Nature of a Manufacturing Business

Manufacturing Business

This business buys raw materials then converts them into finished goods then sells them to customers at a selling price.

The primary product for this business is the goods they produce or manufacture.


Operating Cycle of a Manufacturing Business

Business Activities

Classification as to Business Core Operations

Activities of the organization depends with the industry it belongs. Different industries have their own sets of industrial core activities, the three most common of which are the following:

• Servicing

The primary product this business sells is the "services" it offers. 

In order to earn, those in this business renders services to its clients for a fee. 

• Merchandising

The primary product of this business is the "merchandise" items it sells.

This business in order to earn, the entity buys goods and adds markup or profit to the cost of goods then sells them to the customers.  In short, they are involve in buy-and-sell of merchandise.   

• Manufacturing

The primary product for this business is the goods they produce or manufacture.

This business buys raw materials then converts them into finished goods then sells them to customers at a selling price. 

Note that in the conduct of business, the entity must be viewed as a separate entity which means their transactions and activities are separate and distinct from that of the owners.

Classification as to Cash Transactions

Though various industries exist but the following economic activities are mutual to all:

• Operating activities

The Operating Activities are those business transactions which generates revenue for the organization. These include expenses incurred to produce revenues...read more 

• Investing activities

The Investing Activities are those transactions which involve acquisition and disposal of assets other then inventory, which are necessary in the business operations...read more

• Financing activities

The Financing Activities are those transactions between the entity and its owners or creditors...read more

Manufacturing operations

9.  Manufacturing operations

9.1   Nature of manufacturing business

9.2   Transactions related to the manufacturing process

9.3   Elements of manufacturing costs

9.4   Preparation of financial statements of a manufacturing enterprise

• statement of financial position formerly balance sheet, 

• income statement, 

• statement of cost of goods manufactured and sold