Monday 7 November 2016

Accounting Process for Manufacturing Companies

Like any other business, the accounting process is important for manufacturing firms. The accounting information is essential for a variety of users like investors, creditors, management and government regulators. Manufacturing accounting involves various functions like financial accounting, management accounting, auditing and tax accounting. Basically, accounting helps in reporting the financial information of an organization. It involves processes like measurement, analysis and reporting for management purposes.




The accounting cycle involves converting the company's transactions into financial statements. The statements carry complete information regarding the expenses and revenues during a particular period of time. A proper record of the assets and liabilities is also maintained. Different firms might follow different manufacturing accounting processes but the basic processes are same like recording transactions, verifying transactions, making adjustments for accrual, verifying the adjusted totals, preparing the financial statements etc.



In order to complete the accounting for manufacturing business process, the following processes need to be followed:

Preparing ledger accounts- The recording process involves two main factors. Firstly all the business transactions are recorded. Secondly, these transactions are posted to the ledger accounts. Different ledger accounts are prepared for different items like cash, revenues, expenses, accounts payable, accounts receivable etc.

Adjustments- In a manufacturing company inventory is involved. So the accrual method rather than the cash method is used for tax preparation. In the accrual, method transactions are recorded when bills become payable rather than when they are actually paid. Credit sales are recorded when a customer makes the actual payment. Adjusting entries are made in the ledgers. So invoices rather than cash records are considered important in this regard.

Inventory management- A manufacturing accountant must place a value on each item while preparing the statements at the end of the accounting period. In order to ensure that no confusion is created, if various units of an item are purchased at different prices, one of the consistent methods of valuation should be followed. The methods most commonly used are First in First Out and Last in First Out method. The accounting methods followed also depend on the accounting practices followed in a particular country.

Outsourcing can also be used as an option for accounting for manufacturing business. Outsourcing offers various benefits. You don’t require investing in infrastructure and payroll. You can also gain access to accomplished staff without having to invest time in hiring them.


Outsourcing services can offer prompt and effective results in cases of urgent requirement. The remuneration charged by outsourcing firms is much less in comparison to local rates in nations like the US, UK etc. as most of the outsourcing firms are based in developing nations like India, China etc. Outsourcing also offers the opportunity to concentrate on core activities and maximize profits.    

Options to Consider When Outsourcing Accounting for Your Manufacturing Business

Cogneesol is among the leading outsourcing companies offering accounting for manufacturing companies to business ventures from all over the world. These services are meant for enabling the manufacturing organizations to concentrate on their core activities, reduce costs and maximize profits. To know more, contact us at info@cogneesol.com or call us at +16466882821.