OxfordAQA IGCSE Accounting: Manufacturing accounts (9215) – Revision Notes

These notes condense the manufacturing organisations content of section 3.4 of the OxfordAQA International GCSE Accounting (9215) specification, version 1.2, for exams from May/June 2026. For full explanations and a long worked example, read the study guide. Test yourself with the practice questions, check your coverage on the checklist and see the OxfordAQA IGCSE Accounting hub. Not sure where you stand? Try the free diagnostics. For how the papers are organised, see Two 75-Mark Papers and How to Work Them. Amounts are in dollars.

Key terms

Term	Meaning
Manufacturing account	Statement that finds the cost of making the goods finished in the year
Direct cost	Cost you can trace to the goods: raw materials and direct wages
Prime cost	Cost of raw materials used plus direct wages
Overheads	Factory running costs that cannot be traced to one unit
Factory cost of finished goods	Prime cost plus overheads
Cost of sales (manufacturer)	Opening finished goods + factory cost of finished goods - closing finished goods

The statements in order

1. Manufacturing account: raw materials used, then prime cost, then overheads, then factory cost of finished goods.
2. Income statement: net sales, cost of sales using the factory cost, gross profit, expenses, profit for the year.
3. Statement of financial position: two inventories lines, machinery with accumulated depreciation, then equity.

The specification says the provision for unrealised profit will not be examined, so finished goods move from the factory at cost.

Layout to learn

Line in the manufacturing account	Add or deduct
Opening inventory of raw materials	Add
Purchases of raw materials	Add
Carriage inwards	Add
Returns outwards	Deduct
Closing inventory of raw materials	Deduct
Direct wages	Add after materials used
Prime cost	Subtotal
Each overhead	Add, after adjustment
Factory cost of finished goods	Total

Where each cost belongs

Cost	Manufacturing account	Income statement
Raw materials purchased	Yes	No
Carriage inwards on materials	Yes	No
Carriage outwards	No	Yes
Direct wages	Yes	No
Indirect factory wages	Yes	No
Factory power, insurance, rent	Yes	No
Depreciation of machinery	Yes	No
Depreciation of office equipment	No	Yes
Office salaries, selling expenses	No	Yes
Opening and closing finished goods	No	Yes
Closing raw materials	Yes (deduct)	No

Adjustments in steps

1. Read the trial balance and the notes, and list every adjustment before you start.
2. Other payables: add to the cost. Other receivables (prepayments): deduct from the cost.
3. Depreciation: straight line = (cost - residual value) / years, if a residual value is given. Reducing balance = rate x carrying amount.
4. Shared costs: split by the fraction given, then put each part in its section.
5. Provision for doubtful debts: new provision less old provision. Only the change goes to the income statement.
6. Goods for own use: deduct at cost from cost of sales and add to drawings.
7. Check: net assets must equal equity.

Worked reminder: Brimwell Candles

Opening raw materials 2,000; purchases 18,000; returns outwards 500; carriage inwards 400; closing raw materials 2,600; direct wages 9,700. Indirect wages 3,200; insurance paid 1,800 with 300 prepaid; power paid 2,100 with 200 owing; machine cost 24,000, residual value 4,000, life 5 years, straight line. Opening finished goods 3,000; closing 4,500; net sales 52,000.

Step	Working	Result
Raw materials used	2,000 + 18,000 - 500 + 400 - 2,600	17,300
Prime cost	17,300 + 9,700	27,000
Insurance	1,800 - 300	1,500
Power	2,100 + 200	2,300
Depreciation	(24,000 - 4,000) / 5	4,000
Overheads	3,200 + 1,500 + 2,300 + 4,000	11,000
Factory cost of finished goods	27,000 + 11,000	38,000
Cost of sales	3,000 + 38,000 - 4,500	36,500
Gross profit	52,000 - 36,500	15,500

Continuing Brimwell Candles to profit

Now add these facts. The owner took finished goods that cost 600 for own use. Selling expenses are 4,100. Office wages paid are 5,300 and 400 is owing. Office equipment depreciation is 800. Trade receivables are 6,000, the old provision for doubtful debts is 150 and the new provision is 4% of trade receivables.

Line	Working	Result
Cost of sales	3,000 + 38,000 - 4,500 - 600	35,900
Gross profit	52,000 - 35,900	16,100
Office wages	5,300 + 400	5,700
Provision change	4% of 6,000 = 240, less 150	90
Total expenses	4,100 + 5,700 + 800 + 90	10,690
Profit for the year	16,100 - 10,690	5,410

The 600 of goods also increases drawings by 600 in the equity section.

