OxfordAQA IGCSE Accounting: Manufacturing accounts (9215)

This guide follows the OxfordAQA International GCSE Accounting (9215) specification, version 1.2, for exams from May/June 2026. It covers the manufacturing organisations part of section 3.4, Preparation of financial statements. The qualification is untiered, and the specification lists content 3 to 5 for Paper 2, Financial Statements. You learn how a business that makes its own goods works out what the goods cost, and how that figure feeds the income statement and the statement of financial position. Use it with the revision notes and the practice questions. Start from the OxfordAQA IGCSE Accounting hub, tick topics off on the checklist and find weak spots with the free diagnostics. The routine around Paper 2 is in Two 75-Mark Papers and How to Work Them, and the trial balance behind every statement is covered in Verification of Accounting Records. All amounts below are in dollars.

What the specification asks for

Specification point	Where it is taught here
Financial statements of manufacturers: manufacturing account, income statement, statement of financial position	Sections 1, 5, 6, 7
Prime costs	Section 2
Overhead cost	Section 3
Factory cost of finished goods	Section 4
Adjustments from the use of concepts (other payables, other receivables, depreciation, provision for doubtful debts, goods taken for own use, inventory)	Sections 3, 5, 7
Comment on the statements	Section 8

The specification says the provision for unrealised profit will not be examined. That means finished goods are moved from the factory to the income statement at cost, with no profit added by the factory.

1. Why a manufacturer needs a manufacturing account

A trading business buys goods and sells them. A manufacturer buys materials, pays workers and runs machines to turn them into goods. The manufacturing account collects every cost of making the goods and ends with one figure, the factory cost of finished goods. That figure then takes the place of purchases in the income statement.

The three statements fit together like this.

Statement	Question it answers	Ends with
Manufacturing account	What did it cost to make the goods finished this year?	Factory cost of finished goods
Income statement	Did selling the goods make a profit?	Profit for the year
Statement of financial position	What does the business own and owe on the last day?	Net assets equal to equity

2. Prime cost

Prime cost is the cost of the materials used in the goods plus the wages of the people who make them. Both are direct costs, which means you can trace them to the goods.

Line	Treatment
Opening inventory of raw materials	Add
Purchases of raw materials	Add
Carriage inwards on raw materials	Add
Returns outwards of raw materials	Deduct
Closing inventory of raw materials	Deduct
Cost of raw materials used	The result
Direct wages	Add
Prime cost	Raw materials used plus direct wages

Carriage inwards is the cost of bringing materials to the factory, so it belongs here. Carriage outwards is the cost of delivering to customers, so it belongs in the income statement.

3. Overhead cost

Overheads (factory overheads) are the costs of running the factory that you cannot trace to one unit of output. Typical items are indirect wages (supervisors, cleaners, maintenance staff), factory power, factory insurance, factory rent and rates, and depreciation of machinery.

Four rules from the adjustments in the specification apply.

• Other payables. A cost owing at the year end is added to the amount paid. Power paid plus power owing gives the power cost for the year.
• Other receivables. A cost paid in advance is deducted from the amount paid. A prepayment is an other receivable in the statement of financial position.
• Depreciation. Depreciation of factory machinery is a factory overhead. Depreciation of office equipment is not. The specification names the straight line and reducing balance methods.
• Shared costs. When one bill covers both the factory and the office, split it on the basis the question gives, such as floor area, and charge each part to its own section.

4. Factory cost of finished goods

Add the overheads to the prime cost:

Factory cost of finished goods = prime cost + overheads

The result is the cost of the goods completed in the year. The factory then passes the goods to the finished goods store at this cost. The specification does not name work in progress as a topic, so the examples here have none. If a question gives work in progress figures, treat them as a further adjustment and follow the instruction on the paper.

5. The income statement of a manufacturer

The top half changes. The cost of sales uses the factory cost, not purchases.

Line	Treatment
Revenue less sales returns	Net sales
Opening inventory of finished goods	Add
Factory cost of finished goods	Add
Closing inventory of finished goods	Deduct
Goods taken by the owner for own use	Deduct, then debit drawings
Cost of sales	The result
Gross profit	Net sales less cost of sales

Below gross profit, list the expenses of selling, distribution and administration, including adjustments for the provision for doubtful debts and irrecoverable debts. Gross profit less these expenses is the profit for the year.

6. The statement of financial position

The headings are the ones used for any sole trader. A manufacturer has two things to remember.

• Inventories are shown in two lines: raw materials and finished goods. Both are current assets at the closing figures used in the statements.
• Machinery and factory buildings sit with the non-current assets, at cost less accumulated depreciation.

7. Worked example: Ashvane Joinery

Ashvane Joinery, owned by Bilal Ashvane, makes wooden doors. The year ended 31 December 2025. These are the balances after the trial balance, with the year-end information.

Item	Amount
Inventories at 1 January: raw materials / finished goods	6,400 / 9,200
Purchases of raw materials	71,500
Carriage inwards (raw materials)	2,000
Returns outwards (raw materials)	1,500
Direct wages	48,600
Indirect factory wages	14,300
Factory power paid	8,900
Rent and rates	16,000
Machinery at cost / accumulated depreciation	90,000 / 36,000
Office equipment at cost / accumulated depreciation	20,000 / 6,000
Revenue / sales returns	262,000 / 4,000
Selling expenses / office salaries / office expenses	11,800 / 24,000 / 5,400
Trade receivables / provision for doubtful debts	18,000 / 600
Trade payables	13,200
Capital / drawings / bank (debit balance)	80,000 / 30,000 / 19,200

Year-end information:

1. Closing inventories: raw materials 7,100; finished goods 10,400.
2. Power owing 700. Office salaries owing 1,000. Office expenses prepaid 300.
3. Rent and rates are shared three-quarters factory, one-quarter office.
4. Machinery is depreciated at 20% a year on the reducing balance. Office equipment is depreciated at 10% a year on cost, which is the straight line method.
5. The provision for doubtful debts is to be 5% of trade receivables.
6. Bilal took finished goods that cost 1,500 for his own use.

Manufacturing account for the year ended 31 December 2025

	Dollars	Dollars
Opening inventory of raw materials		6,400
Purchases of raw materials	71,500
Carriage inwards	2,000
Less returns outwards	(1,500)	72,000
		78,400
Less closing inventory of raw materials		(7,100)
Cost of raw materials used		71,300
Direct wages		48,600
Prime cost		119,900
Indirect factory wages	14,300
Factory power (8,900 + 700)	9,600
Rent and rates (three-quarters of 16,000)	12,000
Depreciation of machinery (20% of 54,000)	10,800
Overheads		46,700
Factory cost of finished goods		166,600

The machinery depreciation uses the carrying amount of 90,000 less 36,000, which is 54,000.

Income statement for the year ended 31 December 2025

	Dollars	Dollars
Revenue		262,000
Less sales returns		(4,000)
Net sales		258,000
Opening inventory of finished goods	9,200
Factory cost of finished goods	166,600
	175,800
Less closing inventory of finished goods	(10,400)
Less goods taken for own use	(1,500)
Cost of sales		(163,900)
Gross profit		94,100
Selling expenses	11,800
Office salaries (24,000 + 1,000)	25,000
Office expenses (5,400 − 300)	5,100
Rent and rates (one-quarter)	4,000
Depreciation of office equipment	2,000
Increase in provision for doubtful debts	300
Total expenses		(48,200)
Profit for the year		45,900

The provision rises from 600 to 5% of 18,000, which is 900, so the increase is 300.

Statement of financial position at 31 December 2025

	Cost	Depreciation	Carrying amount
Machinery	90,000	46,800	43,200
Office equipment	20,000	8,000	12,000
Non-current assets	110,000	54,800	55,200

Current assets	Dollars	Dollars
Inventories: raw materials	7,100
Inventories: finished goods	10,400
Trade receivables less provision (18,000 − 900)	17,100
Other receivables (prepaid expenses)	300
Bank	19,200	54,100
Current liabilities
Trade payables	13,200
Other payables (700 + 1,000)	1,700	(14,900)
Net assets		94,400
Capital		80,000
Add profit for the year		45,900
Less drawings (30,000 + 1,500)		(31,500)
Equity		94,400

Net assets are 55,200 + 54,100 − 14,900 = 94,400, which equals equity. That agreement is your check.

8. Commenting on the statements

You may be asked to comment on a manufacturer’s results. Work from figures you can calculate from the statements.

• Overheads as a share of prime cost. Ashvane’s overheads are 46,700 against a prime cost of 119,900, or 38.9%. If this share rises year on year, ask whether factory running costs are being controlled.
• Gross profit margin. Gross profit of 94,100 on net sales of 258,000 is 36.5%. A fall in the margin can come from a higher factory cost or lower selling prices.
• Cost of materials against wages. Materials used (71,300) and direct wages (48,600) are the two parts of prime cost. A change in either points to a different problem: a price from suppliers, or labour hours.

A comment needs a figure, a comparison and a reason. State that a limit applies: one year of figures cannot show a trend.

9. Common errors

• Putting office depreciation or office salaries in the manufacturing account.
• Deducting closing inventory of finished goods in the manufacturing account. It belongs in the income statement.
• Using purchases of raw materials as the prime cost without adjusting for inventory.
• Charging all of a shared bill to the factory.
• Forgetting that goods taken for own use are deducted from cost of sales and added to drawings.
• Showing only one inventories line in the statement of financial position.

Frequently asked questions

What is prime cost in OxfordAQA International GCSE Accounting 9215? Prime cost is the cost of the materials used in the goods plus the wages of the people who make them. Carriage inwards on raw materials is part of the materials cost; carriage outwards is a selling cost.

How do you calculate the factory cost of finished goods? Factory cost of finished goods = prime cost + overheads. It is the cost of the goods completed in the year, and it replaces purchases in the manufacturer’s cost of sales.

What are factory overheads? Factory overheads are the costs of running the factory that cannot be traced to one unit of output, such as indirect wages for supervisors and cleaners, factory power, insurance, rent and rates, and depreciation of machinery.

How are a manufacturer’s inventories shown in the statement of financial position? Inventories are shown in two lines, raw materials and finished goods, both as current assets at the closing date.

How should I comment on a manufacturer’s results? Work from figures you can calculate, such as overheads as a share of prime cost, and give a figure, a comparison and a reason. One year of figures alone cannot show a trend.

Official syllabus

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