What is manufacturing cost? Also explain Accounting cycle in own words?

 

Manufacturing cost is the sum of all expense incurred in acquiring of all resources that are used in the process of producing a given product. These costs are classified into 3 categories namely direct expenses of materials, direct cost incurred on labor and overheads. 

Direct costs of materials is the expense that is incurred on raw materials and the equipment used in the process of making a product. 

Direct labor costs are expenses that a manufacturer incurs to pay for wages and salaries of the workers.

Overheads costs of manufacturing are the indirect expenses incurred during the making process which may include repairs, depreciation, insurance, electricity, indirect labor, indirect material, etc. 

Step-by-step explanation

The accounting cycle is a combination of different processes of identifying, evaluating and recording a firm's accounting events. It is a typical process with 8 processes which starts at the time a transaction happens and completes with the transaction being included in the financial statements. In general cases, the cycle comprises a year but can also comprise other accounting periods. 

The 8 steps of accounting cycle

i. Identifying transactions-such transactions may include a sale, repayment, payment to a supplier, etc.

ii. Recording transactions in a journal- this is done upon the receipt of an invoice, acknowledgement of a sale or completion of any other economic events.

iii. Posting- after recording a transaction in a journal it is posted to a general ledger account in which provides for a breakdown of events

iv. Unadjusted Trial Balance- general ledgers helps in preparation of a trial balance which ensures that total debits equates to the total credits in the financial records.

v. Worksheet- they are prepared and useful in ensuring that debits and credits are equal. If there are differences then adjustments are made.

vi. Adjusting journal entries: this is as a result of worksheet balancing the debits and credits.

vii. Financial Statements: Upon adjusting of trial balance, a business prepares an adjusted trial balance and then the actual official financial statements.

viii. Closing the books: this is finalizing temporary accounts, expenses and revenues using closing entries. These closing entries may include shifting net income into retained earnings.