Production Account18th July 2021 0 By indiafreenotes
Production Account is a statement of cost or cost-sheet in a ledger account form, showing output during a given period, total cost and per unit cost incurred during the period and their components, as also the profit or loss for that period.
According to Glover and Williams, ‘The term Production Account is used to denote a particular form of Manufacturing Account, prepared in conjunction with the financial accounts in order to show the actual cost of producing the goods manufactured during the period under review. These accounts may be drawn up at short intervals e.g. monthly’.
Production Account is an account created under unit costing, which exhibit, the product produced, total cost of sales and the per unit cost incurred during the given period.
Production Account is something that integrates into itself, the components of cost sheet and the trading and profit and loss account. It not only includes the total cost of production but also accounts for the selling and distribution overheads.
There are three parts of a production account, in which the first part represents the cost of production, the second one shows the cost of goods sold and the last indicates the cost of sales, i.e. total cost.
It should be noted that Production Account is prepared in the form in which Trading Account is prepared. It has normally two parts. The first part gives total cost as well as cost per unit. The second part gives the cost of goods sold and sales.