Posting to General Ledger - Standard Costing

The standard costing system posts all transactions that affect the value of inventory to the GL inventory distribution journals. All transactions are processed using standard costs that have been established with variances being posted to a series of variance account numbers.

General Ledger Account Numbers Used

Before processing any transactions in the manufacturing modules you must set up the GL account numbers to use for posting to the inventory distribution journals. These account numbers can be found in the Product Codes, Departments, Purchasing Parameters, and Distribution Accounts forms.

The following list details the accounts you need to set up.

Product Codes - WIP

WIP Material

WIP Labor

WIP Fixed Overhead

WIP Variable Overhead

WIP Outside

Product Codes - Miscellaneous

Inventory Adjustment

Product Codes - Applied Overhead

Material Fixed Overhead Applied

Material Variable Overhead Applied

Note: The Material Fixed Overhead Applied and the Material Variable Overhead Applied accounts are required only when basing overhead on job material issues.

Product Codes - Variance

Purchase Cost

Material Usage

Routing

Product Codes - Labor Variance

Labor Rate

Labor Usage

Product Codes - Overhead Variance

Labor Fixed Overhead Usage

Labor Variable Overhead Usage

Material Fixed Overhead Usage

Material Variable Overhead Usage

Machine Fixed Overhead Usage

Machine Variable Overhead Usage

Note: The Material Fixed Overhead Usage and the Material Variable Overhead Usage accounts are required only when basing overhead on job material issues.

Purchasing Parameters

Vouchers Payable

Departments

Direct Labor Applied Account

Fixed Overhead Applied Account

Variable Overhead Applied Account

Note: The Fixed Overhead Applied and the Variable Overhead Applied accounts are required only when basing overhead on job labor.

Although these rates default from this location, they are also maintainable at the Current Operations, Job Operations, and Estimate Operations forms.

Work Centers - Costing

Fixed Machine Overhead Applied Account

Variable Machine Overhead Applied Account

Although these rates default from this location, they are also maintainable at the Current Operations, Job Operations, and Estimate Operations forms.

Distribution Accounts - Inventory

Inventory

Inventory Labor

Inventory Fixed Overhead

Inventory Variable Overhead

Inventory Outside

Distribution Accounts - Sales/Cost of Goods Sold

COGS Material

COGS Fixed Overhead

COGS Variable Overhead

COGS Outside

Distribution Accounts - In-Transit

In-Transit Material

In-Transit Labor

In-Transit Fixed Overhead

In-Transit Variable Overhead

In-Transit Outside

Note: You are allowed to delete any distribution account record, including the default distribution account with a blank warehouse and blank product code.

The inventory account number used for journal transactions does not come directly from the Distribution Accounts form. Rather, the inventory accounts used comes from the stock location being accessed when the transaction is performed.

When a stock location is added for an item in the Inventory module, an inventory account is entered for the location, and an account number for each cost detail component is added.

The default for these fields are the inventory account numbers in the Distribution Accounts file to which the item belongs.

To locate the inventory account numbers, the system searches, in the following order, for:

An exact match for both the warehouse and the product code.
A match for the product code and a blank warehouse.
A match for the warehouse and a blank product code.

The system does not post to the G/L inventory distribution journals if any of the account numbers it is attempting to use are not set up.

Transaction Posting to the Inventory Distribution Journals

Outlined below is every transaction that is posted to the inventory distribution journals when standard costing is being used.

Purchasing Transactions

The following transactions are posted to the inventory distribution journal named PO Dist.

Purchase Order Receipt:


	Debit	Credit
Inventory	xxxx
Vouchers Payable		xxxx
Purchase Variance	xxxx or	xxxx

Note: Since this transaction is for a purchased item, only inventory material cost details component is posted.

Inventory = (quantity received * standard unit cost from the Items form)
Vouchers Payable = (quantity received * po unit cost)
Purchase Variance = (qty received *(std unit cost - po unit cost))

The amount that inventory is debited is the quantity received multiplied by the item's standard unit cost: AID = QR * ISUC, where:

AID = Amount that Inventory is Debited
QR = Quantity Received
ISUC = Item's Standard Unit Cost

Vouchers Payable is credited with quantity received multiplied by the purchase order line item unit cost. If there is a difference between the item's standard unit cost and the purchase order unit cost, the purchase cost variance account is either debited or credited with the difference, which balances the transaction.