Income statement layout for a manufacturer

Block	Contents
Net sales	Revenue less sales returns
Cost of sales	Opening finished goods, plus factory cost of finished goods, less closing finished goods, less goods for own use
Gross profit	Net sales less cost of sales
Expenses	Selling, distribution, administration, depreciation of non-factory assets, irrecoverable debts, change in the provision for doubtful debts
Profit for the year	Gross profit less expenses

Income due (such as rent receivable) is added to profit as other income. Income received in advance is deducted from the income of the year.

Statement of financial position headings

Heading	What a manufacturer shows
Non-current assets	Machinery, factory buildings, office equipment, each at cost, accumulated depreciation and carrying amount
Current assets	Raw materials inventory, finished goods inventory, trade receivables less provision, other receivables, bank
Current liabilities	Trade payables, other payables, any overdraft
Equity	Opening capital, plus profit for the year, less drawings (including goods taken for own use)

Must-know distinctions

• Prime cost and factory cost. Prime cost is materials and direct wages only. Factory cost adds overheads.
• Direct wages and indirect wages. Direct wages are paid to those who make the goods. Indirect wages are paid to supervisors and cleaners, so they are overheads.
• Carriage inwards and carriage outwards. Inwards is part of material cost. Outwards is a selling cost.
• Raw materials inventory and finished goods inventory. Raw materials adjust the manufacturing account. Finished goods adjust the cost of sales.
• Purchases and factory cost. A trader uses purchases in cost of sales. A manufacturer uses the factory cost of finished goods.

Commenting on results

Use figures from the statements and give a reason.

• Overheads divided by prime cost shows how heavy the running costs are against the direct costs.
• Gross profit divided by net sales shows the margin left after the cost of making and selling the goods.
• Say what could cause a change, such as a supplier price, wage rates or selling prices, and state that you would need more years to see a trend.

Quick self-test

1. State what is included in prime cost.
2. Is carriage inwards on raw materials a manufacturing account cost or an income statement expense?
3. Opening raw materials 1,200, purchases 9,800, closing raw materials 1,500, direct wages 6,000. Calculate prime cost.
4. Factory power paid is 4,200 and 350 is owing. State the overhead cost.
5. Rent of 12,000 is shared two-thirds factory and one-third office. How much is a factory overhead?
6. Machinery cost 50,000 and accumulated depreciation is 12,000. Depreciation is 15% on the reducing balance. Calculate the charge.
7. Prime cost is 40,000 and overheads are 12,500. Calculate the factory cost of finished goods.
8. Using question 7, opening finished goods are 2,000 and closing finished goods are 3,000. Calculate cost of sales.
9. Express the overheads in question 7 as a percentage of prime cost.
10. Is the provision for unrealised profit examined, according to the specification?

Answers

1. Cost of raw materials used plus direct wages.
2. A manufacturing account cost, as part of the cost of raw materials.
3. 1,200 + 9,800 - 1,500 + 6,000 = 15,500.
4. 4,200 + 350 = 4,550.
5. Two-thirds of 12,000 = 8,000.
6. 15% of (50,000 - 12,000) = 15% of 38,000 = 5,700.
7. 40,000 + 12,500 = 52,500.
8. 2,000 + 52,500 - 3,000 = 51,500.
9. 12,500 / 40,000 x 100 = 31.25%, or 31.3% to 1 decimal place.
10. No. The specification says it will not be examined.

Where marks are usually lost

• Leaving office expenses or office depreciation in the manufacturing account.
• Forgetting to deduct closing raw materials when finding the cost of materials used.
• Adding returns outwards instead of deducting them.
• Treating indirect wages as direct wages.
• Ignoring an amount owing or a prepayment when finding the overhead.
• Using the original cost, not the carrying amount, for reducing balance depreciation.
• Showing a single inventories figure in the statement of financial position.
• Writing comments with no figure and no reason.

Frequently asked questions

What is the difference between prime cost and factory cost? Prime cost is the cost of raw materials used plus direct wages. Factory cost of finished goods adds factory overheads to prime cost.

Is carriage inwards a manufacturing cost? Yes. Carriage inwards on raw materials is part of the cost of materials in the manufacturing account. Carriage outwards is a selling cost in the income statement.

Is the provision for unrealised profit examined in OxfordAQA International GCSE Accounting 9215? No. The specification says the provision for unrealised profit will not be examined.

What is the difference between direct and indirect wages? Direct wages are paid to those who make the goods and are part of prime cost. Indirect wages are paid to supervisors and cleaners, so they are factory overheads.

How are inventories shown in a manufacturer’s statement of financial position? Show each inventory separately, such as raw materials and finished goods, rather than as a single inventories figure.

Official syllabus

OxfordAQA International GCSE Accounting (9215), version 1.2, for exams from May/June 2026, published by OxfordAQA. These notes cover the manufacturing organisations content of section 3.4.