Solution of Problem of Cost of Production and Cost of Goods sold


Dear Vinod Kumar
I hope you will be fine there. Thanks for reply my question. I already told you that I am an accountant recently I join a manufacturing company. If tally can calculate the cost of finish goods so how tally will show statement of production cost. Because I never find in tally any statement report like this on gateway of tally I find Balance sheet and income statement only and how tally will show
Material consumed/issued to production
Prime cost
Factory cost
Production cost of finish goods

Please help me to remove my confusion because I think that tally can’t fulfill manufacturing accounts requirement. If you have any spaceman according to this matter so please send me


Calculating the prime cost , factory cost and production cost of finish goods are an extra work for control on cost in cost accounting and tally is basically form for recording of financial transactions on the basis of bills but , you can get all informations for calculating more analysis in excel sheet .
In manual accounting, we first makes all journal, ledger, trial balance, and final accounts and on these statements we makes other cost sheets, job analysis sheet and overhead distribution list and same can be done by tally. In simple words, tally save the time for making extra ledgers and final accounts and create interesting environment for recording of transactions fast.

But for calculating of cost of production, I can explain with example

Suppose, Ram is a manufacturer who has raw material of CPU, Monitor, Keyboard and Mouse and his business to produce finished product and he has given its name as Computer.
The opening balance of raw material

CPU = 5 CPU at 10000 each = Rs. 50000
Monitor = 5 at 5000 each = Rs. 25000
Keyboard = 5 at 1000 each = Rs. 5000
Mouse = 5 at 500 each = Rs. 2500

2. He purchases of

2 CPUs , 4 Monitors

2CPU at Rs. 10000 per piece = 20000
4 monitor at Rs. 5000 per piece = 20000

Ram sells computer (Finished product) 4 at Rs. 30000 per computer

Calculation of cost of production, cost of goods sold with tally 9

Cost of production = Opening stock of raw material + purchase of raw material + direct expenses

Cost of goods sold = Cost of production – cost of closing stock of raw material

1st step

Make inventory ledger

Inventory info >> unit of measure >> p >> piece >> accept

Inventory info >> stock item >> create all four items and also write its opening stock

Dear we also make stock item of finished product in inventory info because finished product names often new because , there is no opening stock of finished product , so leave it blank .

After this create also following ledgers

Account info >> ledger >> creation

1. Purchase account under purchase account

Sale account under sale account
stock under stock in hand = total value of all raw material items =

cpu + monitor + keyboard + mouse = 82500

After this pass the voucher entries

purchasing of raw material

Voucher entry of sale

Before passing voucher entry of sale of computer, you must pass inventory voucher of transfer of raw material to production in tally 9 and this is also the real answer of your question.

You know better that with raw material , we make finished product . So, in tally we write it here

Gate way of tally >> inventory voucher >> voucher creation

If we produce 4 computer it means raw material will write in same quantity .

Raw material of Cpu = 4 = rate 10000 == cost = 40000
Monitor = 4 = rate 5000 = cost = 20000
Keyboard = 4 = rate 1000 = cost = 4000
mouse = 4 = rate 500 = cost = 2000

Total unit of sale of raw material = 16 = total cost = 66000

= 66000 / 16 = 4125

Total cost of finished goods of 1 computer = 4125 X 4 ( four items of raw material ) = 16500

One good idea

When you will write destination or production of computer in tally you will write quantity and then jump on amount and write 66000, tally automatically write its cost of rs. 16500

So, Cost of goods sold is 66000 if you generally pass the voucher entries of wages and other direct expenses , then tally automatically adjust in gross profit .

if you want to know your cost of production

Now after this you can pass the voucher entry of sale

You can also see other reports relating to inventories

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Accounting Education: Solution of Problem of Cost of Production and Cost of Goods sold
Solution of Problem of Cost of Production and Cost of Goods sold
Accounting Education
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