If (ISUC - POUC) >> 0, then PCVA = DD or CD, where:

ISUC = Item's Standard Unit Cost
POUC = Purchase Order Line Item Unit Cost
PCVA = Purchase Cost Variance Amount
DD = Debited with the Difference
CD = Credited with the Difference

Purchase Order Return:


	Debit	Credit
Vouchers Payable	xxxx
Inventory		xxxx
Purchase Variance	xxxx or	xxxx

Note: Since this transaction is for a purchased item, only inventory material cost details component is posted.

Vouchers Payable = (quantity returned * po unit cost)
Inventory = (quantity returned * Items standard unit cost)
Purchase Variance = (qty returned *(std unit cost - po unit cost))

The amount that vouchers payable is debited is the quantity returned multiplied by the purchase order unit cost. Inventory is credited with quantity returned multiplied by the item's standard unit cost. If there is a difference between the item's standard unit cost and the purchase order unit cost the purchase cost variance account is either debited or credited with the difference, which balances the transaction.

Voucher Generation:


	Debit	Credit
a. If vouchered cost is greater than receipt cost:
Vouchers Payable	xxxx
Purchase Variance	xxxx
Accounts Payable		xxxx
b. If vouchered cost is less than receipt cost:
Vouchers Payable	xxxx
Purchase Variance		xxxx
Accounts Payable		xxxx

The previous transaction is created only if any line items were vouchered at a different cost than the cost at which they were received into inventory. (The cost at which the items were received into inventory is the line item unit cost field at the time of the receipt.)

Variance = (VP - AP), where:

VP = (qty vouchered * received cost)
AP = (qty vouchered * vouchered cost)

Production Transactions

The following transactions are posted to the inventory distribution journal named SF Dist.

Job Material Issue:


	Debit	Credit
WIP Material	xxxx
WIP Labor	xxxx
WIP Fixed Overhead	xxxx
WIP Variable Overhead	xxxx
WIP Outside	xxxx
Inventory Material		xxxx
Inventory Labor		xxxx
Inventory Fixed Overhead		xxxx
Inventory Variable Overhead		xxxx
Inventory Outside		xxxx
Fixed Material Overhead Applied		xxxx
Variable Material Overhead Applied		xxxx

At the time of issue, the work in process account is debited with the total standard cost of the material being issued plus the fixed and variable material overhead amounts:

WIPA = MC + (FMO * MC) + (VMO * MC), where:

WIPA = WIP Amount
MC = Material Cost
FMO = Fix Material Overhead
VMO = Variable Material Overhead

MC = SUC * QI, where:

MC = Material Cost
SUC = Standard Unit Cost of Material
QI = Quantity Issued

Inventory is credited with the material cost shown above. The Overhead accounts are credited with the material cost multiplied by the material overhead rates.

Job Material Withdrawal:


&nbap;	Debit	Credit
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
WIP Material		xxxx
WIP Labor		xxxx
WIP Fixed Overhead		xxxx
WIP Variable Overhead		xxxx
WIP Outside		xxxx

The amount used is the quantity withdrawn multiplied by the item's standard unit cost.

Post Job Transaction:


	Debit	Credit
WIP Material	xxxx
WIP Labor	xxxx
WIP Fixed Overhead	xxxx
WIP Variable Overhead	xxxx
WIP Outside	xxxx
Direct Labor Applied		xxxx
Fixed Overhead Applied		xxxx
Variable Overhead Applied		xxxx
Labor Rate Variance	xxxx or	xxxx
Labor Usage Variance	xxxx or	xxxx
Fixed Overhead Usage Variance	xxxx or	xxxx
Variable Overhead Usage Variance	xxxx or	xxxx

Work in process (WIP) is debited (increased) by what the labor and overhead should be for the transaction entered based on the standard run and setup times in the Job Operations record and the standard setup and run rates in the Work Centers form. The calculation varies depending on the type of job transaction being processed.

