 In this presentation we will record journal entries related to wages both direct and indirect within a job cost system. Information will be on the left. We're going to enter that into our general journal then post it to the general ledger general ledger being used to create the trial balance. Here is our trial balance. It's an order assets and then liabilities and then equity income and expenses. We of course are focusing in on the asset accounts more specifically the inventory accounts as we take a look at the flow of a job cost system. What we're doing here is looking at the wages that are paid to people that work in basically the where in the construction of whatever we make for making guitars in the construction if we have construction jobs within the construction process to people that work directly on that as well as the people that work indirectly we're going to have to sort those two out and record this information to understand this we first need to think about that we're really kind of just processing payroll here we're processing payroll to people that work on the jobs if they work in the factory and they're making guitars they work in the factory we're processing the payroll now when that happens typically we think that the journal entry if we if we take out all the withholdings we're not going to get into payroll withholdings and whatnot but if we think about the simplified transaction of payroll transaction it would be we're paying someone crediting cash we instead are going to make a payable wages payable and then the debit traditionally we would think would go to wages expense or something some type of expense in this case that's of course what the difference is going to be and it takes a little little while to really understand that this is going to happen a lot in a job cost system because we start to memorize if we've worked in other types of industries a service company merchandising company that every time we have payroll it's just going to be wages expense but in this case when that's because of the matching principle before it used to be that we used those wages in order to help us generate revenue in the same time period and this time where they're not generating revenue yet they're making an asset they're making inventory so that's the first thing we need to realize we're kind of processing payroll but it's going to look different and we're going to have to just basically unlearn if we just memorized kind of the payroll journal entry which is the credit cash or credit wages payable and debit the expense we're not going to debit the expense because it's not an expense type what we're going to have over here is the jobs that they worked on and that's what we will have to track so let's take a look at that real quick on how that might happen from a forms basis just an example so we're going to go to the right over here all the way to the right and we're going to have something like a time ticket of course and the time ticket is going to give us an idea of the the jobs the people that worked the jobs that they worked on so that we can track what job is being worked on so just note that we're going to need some type of system within a job cost system to track which jobs are being worked on so that when we process the payroll we can process it and and select the correct account to hit which is going to be the correct job account when processing their payroll process so this individual worked on job b15 and that's where we need to apply the expense of the wages we're going to pay for this individual note that this could happen for a company that makes stuff or for a service company like a service company like a bookkeeping company may have a job cost system in a similar fashion also note that here we're applying out the actual cost if we work in a bookkeeping company or something like that or law firm we may have a billable rate for people that might be different meaning we might make our invoices using some type of billable rate that's different from the actual pay rate or we might make our invoice with what we actually pay an individual and then mark it up use some kind of markup in order to record it here though we're tracking the cost to the inventory the cost to the job so we're really using the actual number that we pay employees here so I'm going to go all the way to the left again so I've scrolled all the way back to the left now that we're just seeing the documentation that might be used to create this we're going to just look at the jobs here this is the the jobs and the direct labor that we are applying to them which we're putting together by basically tracking as we as the employees work typically in a database program of some kind what job they worked on so job b15 we've got 1200 that's going to be applied for direct labor job b16 900 b17 560 b18 850 and b19 690 for a total of 4200 so the journal entry then is pretty straightforward we don't need to break it out for the journal entry but we do need to break it out for the supporting documentation in each job so the journal entry we're just going to use this total here it's going to go into work and process and that's usually that's going to be kind of the confusing thing here because again typically we would think of it as an expense here we are using these wages in order to help us generate an asset which is going to be inventory which is represented here by unfinished work in process so it's a debit balance we're going to make it go up by doing the same thing to another debit so we're going to right click and copy we're going to put this in b10 right click and paste 123 the amount in c10 is going to be that 4200 then we're going to credit something for 4200 i'm going to use the kind of plug formula of negative of that number and enter and then we just need to see the amount now we could say that we paid cash but typically a lot of book problems and in practice we may go into wages payable first and then pay it at a later time so i'm going to put wages payable so j14 right click and copy we're going to put that in b11 right click and paste 123 values only so again if if this was a normal payroll journal entry for a non-manufacturing company we would credit wages payable or cash and debit wages expense or something like that and then we'd have withholdings too we're simplifying the kind of payroll entry here but we would debit wages expense here we're not debiting the expense and that's kind of the tricky thing that we're going to have to see a few times over as we go through a manufacturing company and that's because of the matching principle we haven't used those wages to help generate revenue yet they're going to help us generate revenue in the future when we finally sell the inventory we will expense it in the form of cost of good sold so the value of that work is going into the inventory which is currently in process and therefore going into work in process so let's record that out here's the work in process account it's going to be one two three four accounts down here it's going to be four accounts over on the gl then we're going to try to just scroll back and forth if you want to make the screen smaller that can help to record i'm going to try to keep it full size and use scrolling to do this we could also freeze the pains but we'll do it this way so we're going to go to work in process here it is we want to be in the debit we are in cell s 10 i'm going to say equals and point to that 4200 and that's going to bring the balance from 2002 30 up by 4200 to 6430 that then