Correct cost accounting methods are of greater importance to the manufacturer than the method of keeping accounts with his customers. He cannot afford to wait until the end of the year for results; he must know what his goods cost him if he is to intelligently make selling prices. There are so many opportunities for fluctuations in manufacturing costs that the accounts must at least show approximate results at all times.
Cost accounting is a profession in itself, and it is not our purpose to discuss, in this paper, all of the details of collecting data in the factory and shop. The purpose of this paper is to show the accounts with which a bookkeeper for a manufacturing business should become familiar. Even when a manufacturer does not maintain a complete cost accounting system the bookkeeper can produce some valuable statistics by a proper arrangement of the accounts.
ACCOUNTS USED
56. For the purpose of illustration we have selected a representative schedule of the accounts of a manufacturing business. The following accounts are those which have a direct bearing on the manufacturing branch of a business and do not include the administrative and selling branches.
FACTORY ASSETS
1. Real Estate. Includes the cost of land and factory buildings.
2. Machinery. Charged with the cost of all machinery including total cost of installation. Freight, cartage, and cost of erecting the machine ready for use should be included.
3. Patterns and Tools. Charged through cash and purchase book for all patterns and tools purchased. Charged through cash book and journal—with proper credit to material and labor accounts—if manufactured in the factory.
4. Material Purchases. Charged through purchase and cash books for all purchases of material that enters into the product. Cost includes charges for delivery. Credited for all material used in the factory. This may be subdivided into several accounts to represent the different classes of material used—as iron, steel, lumber, leather, hardware, etc.