Much like the industry itself, manufacturing is a complicated field for accounting. A manufacturing business has a variety of fronts, but what is most commonly dealt with are inventory valuation and the cost of goods—elements that are relatively unique from other industries except on a more basic level. Other areas include:
– Direct cost assignment
– Overhead cost assignment
– Impairment testing
As with any business that deals with inventory, the accounting is incredibly detailed. For some companies with an excessively large inventory, this can be an ordeal. Workload can be maintained with the proper management of inventory on hand. Other methods for reducing investment in inventory is to encourage on-site inventory ownership from suppliers or to employ drop shipping.
It goes without saying, but all this inventory must also be carefully tracked to determine the valuation. Periodic inventory systems are maintained by physical inventory counts, which are incredibly time-consuming. With careful record-keeping and cycle counting, inventory counts can be maintained in a far more efficient and accurate way.
A manufacturing company concerns itself with producing goods for resale—but this process incurs a cost. Therefore, a cost of goods manufactured account is employed which tracks three types of inventory:
– Direct Material
– Goods in Process
– Finished Goods
There are, of course, many methods used to track manufacturing processes and tax liabilities. We excel in assisting clients with general financial help, such as by analyzing accounts receivable, accounts payable, and competitors in your market. For more information about the specifics of taxes in manufacturing, contact Atherton & Associates, LLP.