WIP amount for (S)etup transaction = [(SSH * WCSSR) * EFFICIENCY FACTOR] + [(SSH * DFOR) * EFFICIENCY FACTOR] + [(SSH * DVOR) * EFFICIENCY FACTOR], where:

SSH = Standard Setup Hours
WCSSR = Work Center Standard Setup Rate
DFOR = Department Fixed Overhead Rate
DVOR = Department Variable Overhead Rate

WIP amount for (R)un Transaction = [(AP * SRHU * WCSRR) * EFFICIENCY FACTOR] + [(AP * SRHU * DFOR) * EFFICIENCY FACTOR] + [(AP * SRHU * DVOR) * EFFICIENCY FACTOR], where:

AP = Actual Pieces
SRHU = Standard Run Hours (Labor) per Unit
WCSRR = Work Center Standard Run Rate
DFOR = Department Fixed Overhead Rate
DVOR = Department Variable Overhead Rate

Direct labor applied, fixed overhead applied, and variable overhead applied amounts are based on the actual hours reported for the transaction:

WIP Amount for (C) Machine Transaction = [(AP * SRHMU * WCFOR) * Efficiency Factor] + [(AP * SRHMU * WCVOR) * Efficiency Factor], where:

AP = Actual Pieces
SRHMU = Standard Run Hours (Machine) per Unit
WCFOR = Work Center Fixed Overhead Rate (Machine)
WCVOR = Work Center Variable Overhead Rate (Machine)

FO = (AH * DFOR) or (M * MFOR), where:

FO = Fixed Overhead
AH = Actual Hours (Labor)
DFOR = Department Fixed Overhead Rate
M = Material

MFOR = Material Fixed Overhead Rate

VO = (AH * DVOR) or (Material * MFOR), where:

VO = Variable Overhead
AH = Actual Hours (Labor)
DVOR = Department Variable Overhead Rate
M = Material
MFOR = Material Fixed Overhead Rate

An entry is made for labor rate variance if there is any difference between the actual employee manufacturing rate and the work center standard pay rate:

LRV = (MR - SR) * AH, where:

LRV = Labor Rate Variance
SR = Standard Rate
MR = Manufacturing Rate
AH = Actual Hours (Labor)

A labor usage variance, fixed overhead variance, and variable overhead variance are posted if the actual hours are less than (<) or greater than (>) the time it should have taken to complete the pieces that were reported:

LUV = ((((SRHU / EF) * PC) - AH) * SPR), where:

LUV = Labor Usage Variance
SRHU = Standard Run Hours per Unit
PC = Pieces Complete
AH = Actual Hours (Labor)
SPR = Standard Pay Rate
EF = Efficiency Factor (100/ER)
ER = Efficiency Rate
WCSSR = Work Center Standard Setup Rate

SET-UP: LUV = ((SSHU - AH) * WCSSR) / ER

FOUV = (((SRHU / EF) * PC) - AH) * DFOR), where:

FOUV = Fixed Overhead Usage Variance
SRHU = Standard Run Hours per Unit
PC = Pieces Complete
AH = Actual Hours (Labor)
DFOR = Department Fixed Overhead Rate
SSHU = Standard Setup Hours per unit
EF = Efficiency Factor (100/ER)
ER = Efficiency Rate

SET-UP: FOUV= ((SSHU - AH) * DFOR) / ER

VOUV = (((SRHU / ER)* PC) - AH) * DVOHR), where:

VOUV = Variable Overhead Usage Variance
SRHU = Standard Run Hours per Unit
PC = Pieces Complete
AH = Actual Hours (Labor)
DVOHR = Department Variable Overhead Rate
SSHU = Standard Setup Hours per Unit
ER = Efficiency Rate

SET-UP: ((SSHU) - AH) * DVOHR) / ER

FMOUV = (((SRHU / ER) * PC) - AH)) * WCFOR, where:

