The financial statements of Jarvis, just illustrated, are subject to the limitation that the respective amounts of the gross profit which are attributable to the manufacturing side or to the selling side of the business are not known. A technique is sometimes used to bring out this additional information. This method uses the cost which would have been involved if the goods had been bought in their finished state instead of being manufactured by the business. This figure is credited to the manufacturing account and debited to the trading account so as to throw up two figures of gross profit instead of one. It should be pointed out that the net profit will remain unaffected. All that will have happened will be that the figure of $207,650$ gross profit will be shown as two figures instead of one. When adided together, they will total $207,650.$

Assume that the cost of buying the goods instead of manufacturing them had been $950,000.$ The relevant parts of the Manufacturing Account and Income Statement will then be: