LABOR ACCOUNTING ± CONTROL AND COSTING

LABOR COST
Represents the human contribution to production ´ Consists of basic pay and fringe benefits ´ Classified as
´
«

direct labor ² wages

paid to the workers who are directly engaged in the mfg operations ² allocated directly to the units or jobs manufactured.
«

indirect labor ²
² wages

paid to employees whose work pertains to the productive activities ² cannot be allocated with accuracy to the units produced or to the special jobs manufactured.

PAYROLL PROCEDURE
1. 2.

3.

4.

Accumulate the number of hours worked each day by each employee as shown by the time card. Classify the hours and type of work performed each day by each employee as indicated by the time tickets. Convert labor hours into peso amounts using the regular rate and/or overtime rate of each employee At the end of the period (usually a week) summarize in a payroll sheet the gross earnings, deductions, and net pay for each employee.

PAYROLL PROCEDURE
5. 6. 7.

8.

9.

Prepare voucher on the basis of the totals of the payroll sheet, and enter same in the voucher register Issue check for the total net payment Prepare recapitulation sheet. Prepare journal voucher charging work in process for the direct labor cost and factory overhead for indirect labor Post direct labor cost to the individual job cost sheet. Post the indirect labor cost to the factory overhead subsidiary ledger Using the payroll sheet, post the gross earnings, deductions, and net pay for each employee in the individual earnings record.

FORMS OR DOCUMENTS
Time card or clock card ´ Time tickets ´ Payroll register or payroll sheet ´ Recapitulation sheet
´

CHARGING LABOR COSTS INTO PRODUCTION
items Direct labor Indirect labor Employer·s share of the SSS, Philhealth, Pag-ibig contribution in the factory Employer·s share of the SSS, Philhealth, Pag-ibig contribution in the selling department Employer·s share of the SSS, Philhealth, Pag-ibig contribution in the admintrative department Overtime premium (due to rush nature of job) Overtime premium (due to internal failure) Work in Process Factory Overhead, Control Factory Overhead, Control Selling expense, control account

General Expense, Control

Work in Process Factory Overhead, Control

RECORDING PROCEDURE:
a.

To record payroll Factory payroll xx SSS, PH, Pag-ibig cont. payl withholding tax payl vouchers payable xx

xx xx

RECORDING PROCEDURE:
b.

To record issuance of checks for the payroll vouchers payable xx cash To record distribution of payroll work in process (direct labor) xx factory overhead control* factory payroll

xx

c.

xx xx

*indirect labor, overtime premium, shift premium

RECORDING PROCEDURE:
d.

To record employer·s SSS, PH, pag ² ibig factory overhead, control xx Selling expense, control xx General expense, control xx SSS, PH, Pag-ibig cont. payl xx

RECORDING PROCEDURE:
e.

To prepare voucher for SSS, PH, Pag ² ibig, withholding tax SSS, PH, Pag-ibig cont. payl xx withholding tax payl xx vouchers payable xx To record issuance of check for the SSS, PH, Pagibig, and withholding tax vouchers payable xx cash xx

e.

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