The Difference Between a Trading Account and a Manufacturing Account

by Jennifer VanBaren; Updated September 26, 2017
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Trading accounts and manufacturing accounts are two very different accounts but are used together in manufacturing companies. The balance from a manufacturing account is used to calculate the balance of a trading account.

Trading Accounts

A summary of all transactions from a period is placed into an account called a trading account. This account is used to determine a company’s gross profit or gross loss during a specified period.

Manufacturing Accounts

All costs of manufacturing are placed into a manufacturing account. This account is a complete record of all costs of production.

Trading Account Computation

When calculating the balance in a trading account, an accountant finds the difference between the selling price of all manufactured goods minus the total cost of all goods. This number is found in the manufacturing account. When these two amounts are subtracted, it tells the company’s gross profit or gross loss.

Manufacturing Account Computation

When calculating the balance in a manufacturing account, an accountant places all costs of production into this account. This includes raw materials, direct labor, indirect costs and overhead. This amount represents the total cost of goods manufactured. This number is used in the trading account to find gross profit.

About the Author

Jennifer VanBaren started her professional online writing career in 2010. She taught college-level accounting, math and business classes for five years. Her writing highlights include publishing articles about music, business, gardening and home organization. She holds a Bachelor of Science in accounting and finance from St. Joseph's College in Rensselaer, Ind.

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