Question

The following details were extracted from the books of Konongo Industries Limited a manufacturer of soap for the year ended 31^st March, 1999

                                                                                                              GH¢

Opening Stocks: Raw materials                                                          785,000

                            Work-In-Progress (WIP)                                        K216,000

                              Finished Goods                                                     432,750

Purchases                                                                                            1,871,215

Sales                                                                                                    4,343,680

Return Outwards                                                                                52,100

Return Inwards                                                                                   18,350

Carriage Inwards                                                                                74,180

Discount Allowed                                                                               15,015

Discount Received                                                                              46,780

Plant and Machinery at cost                                                               1,850,000

Freehold Building at cost                                                                    1,610,000

Furniture and Fittings at cost                                                              318,000

Indirect Wages                                                                                    127,125

Lighting and Heating                                                                          74,300

Insurance                                                                                             16,720

Rates                                                                                                   18,000

Salaries-selling and administration                                                     342,180

Motor Vehicle at cost                                                                         1,000,000

Direct wages                                                                                       692,750

Additional Information:

1. Depreciation was charged on cost at the following rates:

Plant and machinery                10% per annum

Furniture and Fittings             12.5% per annum

Freehold Building                   10% per annum

Motor Vehicles                       20% per annum

2. The proportion of use of the fixed assets as at 31^st March, 1999 by the factory and office was as follows:

Factory                                                Office

Plant and machinery                            90%                                                     10%

Furniture and Fittings                         25%                                                     75%

Freehold Building                               80%                                                     20%

Motor Vehicles                                   ***                                                      100%

3. The insurance expense was in respect of the plant and machinery.
4. Light and heating and rates were in respect of the freehold building.
5. Closing stocks of raw material GH¢539,400; closing WIP GH¢363,910 and closing finished goods GH¢244,840

Required: prepare manufacturing, trading and profit and loss account for the year ended 31^st March,1999.

Answer 1

From thegiven data we are now preparing the following accounts wise

1. Manufaturing account( that shows the all expenditure incurred by the concerns from input to get finished good of the product)

2. Trading account (that was taking into account for computing the gross profit of the concern fom all trading activities of the company i.e profit derived by the concern from the sale of finfished product result of manufacturing process and after meeting al the costs incurred for sale of such product in the market)

3. Profit and loss account (that was prepared for knowing all the profit that was derived by the company after meeting all administratvie expenditure for running of the business of the company)

1. Manufaturing Account

Particulars	amount	particulars	amount
To opening balances		By closing balances
Raw material	7,85,000	Raw materials	5,39,400
Work in progress	2,16,000	work in progress	3,63,910
To purchses	18,71,215	By finished goods	30,63,461
To direct wages	6,92,750	By return out ward	52,100
To carriage inwards	74,180
To depreciation incurred for factory	3,05,238
To lighting and heating incurred for factory	59,440
To insurance attributable to factory	15,048
TOTAL	40,18,871	TOTAL	40,18,871

NOTE

1.computation of depreciation and allocated to manufacturing and admin purpose

Asset type	Amount	%Dep	Depreciation	factory	office
plant and machinery	18,50,000	10	1,85,000	1,66,500	18,500
furniture and fittings	3,18,000	12.5	39,750	9,938	29,812
freehold building	16,10,000	10	1,61,000	1,28,800	32,200
Motor vehicles	10,00,000	20	2,00,000	-------------	2,00,000
total				3,05,238	2,80,512

2.lighting and heating charges

total amoount of exp 74,300

manufacturing @80% 59,440

admin purpose @20% 14,860

3. insurace expenses

total amount of expenditure was 16,720

manufacturing @ 90% 15,048

admin purpose @ 10% 1672

2. Trading Account:

particulars	amount	particulars	amount
To opening balance		By sales	43,43,680
finished goods	4,32,750	By closing stock
To finished goods from manufacture	30,63,461	finished goods	2,44,840
To returns inward	18,350
To discount allowed	15,015
To indirect wages	1,27,125
To gross profit	9,31,819
total	45,88,520	total	45,88,520

3.Profit and loss account

particulars	amount	particulars	amount
TO		By
lighting and heating	14,860	gross profit	9,31,820(round off)
insurance	1,672	discount received	46,780
rates	18,000	net profit	3,21,375
salaries	3,42,180
depreciation	2,80,512
total	978600	total	978600