehicles (Note 5) 2 20,480 Depreciation Office Equip. (Note5) 3,281 Administrative Expenses 518,761

Note # 3 Selling Expenses

Salesman Commission

120,000 Carriage Outward 35,000 Selling Expenses 155,000

Note # 4 Fixed Assets at WDV

	Cost	Rate	Opening	For the year	Closing	WDV
Plant & Mach.	400,000	20%	195,200	40,960	236,160	163,840
Vehicles	200,000	20%	97,600	20,480	118,080	81,920
Office Equipment	45,000	10%	12,195	3,281	15,476	29,524
				64,721		275,284

Note # 5 Current Assets

Stock
Raw Material

42,000 Work in Process 56,500 Finished Goods 60,000
158,500 Debtors 250,000 Less: Bad Debts (30,000) Bank 165,000 Cash 110,000 Current Assets 653,500

Note # 6 Current Liabilities

Trade Creditors

220,000

Illustration # 2

Following trial balance has been extracted from the books of Javed Furniture Manufacturers on June 30, 2002.

Javed Furniture Manufacturers
Trial balance As on June 30, 2002
Particulars	Amount Dr. (Rs.)	Amount Cr. (Rs.)
Raw Material stock Jul. 01, 2001	52,500
Work in process Jul. 01, 2001	97,250
Finished goods stock Jul. 01, 2001	33,750
Raw material purchased	925,000
Wages	812,500
Freight inward	8,750
Plant and machinery	700,000
Office equipment	50,000
Acc. depreciation Plant		125,000
Acc. depreciation Office equipment		20,000
General factory overheads	77,500
Office electricity	18,750
Factory power	34,250
Salaries administrative staff	110,000
Salaries sales staff	75,000
Salesman commission	28,750
Rent	30,000
Insurance	10,500
General Admin. Expense	33,500
Bank Charges	5,750
Discounts Allowed	12,000
Carriage outward	14,750
Sales		2,500,000
Trade Debtors	355,750
Trade Creditors		312,500
Bank	142,000
Cash	21,250
Drawings	50,000
Capital July 01, 2001		742,000
Total	3,699,500	3,699,500

Notes:

• Stocks on June 30, 2002
  o Raw Material Rs. 60,000
  o Finished Goods Rs. 100,000
  o Work in Process Rs. 37,500.
• Out of total wages Rs. 450,000 is direct and balance indirect.
• 80% of Rent and Insurance are to be apportioned to factory and balance to administrative office.
• Depreciation to be charged on Machinery at 20% and Office Equipment at 10% on cost.

You are required to prepare profit and loss account for the year and balance sheet as on june30, 2002.

Solution

Javed Furniture Manufacturer
Profit and Loss Account For the Year Ending June 30, 2002
Particulars	Note	Amount Rs.
Sales Less: Cost of Goods Sold	1	2,500,000 2,016,400
Gross Profit Less: Administrative Expenses Less: Selling Expenses	2 3	483,600 175,350 118,500
Operating Profit		189,750
Less: Financial Charges	4	17,750
Net Profit Before Tax		172,000

 

Javed Furniture Manufacturer
Balance sheet For the Year Ending June 30, 2002
Particulars	Note	Amount Rs.
Fixed Assets at WDV	5	460,000
Current Assets Current Liabilities	6 7	716,500 (312,500)
Operating ProfitWorking Capital Total Assets Employed Financed by: Capital Add: Profit for the year Less: Drawings Total Liabilities		404,000 864,000 742,000 172,000 (50,000) 864,000

Working 1 – Cost of Goods Sold

Stock of Raw Material Jul 01, 2001

52,500 Add. Purchases 925,000 Add. Carriage Inward 8,750
986,250 Less: Closing Stock of Raw Material (60,000) Raw Material Consumed 926,250 Direct labor 450,000

Factory Overheads
General Factory Overheads 77,500 Power 34,250 Rent (80% of 30,000) 24,000 Insurance (80% of 10,500) 8,400 Plant dep. On cost (Note 5) 140,000 Indirect Labor 362,500
646,650 Total Factory Cost 2,022,900 Add: Work in Process Jul 01, 2001 97,250 Less: Work in Process Jun 30, 2002 (37,500) Cost of Goods Manufactured 2,082,650 Add: Finished Goods Stock Jul 01, 2001 33,750 Less: Finished Goods Stock Jun 30, 2002 (100,000) Cost of Goods Sold 2,016,400

Working 2 – Administrative Expenses

Administrative Salaries

110,000 Rent (20% of 30,000) 6,000 Insurance (20% of 10,500) 2,100 General Admin Expenses 33,500 Office Electricity 18,750 Depreciation Office Equip. (Note5) 5,000 Administrative Expenses 175,350

Working 3 – Selling Expenses

Salesman’s Salary

75,000 Commission on Sales 28,750 Carriage Outward 14,750 Selling Expenses 118,500

Working 4 – Financial Expenses

Bank Charges

5,750 Discount Allowed 12,000 Financial Expenses 17,750

Working 5 – Fixed Assets at WDV

	Cost	Rate	Opening	For the year	closing	WDV
Plant and Mach.	700,000	20%	125,000	140,000	265,000	435,000
Office equipment.	50,000	10%	20,000	5,000	25,000	25,000
				145,000		460,000

Working 6 – Current Assets

Stock
Raw Material

60,000 Work in Process 37,500 Finished Goods 100,000 Debtors 355,750 Bank 142,000 Cash 21,250 Current Assets 716,500

Working 7 – Current Liabilities

Creditors

312,500

Related Content: MGT101 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Financial Accounting

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