247 Work In Process - Labor

Assets

Inventories

Synopsis

Account 247 is established to record the amount of Work In Process, which is defined as the compensation of Mechanical and Body Shop technicians, but not yet sold to customers.

Debits

Credits

  1. The total agreed-upon compensation, including incentive pay, of mechanical and body shop technicians and their helpers.  This includes those employed in reconditioning used vehicles and in preparing new vehicles for delivery

  2. The amount of an employee’s compensation applicable to productive service work if the individual functions as a service manager or foreman and as a technician

  3. The compensation of employees not classified as technicians for any portion of their time, which is devoted to productive service work

 

  1. The compensation of mechanical and body shop technicians for any portion of their time which is devoted to non-productive work

  2. The Cost of labor on completed repair orders

  3. The monthly adjustment to agree with the schedule of cost of labor on mechanical repair orders in process

  4. The monthly adjustments to agree with the schedule of cost of labor on body shop repair orders in process

 

Example 1

Record a mechanical shop technician’s compensation of $1,722, including holiday and vacation pay and Employer contribution of $122.

Journal: Payroll

Entry:

 

Debit

Credit

Account 247A

Inventory – Work in Process – Mechanical

$800

 

Account 024-05

Absentee Compensation – Mechanical

$800

 

Account 025-05

Taxes – Payroll – Mechanical Department

$122

 

Account 321

Salaries, Wages & Commissions Payable

 

$1,178

Account 323

Payroll Taxes Payable

 

$544

Example 2

Record a customer cash sale of $310 for mechanical repairs on a service customer’s vehicle. The customer mechanical labor sale is $170, the sale of shop supplies is $5, and the sale of parts mechanical repair orders is $120. The cost of customer mechanical labor sales is $50. The cost of shop supplies is $4 and the cost of mechanical parts is $85.

Journal: Service Sales - Cash

Entry:

 

Debit

Credit

Account 225

Cash Sales

$310

 

Account 660A

Cost of Sales – Customer Labor – Cars & Light Duty Trucks

$50

 

Account 669

Cost of Sales – Shop Supplies

$4

 

Account 667

Cost of Sales – Parts – Mechanical Repair Orders Cars & Light Duty Trucks

$85

 

Account 460A

Sales – Customer Labor – Cars & Light Duty Trucks

 

$170

Account 469

Sales – Shop Supplies

 

$5

Account 467

Sales – Parts – Mechanical Repair Orders Cars & Light Duty Trucks

 

$120

Account 247A

Inventory – Work in Process – Mechanical

 

$50

Account 242

Inventory – Parts & Accessories

 

$85

Account 242

Inventory – Parts & Accessories

 

$4

Account 324

Sales Taxes Payable

 

$15

Example 3

Record the $675 monthly adjustment to agree with the schedule of the cost of labor sales on mechanical repair order in process.

Journal: General Journal

Entry:

 

Debit

Credit

Account 665

Adjustment – Cost of Labor Sales – Mechanical

$675

 

Account 247A

Inventory – Work in Process – Mechanical

 

$675

Comments

A debit balance represents the cost of labor on repair orders in process.

Note:

1. This compensation SHOULD NOT include absentee compensation such as holiday, vacation, sick leave and pay while attending training schools.

2. Separate general ledger accounts should be established for the cost of mechanical and body shop labor on repair orders in process.

3. Month-end Open Repair Orders should be reconciled to the General Ledger Work in Process inventory values for Mechanical and Body Shop.

4. Sub-accounts should be created to separate Work in Process between Mechanical and Body Shop technicians.  Also, if non-productive personnel (i.e. Service Advisors, Managers, Porters) perform “Labor”, then a separate sub-account is advisable