• Learn the nature of a manufacturing concern in

a sole proprietorship form of business so we

can compare this to service and merchandising
concern;
• Familiarize the various statements needed in
manufacturing, such as Statement of Cost of
Goods Manufactured and Cost of Goods Sold
which are the very objectives of these study of
non-cost system.
 Manufacturing Concern
(Non-Cost System)

Trading of Merchandising Concern

Sells Goods

Manufacturing Concern

Processes and
Purchases Converts Raw Sells
Raw Materials into Finished
Materials Finished Goods
Products
 • Manufacturer – buys raw materials
and converts them into finished
products by employing manpower,
machinery, etc., and incurring
expenses. These finished products
are bought by an merchandiser

Merchandiser - these
finished products are
bought by an merchandiser
and sells to customers.
Elements of Manufacturing Cost
1. Direct Materials – refers to the cost of raw
materials which are charged directly and can be
traced to have form part of the finished product.
- first element that enters into the finished
product.
Examples: Lumber and bamboo - for the
manufacturing of tables and chair
• indirect materials – are the amounts that
are relatively small allocation. Examples
are the cost of nails, varnish, wood
glues, etc.
 Elements of Manufacturing Cost
2. Direct Labor – refers to wages paid to
workers who are working directly on
the product.
- second element that enters into the
finished product.
Examples: salaries of carpenters, production
supervisors, delivery truck drivers and quality control
inspectors
• indirect labor – the nature of their works cannot
be charged to a particular product.
Examples: salaries of plant supervisors, foremen,
timekeepers, janitors
 Elements of Manufacturing Cost
3. Manufacturing Overhead – refers to all cost
incurred in the manufactured of product
other that than direct materials and direct
labor.
- third and last element of costs that enters
into the finished product.
Examples: indirect materials, indirect labor, factory supplies,
shop light and power, depreciation of factory equipment,
amortization of property insurance and amortization of
intangible assets.
 What is Manufacturing Non-System?

• NON- COST SYSTEM – a type of accounting

system which does not provide a flow of cost
or manufacturing process in details and
precise measurement.
 Inventories of a Manufacturing
Concern
3 Major Types of Inventories:

1. Finished Goods Inventory

- are completely manufactured or fully
processed goods which are ready for sale.
-( not 100% complete)

• “Finished Goods Inventory, End” - the finished good that are

left unsold and that are on hand at the end of period.
• “Finished Goods Inventory, Beginning” - at the beginning of
the next accounting period.
 Inventories of a Manufacturing
Concern
2. Goods in Process Inventory – are products or
goods where works have been started
already but are not in finished in form yet.
- ( not 100% complete)

• “Goods in Process Inventory , End” – at the end of the

accounting period.
• “Goods in Process Inventory , Beginning” - at the
beginning of the next accounting period.
 Inventories of a Manufacturing
Concern
3. Raw Materials Inventory – cost of raw
materials that are purchased but were not
issued to production and are on hand.

• “Raw Materials Inventory , End” – at the end of the

accounting period.
• “Raw Materials Inventory , Beginning” - at the
beginning of the next accounting period.
 Voucher System
- A form of an internal control over cash
disbursement whereby all payments are made
by checks except for small expenses where
payment is made out of petty cash fund.

- Prepared with attached invoices or supporting

documents
• Voucher Register – where purchases of raw
materials and supplies , acquisition of fixed
assets, payroll and other transactions with
require cash payments are recorded in this
book. Which takes place of a “Purchase Book”.
- the entry in the voucher register requires all
credit to this “Vouchers Payable” account so that there is
always immediate recognition of a liability.

• Check Register – recorded in this book are the checks

are issued for payment which takes place of the “ Cash
Disbursement”.
- all payments made are debited to “Vouchers
Payable” account to close the vouchers payable set-up in
the Voucher Register