Factory Ledger

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It is often practical for a manufacturing concern to include a factory ledger in its accounting system. Generally, this procedure is followed when manufacturing operations are far-flung from the main office, or when the nature of such operations requires a large number of accounts.
Some accounts relating to manufacturing are kept in factory office books while other are kept in general office books. What accounts and other records be kept in the factory journal and ledger and what accounts and records be maintained in the general journal and ledger would depend on various factors and the nature of manufacturing concerns. However, there are certain accounts which are usually kept on the factory books. These are accounts concerned with manufacturing costs and include stores or materials accounts, labor or payroll accounts, factory overhead accounts, general ledger, is also included on the factory books.
Most organizations maintain cash and other factory assets on the general office records. Thus the general ledger includes such accounts as sales, cost of goods sold, factory plant and machinery, accumulated depreciation and liabilities etc. It also includes the control account, factory ledger.
Entries relating with general ledger and factory ledger are first recorded in the general ledger and factory journal. The control accounts factory ledger and general ledger are reciprocal in nature i.e., a debit to one is an automatic credit to the other and vice versa; so they permit each ledger to be self-balancing.
In order to check the reciprocal accounts (factory ledger control account in the general office books and general ledger control account in the factory office books), inter office vouchers, which are also called transfer vouchers, are used. Through these inter office or transfer vouchers, the general office is informed by the factory office; and factory office is informed by the general office.

About the Author:
Rashid Javed is an Asian author. He writes articles about various topics of
financial accounting and
managerial accounting such as

cash flow statement and
activity
based costing.



Article Originally Published On: http://www.articlesnatch.com


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