MODULE 2

• manufacturer's product's flow

  1. Manufacturers purchase raw materials.
  2. Manufacturers pay for labor and overhead to work on those raw materials. After they go into production, raw materials become work-in-process inventory.
  3. When completed, work-in-process inventory becomes finished goods.
  4. When the goods are sold, they go to the customer.
• The ‘Raw Materials’ account is increased for purchases and decreased for materials issued or used in the production.
• first step in the manufacturing process is purchasing of inputs (raw materials).
• Once the production has started, all the raw materials, labor and overhead costs will be charged to the ‘Work-in-Process Inventory’ account
• Once the goods are completed, it will be transferred to the ‘Finished Goods Inventory’ account.
• once the goods are sold it will be charged to the ‘Cost of Goods Sold’ account. This
• manufacturer's cost flow

  1. raw materials, labor, overhead
  2. work in process
  3. finished goods
  4. cost of goods sold
• Raw Materials Inventory. This account shows the raw materials available for use in the manufacturing process. This account include both direct and indirect materials.
• Work In Process Inventory. This account represents the costs of partially completed goods on which production activities have started but not yet completed as of a certain period.
• Finished Goods Inventory. This account summarizes the costs of completed jobs stored in the warehouse ready for delivery to customers.
• This statement summarizes the total manufacturing costs charged to the process, the amount of goods completed for the period as well the amount of goods sold.

  statement of cost of goods manufactured and sold