FMOUV = Fixed Machine Overhead Usage Variance
SRHU = Standard Run Hours (Machine) Per Unit
PC = Pieces Complete
AH = Actual Hours (Machine)
WCFOR = Work Center Fixed Overhead Rate (Machine)
ER = Efficiency Rate

VMOUV = (((SRHU / ER) * PC)- AH)) * WCVOR, where:

VMOUV = Variable Machine Overhead Usage Variance
WCVOR = Work Center Variable Overhead Rate (Machine)
ER = Efficiency Rate

Job Finish (Put to Stock):


	Debit	Credit
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
WIP Material		xxxx
WIP Labor		xxxx
WIP Fixed Overhead		xxxx
WIP Variable Overhead		xxxx
WIP Outside		xxxx

Both inventory and WIP are posted with the quantity being put to stock multiplied by the Items form's standard unit cost of the item being moved to inventory.

xxxx = (quantity completed * Items standard unit cost)

Job Close:

If the quantity of any material issued is more or less than the standard quantity required, the following accounts are adjusted:

Material Usage Variance
Fixed Material Overhead Usage Variance
Variable Material Overhead Usage Variance
WIP Material
WIP Labor
WIP Fixed Overhead
WIP Variable Overhead
WIP Outside

The material usage variance amount is the difference between the standard quantity required and the actual quantity issued, extended by the standard cost of the material.

The overhead variance amounts are material usage variance extended by the fixed and variable material overhead rates.

If subsequent to this transaction there is any remaining WIP amount (+ or -), the following adjustment is made.


	Debit	Credit
a. If remaining WIP amount is greater than (>) 0 then:
Routing Variance	xxxx
WIP Material		xxxx
WIP Labor		xxxx
WIP Fixed Overhead		xxxx
WIP Variable Overhead		xxxx
WIP Outside		xxxx
b. If remaining WIP amount is less than (<) 0 then:
WIP Material		xxxx
WIP Labor	xxxx
WIP Fixed Overhead	xxxx
WIP Variable Overhead	xxxx
WIP Outside	xxxx
Routing Variance		xxxx

This transaction may be necessary since the WIP account is increased with amounts that are based on the standard times and rates that are established for the job. The decrease of the WIP in the job finish transaction is based on the standard cost of the item being manufactured. If the total standards for the job do not match the standard unit cost of the item, this adjustment to WIP needs to be made.

If the job is not closed at the time the job transaction is posted, the above transaction is posted at the time the status of the job is manually changed from (R)eleased to (C)omplete.

Inventory Control Transactions

The following transactions (unless otherwise specified) are posted to the inventory distribution journal named IC Dist.

Inventory Adjustment Transaction:


	Debit	Credit
a. Increase quantity:
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
Inventory Adjustment		xxxx
b. Decrease quantity:
Inventory Adjustment	xxxx
Inventory Material		xxxx
Inventory Labor		xxxx
Inventory Fixed Overhead		xxxx
Inventory Variable Overhead		xxxx
Inventory Outside		xxxx

The amount used for an inventory adjustment transaction is the adjustment quantity multiplied by the standard unit cost of the item.

Cycle counting and physical inventory posting create transactions like the transactions depicted previously. Either transaction a or b is created, depending on whether the count quantity is greater than (>) or less than (<) the original quantity.

Inventory Move:


	Debit	Credit
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
Inventory Material		xxxx
Inventory Labor		xxxx
Inventory Fixed Overhead		xxxx
Inventory Variable Overhead		xxxx
Inventory Outside		xxxx

This transaction is only posted if the From and To locations specified on the form have different inventory accounts tied to them. The amount used is the move quantity times the standard unit cost.

Location Update:

A transaction is created if you change the inventory account tied to the location. (The example assumes that all cost details accounts are changed.)


	Debit	Credit
Inventory (New accounts)
Inventory Material Cost 1101	xxxx
Inventory Labor Cost 1102	xxxx
Inventory Fixed Overhead Cost 1103	xxxx
Inventory Variable Overhead Cost 1104	xxxx
Inventory Outside Cost 1105	xxxx
Inventory (Old accounts)
Inventory Material Cost 1001		xxxx
Inventory Labor Cost 1002		xxxx
Inventory Fixed Overhead Cost 1003		xxxx
Inventory Variable Overhead Cost 1004		xxxx
Inventory Outside Cost 1005		xxxx

The amount used is the quantity at the location multiplied by the standard unit cost of the item.

