All general ledger postings from the Work Order module are generated as a result of transactions entered using Work Order Transaction Entry. Of the eight possible transaction types, only the release transaction has no possible effect on the general ledger.
Material Issue Transactions Example
Material issue transactions issue inventory items to work orders. The associated material cost must be credited to the Inventory account and debited to the Work in Process account. The Inventory account is based on the product line assigned to the inventory item issued and, if appropriate, the warehouse location. The Work in Process account is based on the operation code assigned to the routing step to which the material is issued. Any fixed and variable overhead associated with the operation code is also calculated and posted to the appropriate accounts.
The following General Ledger posting shows a material issue transaction for a component item. Five components (component A) are issued to a work order at $10.00 per unit cost. A 5 percent fixed overhead rate and 7.5 percent variable overhead rate are applicable for the operation code.
G/L Account
Debit
Credit
WIP Direct Account
50.00
WIP Fixed Overhead
2.50
WIP Variable Overhead
3.75
Applied Fixed Overhead
2.50
Applied Variable Overhead
3.75
Component A (5 @ 10.00)
Inventory (Raw Material)
_____
50.00
56.25
56.25
Labor Transactions Example
Labor transactions record production costs associated with labor and machine operations based on the number of hours expended and standard rates established for an operation. All accounts posted are determined by the operation code assigned to the routing step to which the transaction is recorded. Direct labor expenses are debited to the Work in Process Direct account and credited to the Applied Direct account. Any fixed and variable overhead associated with the operation code is also calculated and posted to the appropriate accounts.
The following General Ledger posting shows a labor transaction for an employee who worked 8 hours at the rate of $15.00 per hour. A 5 percent fixed overhead and 7.5 percent variable overhead is applicable for the operation code.
G/L Account
Debit
Credit
WIP Direct Account
120.00
WIP Fixed Overhead
6.00
WIP Variable Overhead
9.00
Applied Fixed Overhead
6.00
Applied Variable Overhead
9.00
Labor (8 hours @ 15.00)
Applied Direct
______
120.00
135.00
135.00
Miscellaneous Charge and Outside Processing Transactions Example
Miscellaneous labor, miscellaneous material, and outside processing transactions all post an entered cost to the work order. All accounts posted are determined by the operation code assigned to the routing steps to which the transaction is recorded. Direct expenses are debited to the Work in Process Direct account and credited to the Applied Direct account. Any fixed and variable overhead associated with the operation code is also calculated and posted to the appropriate accounts.
The following General Ledger posting shows an outside processing transaction for $100.00. A 5 percent fixed overhead and 7.5 percent variable overhead are applicable for the operation code.
G/L Account
Debit
Credit
WIP Direct Account
100.00
WIP Fixed Overhead
5.00
WIP Variable Overhead
7.50
Applied Fixed Overhead
5.00
Applied Variable Overhead
7.50
Outside Processing
Applied Direct
______
100.00
112.50
112.50
Completion Transactions Example
Completion transactions post the cost of production to the Finished Inventory account and relieve the Work in Process accounts of the associated costs. If the inventory item uses the Standard Costing method, any difference between the actual cost and the standard cost is posted to the Manufacturing Variance Adjustment account. In the case of partial completion, only the cost associated with the completion of the finished product is allocated. The Inventory and Manufacturing Variance accounts are based on the product line assigned to the inventory item produced. In addition, if the parent item uses the Serial valuation method, and the cost cannot be evenly distributed for the quantity being completed, a posting is made to the Manufacturing Variance account for the difference. If you are completing a special (noninventory) item, you can enter the account number to be used. If you are completing to scrap, the Work Order Scrap account assigned in Work Order Options is used.
The following General Ledger posting shows a completion transaction completing 100 items to an inventory item using the Average Costing method. Because the total production cost is $303.75, the unit cost posted to inventory is $30.375.
G/L Account
Debit
Credit
Parent Item A (10 @ 30.375)
Inventory (Finished)
303.75
WIP Direct
270.00
WIP Fixed Overhead
13.50
WIP Variable Overhead
______
20.25
303.75
303.75
If the product produced in the previous example is a standard costing item, and the standard cost for the item is $30.00 per unit, the following General Ledger postings are made.
G/L Account
Debit
Credit
Parent Item A (10 @ 30.00)
Inventory (Finished)
300.00
Manufacturing Variance Adjustment
3.75
WIP Direct
270.00
WIP Fixed Overhead
13.50
WIP Variable Overhead
______
20.25
303.75
303.75
Close Transactions Example
When a close transaction is processed for a work order, any unallocated costs posted to the work order are cleared from the Work in Process accounts and posted to the Work Order Scrap account. The Work Order Scrap account is assigned in Work Order Options. If there are no unallocated costs remaining for a work order, no General Ledger postings are made when that work order is closed.
WarningWhen a work order number is entered, it is important to verify that the correct work order is being closed. After a work order is closed, it cannot be reopened, and all remaining costs are purged from work in process.
If the work order used in the previous examples had an additional outside processing transaction posted consisting of $50.00 in direct cost, $2.50 in fixed overhead and $3.75 in variable overhead, the following General Ledger postings would be made when the work order is closed.
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