 In this presentation we will take a look at an example of a time ticket and the recording of a journal entry related to labor for a manufacturing company for a company using a job. 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related in some way but notice here what we're trying to do is get to the cost of the job with the time ticket everything we're tracking here is the actual cost of the job so when we consider the time ticket then we're going to have you know any employee that works on the job and we're ultimately going to take their wages that we pay them which we usually record as wages expense or something or you know hourly wages expense to not an expense but to the job to work in process so that's in essence what we're doing here we're tracking the time we're going to apply that time not to an expense at the period in which we paid the employee or even in which they worked but to an asset inventory not expensing it until we sell the inventory in the form of cost of goods sold so this is going to be a time ticket we're going to have the employee here we'll have the employee number if we have one then of course the job that's going to be the important component the job that we're going to assign it to we could you know we have this the similar punching in the time in time out the time that elapsed the rate and that'll give us the amount that we're going to apply to each job now of course this could be used in a computerized system we could have a you know an old time ticking tracker that we're that we're going to have so whatever way that we're going to use to format this we got to make sure that whatever time we have we're applying it out to the correct job so that we can then post this to work in process and have it be supported then by the job sheets so here's an example of the job sheet i'm not tying this ticket in directly to it but it's just an example of a job sheet then this is a particular job that's going to support all the work in process accounts everything that's on the work in process in a similar way as a subsidiary account by customer supports what's in accounts receivable the job sheets are going to report what's on the balance sheet what's on the trial balance for work in process so in this case we're talking about labor so we're tracking labor here so these time tickets are going to help us then to track the labor we might have if we're working a big construction job or something like that we might have you know multiple time tickets that we're going to have to track and we're going to have to apply them to these job sheets and note what's happening here again when we record the journal entry as we'll see we're not going to record it to wages expense meaning when we process payroll we're in essence debiting not an expense but inventory in the form of work in process supporting it by the job we won't expense it until we sell the inventory at the end of this process so so that's going to be what the time ticket function will be we need some format to do that if we're just if we're doing a construction job then we got to apply that apply it out some way if we have a service a bookkeeping company or a law firm then again we have to apply some way the wages out now again the billing is going to be similar to if we had a if we had a construction company or a a law firm or something like that when we create the invoice we might have a billable rate which may or may not be the same as the as the rate that we're using to apply the cost to the job but here again we're looking at the cost so we're looking at the actual cost meaning in other words this looks like a lot like an invoice we may use this to create the invoice we may take the bottom line number of actual costs as close as we can except for the overhead and mark it up so we might say now we're going to mark it up 30 or 40 percent and that's going to be our sales price or if we're if we're a bookkeeping firm or a a bookkeeping firm or or something like that or a law firm we might be tracking the time of our multiple employees and on the invoice we might be having a similar tracking but we might use billable rates that are different from the pay rate in order to create the invoice that might be a way that we create basically invoices but here we're tracking the actual cost of the employees here because we're tracking the cost of the job okay so if we then took this the direct labor and we took all all of these uh labors that were applying to these jobs we took all the time tickets and we applied them out to the jobs so we have a list of jobs now that we're saying all these jobs now are listed out and we know that direct labor applied to them in other words we can think of it this way if we're saying that the payroll for this time period added up to five that's what we have in payroll for for these individuals then we're breaking it out between these jobs that we paid for and this much is indirect that we couldn't apply to a particular job so we're processing this now with a journal entry just like we would with payroll meaning we're going to credit we're going to say wages payable in a simplified journal entry it might be a credit to cash right uh or but wages payable will show us that it's for wages because we're processing payroll and in the debit usually we would think well it's payroll it's going to go to it's going to go to wages expense and again we're not getting we're not getting into the withholdings and everything right now that's a simplified uh payroll journal entry and we're just going to say well the debit would normally go to payroll expense but now we're going to say no it's going to go to work and process why is it going to go to work and process and not payroll expense when we're basically recording the payment of of employees because the expense isn't there just because it's payroll at the time we pay them it's an expense because we used that work that work in order usually to help us generate revenue in the same time period the matching principle here we use this labor not in order to help us generate revenue yet it helped us to make inventory which is work and process it's part of the inventory so the labor the wages that we're paying as part of inventory we will expense it when we're going to expense it when we sell the inventory in the form of cost of goods sold then the other side this is going to be the the labor that wasn't applied to a job meaning like supervisor salaries or possibly maintenance in the in the warehouse we couldn't apply it to a job so it just is going to go to indirect so it's going to go we're still going to go to wages payable because we're going to pay these people and and so it's going to eventually go to cash that you can think of that as cash we're going to pay them as well it's going to go out of payable and then in the cash eventually and then the debit it's going to go to factory overhead so it's going to go to factory overhead again it's not going to go to wages expense because we haven't used it it's going to go to inventory eventually and we're going to have to apply it out from factory overhead to inventory in some way so if we like posting the journal to the general ledger. We've got the working process here so we've got the working process was at $2,230. It's gonna go up by the $4,200 to $6,430. That then is what we have here $6,430. Wages payable so here's wages payable was at zero it's gonna go up by $4,200 and again you can think about it as if we were paying cash right so wages payable is just gonna be an intermediary if this was a very simplified transaction it would just be a debit to the working process credit to cash and that would be similar to us again just processing the payroll we're not dealing with anything else like the withholdings or anything we're just looking at a very basic kind of payroll journal entry. The main thing to note however of course is that the expense here is not going to an expense it's going to that inventory account. We also note that book problems will often use a payable account when working on these types of systems because what they're trying to do is show us just with the journal entry without having to have a note in the journal entry that what this is related to and if we just debit working process and credit cash then just by looking at the journal entry we wouldn't really know what's happening so we use the payable. Now payable is fairly often used but we might see it in some other areas where it's less you know you something like utilities we might see a utilities payable or something like that because that helps us to know that the part that's going in the working process is related to utilities in that case and usually we wouldn't have a utilities payable because we would just pay the utilities it would be a credit to cash we might do it with a note so just be aware of that so we're just processing the payroll here wages payable then we have the factory overhead 1,200 was that 550 we're going to debit it 1,200 to 1,750 that's the amount in factory overhead and then we've got the wages payable again which was that 4,200 we're going to credit the 1,200 to 5,400 so now we have wages payable which we will pay soon when we do so we will debit this making it go down to zero and credit cash