2. Accounting for Manufacturing Activities
Chapter 28
Accounting for Manufacturing Activities
Section 2: Completing the
Accounting Cycle
Section Objectives
In section 2 of chapter 28, we will complete the accounting cycle for a manufacturer--
Prepare a worksheet for a manufacturing business.
Record the end-of-period adjusting entries for a manufacturing business.
Record closing entries for a manufacturing business.
Record reversing entries for a manufacturing business.

3. Objective 5. Prepare A Worksheet For A Manufacturing Business.
The fifth objective of this chapter is to prepare a worksheet for a manufacturing business.

4. The Accounting Cycle for a Manufacturing Business
The steps in the accounting cycle do not change for a manufacturing business.
The worksheet must be constructed to facilitate preparation of the cost of goods manufactured statement.
The worksheet has two new columns:
Cost of Goods Manufactured Debit column
Cost of Goods Manufactured Credit column
The steps in the accounting cycle do not change for a manufacturing business. However, in the worksheet, two new columns are added. We add a cost of goods manufactured debt and credit column.

5. The worksheet of a manufacturing business contains several new accounts:
Raw Materials Inventory
Work in Process Inventory
Finished Goods Inventory
Direct Labor
Various Manufacturing Overhead Accounts
Manufacturing Summary
The worksheet of a manufacturing business contains several new accounts. Those new accounts include:
Raw materials inventory
Work in process inventory
Finished goods inventory
Direct labor
Various manufacturing overhead accounts; and
Manufacturing summary

6. It is similar to the Income Summary account.
QUESTION:
What is the Manufacturing Summary account?
The Manufacturing Summary account is the account to which all items on the statement of cost of goods manufactured are closed.
ANSWER:
What is the manufacturing summary account? The manufacturing summary account is the account to which all items on the statement of cost of goods manufactured are close. It is very similar to the income summary account used in sole proprietorship accounting.
It is similar to the Income Summary account.

7. Adjusting Inventory Accounts
Raw Materials
Work in Process
Finished Goods
DR Manufacturing Summary
CR Raw Materials Inventory for beginning inventory amount
DR Manufacturing Summary
CR Work in Process Inventory for beginning inventory amount
5. DR Income Summary
CR Finished Goods Inventory for beginning inventory amount
DR Raw Materials Inventory
CR Manufacturing Summary for ending inventory amount
DR Work in Process Inventory
CR Manufacturing Summary for ending inventory amount
6. DR Finished Goods Inventory
CR Income Summary for ending inventory amount
In this slide, we examine the various adjusting journal entries made for the raw materials, work in process and finished goods inventory accounts for both beginning and ending inventory.

8. Adjusting Entries on the Worksheet
Inventory
Uncollectible accounts
Expired insurance
Supplies on hand
Depreciation
Accrued salaries
Payroll taxes on accrued payroll
Income tax payable
As with sole proprietorship accounting, we also make adjusting journal entries on the manufacturing worksheet for:
Uncollectible accounts
Expired insurance
Supplies on hand
Depreciation
Accrued salaries
Payroll taxes, and
Income taxes

9. Preparing Financial Statements From the Worksheet
Three sets of columns exist for the financial statements:
Cost of Goods Manufactured
Balance Sheet
Income Statement
When preparing the financial statement for a manufacturing business from a worksheet, we use three sets of columns. Those columns are the Cost of Goods Manufactured, the Balance Sheet and the Income Statement.

10. Objective 6.
Record The End-of-period Adjusting Entries For A Manufacturing Business.
The sixth objective of this chapter is to record the end-of-period adjusting entries for a manufacturing business.

11. Adjusting Entries for a Manufacturing Business
2007
Dec. 31
Manufacturing Summary ,000.00
Raw Materials Inventory ,000.00
(Adjustment a)
Raw Materials Inventory ,500.00
Manufacturing Summary ,500.00
(Adjustment b)
Manufacturing Summary ,900.00
Work in Process Inventory ,900.00
(Adjustment c)
Work in Process Inventory ,500.00
Manufacturing Summary ,500.00
(Adjustment d)
Income Summary ,500.00
Finished Goods Inventory ,500.00
(Adjustment e)
Finished Goods Inventory ,000.00
Income Summary ,000.00
(Adjustment f) 31
In this slide we make the adjusting entries for raw materials, work in process, and finished goods inventory for a manufacturing business. Notice the inventory accounts are credited for the beginning inventory, and credited for the ending inventory.
Inventory accounts are credited for beginning inventory and debited for ending inventory.

12. Adjusting Entries for a Manufacturing Business
Record uncollectible accounts expense
2007
Dec. 31
Administrative Expense (Control) ,240.00
Allowance for Doubtful Accounts ,240.00
(Adjustment g)
Insurance—Factory ,900.00
Administrative Expense (Control)
(Adjustment h)
Supplies on Hand
Indirect Materials and Supplies
(Adjustment i)
Depreciation—Factory Building ,500.00
Depreciation—Factory Equipment ,000.00
(Adjustment j)
Administrative Expense (Control) ,000.00
Accumulated Depr.—Factory Building ,500.00 31
Prepaid Insurance ,000.00
Accumulated Depr.—Factory Equipment ,000.00
Accumulated Depr.—Office Equipment ,000.00
Record expired insurance amount
Record supplies on hand
In this slide, entries are shown to record uncollectible accounts expense, expired insurance, supplies expense and depreciation. These entries are similar to what are recorded in sole proprietorship accounting.
Record depreciation expense

13. Adjusting Entries for a Manufacturing Business
2007
Dec. 31
Direct Labor ,000.00
Salaries and Wages Payable ,500.00
(Adjustment k)
Payroll Taxes—Factory
Social Security Tax Payable
(Adjustment l)
Income Tax Expense ,025.00
Income Tax Payable ,025.00
(Adjustment m) 31
Indirect Labor
Medicare Tax Payable
Record accrued wages
Record payroll taxes on accrued wages
In this slide adjusting journal entries are made for accrued wages, payroll taxes on accrued wages, and estimated income tax expense.
Record estimated income tax

14. Objective 7. Record Closing Entries For A Manufacturing Business.
The seventh objective of this chapter is to record closing entries for a manufacturing business.

15. Closing Entries Close accounts to Manufacturing Summary.
Close revenue and expense accounts to Income Summary.
Close Manufacturing Summary to Income Summary.
Close Income Summary to Retained Earnings.
There are four closing entries need for a manufacturing business. First, accounts are closed to the manufacturing summary. Second, revenue and expense accounts are closed to income summary. Third, the manufacturing summary account is closed to income summary. Finally, the income summary is closed to retained earnings.

16. Objective 8. Record Reversing Entries For A Manufacturing Business.
The eight objective of this chapter is to record reversing entries for a manufacturing business.

17. Reversing Entries
Reversing entries may be made for adjustments for accruals.
Reversing entries are also made for expenditures which were initially debited to expense accounts.
Reversing entries are optional.
Reversing entries for a manufacturing business are very similar to sole proprietorship accounting. First, reversing entries are optional. Second, reversing entries may be made of accruals and for expenditures which were initially debited to an expense account.

18. SECTION R E V I W
Complete the following sentences:
The worksheet for a manufacturing business contains Debit and Credit columns for _________________________.
Cost of Goods Manufactured
All the accounts that appear on the statement of cost of goods manufactured are closed to the _____________________ account.
Manufacturing Summary
Let’s review;
When adjusting the finished goods inventory, debit Finished Goods Inventory and credit _______________ for the ending inventory amount.
Income Summary

19. Complete the following sentences: Cost of Goods ManufacturedV I W
SECTION
Complete the following sentences:
The worksheet for a manufacturing business contains _____ sets of columns for financial statements.
three
The Manufacturing Summary account is closed to the _______________ account.
Income Summary
On the worksheet for a manufacturing business, the inventory accounts appear in the _________________________ section.
Cost of Goods Manufactured

20. College Accounting, 11th Edition
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College Accounting, 11th Edition
Price • Haddock • Brock