Manufacturing Accounting Concepts

To explain the difference between the bank balance shown in the cash book of a business and the balance shown in the bank statement.

When the business gives permission to the bank to effect monthly instalments to other firms such as payments for expenses.

Payments made by customers directly into the business bank account.

<p>When the business gives permission to the bank to pay a supplier directly from its bank accounts.</p> Signup and view all the answers

<p>Cheques issued by the business but not yet presented to the bank for payment by the end of the month.</p> Signup and view all the answers

<p>To check the accuracy of the entries in the Sales Ledger and the Purchases Ledger.</p> Signup and view all the answers

<p>Direct Materials (Raw Materials), Direct Labour, Direct Expenses (Royalties)</p> Signup and view all the answers

<p>Indirect Factory wages, depreciation of machinery, factory power, factory rent</p> Signup and view all the answers

<p>Work-in-progress refers to semi-finished products in the production process.</p> Signup and view all the answers

<p>Fixed costs remain the same irrespective of levels of production. Examples include rent and insurance.</p> Signup and view all the answers

<p>Direct costs can be directly traced to the manufacturing system (e.g., Raw Materials, Direct Labour), while indirect costs like factory overheads cannot be directly traced (e.g., factory supervisors wages, factory light and heat).</p> Signup and view all the answers

<p>Allocation attributes each expense to a specific department (e.g., wages to the department where staff is engaged), while apportionment divides an expense between departments according to specific criteria (e.g., floor area, sales, number of employees).</p> Signup and view all the answers

<p>Unpaid amounts that are written off from the trade receivables account and charged as expenses to the Statement of Profit/Loss.</p> Signup and view all the answers

<p>To estimate future doubtful debts and provide for them in the year of doubt, transferring them to the Statement of Profit/Loss.</p> Signup and view all the answers

<p>Specific allowance is based on individual assessment of trade receivables likely to be irrecoverable, while general allowance is calculated as a percentage of the remaining trade receivables.</p> Signup and view all the answers

<p>The prudence concept dictates that future doubtful debts should be provided for to ensure profits are understated rather than overstated, for safety reasons.</p> Signup and view all the answers

<p>Control accounts help to locate errors, make fraud more difficult, and provide quick totals for Trade Receivables and Trade Payables during Trial Balance preparation.</p> Signup and view all the answers

<p>Set-off occurs when the same entity is both a trade receivable and a trade payable, and the difference is paid by the party that owes more, with the smaller amount being written off from both control accounts.</p> Signup and view all the answers