Location Insertion:


	Debit	Credit
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
Inventory Adjustment		xxxx

This transaction is only posted if a quantity is entered for the location at the same time it is added. The amount is the quantity entered multiplied by the item's standard unit cost.

Roll Current Cost to Std Cost utility:


	Debit	Credit
a. If the new standard is greater than (>) old standard:
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
Inventory Adjustment		xxxx
b. If the new standard is less than (<) old standard:
Inventory Adjustment	xxxx
Inventory Material		xxxx
Inventory Labor		xxxx
Inventory Fixed Overhead		xxxx
Inventory Variable Overhead		xxxx
Inventory Outside		xxxx

Miscellaneous Receipt:


	Debit	Credit
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
Account Entered		xxxx
Purchase Cost	xxxx	xxxx

The amount used is the quantity entered multiplied by the item's standard unit cost.

The credit account is the GL account number entered by you. The account defaults to the item's Inventory Adjustment account.

All variances are posted to the account found in the Purchase Cost field on the item's Product Codes form.

Miscellaneous Issue:


	Debit	Credit
Account Entered	xxxx
Inventory Material		xxxx
Inventory Labor		xxxx
Inventory Fixed Overhead		xxxx
Inventory Variable Overhead		xxxx
Inventory Outside		xxxx

The amount used is the quantity entered multiplied by the item's standard unit cost.

The debit account is the GL account number you entered. The account defaults to the item's Inventory Adjustment account.

Job Issue:

The following transactions are posted to the inventory distribution journal named SF Dist.


	Debit	Credit
WIP Material	xxxx
WIP Labor	xxxx
WIP Fixed Overhead	xxxx
WIP Variable Overhead	xxxx
WIP Outside	xxxx
Inventory Material		xxxx
Inventory Labor		xxxx
Inventory Fixed Overhead		xxxx
Inventory Variable Overhead		xxxx
Inventory Outside		xxxx
Fixed Material Overhead Applied		xxxx
Variable Material Overhead Applied		xxxx

At the time of issue, the work in process account is debited and the inventory account is credited with the standard unit cost of the item issued multiplied by the quantity issued plus overhead. At the time of job close, the material quantity variance is calculated, the work in process account debited, and the material usage variance account credited.


	Debit	Credit
Material Usage Variance		xxxx
WIP Material	xxxx
WIP Labor	xxxx
WIP Fixed Overhead	xxxx
WIP Variable Overhead	xxxx
WIP Outside	xxxx

Job Receipt:

The following transactions are posted to the inventory distribution journal named SF Dist.


	Debit	Credit
Inventory Material	xxxx
Inventory Labor	xxxx
Inventory Fixed Overhead	xxxx
Inventory Variable Overhead	xxxx
Inventory Outside	xxxx
WIP Material		xxxx
WIP Labor		xxxx
WIP Fixed Overhead		xxxx
WIP Variable Overhead		xxxx
WIP Outside		xxxx

Both inventory and WIP are posted with the quantity being put to stock multiplied by the Item Maintenance standard unit cost of the item being moved to inventory.

xxx = (quantity completed * item standard unit cost)

If, subsequent to this transaction, there is any remaining WIP amount (+ or -) the following adjustment is made.


	Debit	Credit
a. If remaining WIP amount is greater than (>) 0:
Other WIP Variance (Routing Variance)	xxxx
WIP Material		xxxx
WIP Labor		xxxx
WIP Fixed Overhead		xxxx
WIP Variable Overhead		xxxx
WIP Outside		xxxx
b. If remaining WIP amount is less than (<) 0:
WIP Material	xxxx
WIP Labor	xxxx
WIP Fixed Overhead	xxxx
WIP Variable Overhead	xxxx
WIP Outside	xxxx
Other WIP Variance (Routing Variance)		xxxx