067 Policy Work - Parts and Service
Expenses
Semi-Fixed
Synopsis
From time to time, a service (or parts) customer may return to the dealership with a complaint (“comeback”). Account 067, Policy Work – Parts and Service is established to record follow-up repairs performed at no charge to the customer.
Debits |
Credits |
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Example 1
Record the write-off of $755 for warranty claims not submitted timely.
Journal: General Journal
Entry: |
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Debit |
Credit |
Account 067-05 |
Policy Work Expense – Service |
$170 |
|
Account 067-07 |
Policy Work Expense – Parts & Accessories |
$585 |
|
Account 263 |
Receivables – Warranty Claims |
|
$755 |
Example 2
Record a repair order in the amount of $310 for mechanical labor performed on a service customer’s vehicle. The customer was not completely satisfied with the service and the dealership split the cost with the customer. The customer labor is $170. The parts sale is $120, the other supplies are $5 and sales tax is $15. The cost of labor is $50. The parts cost is $85 and the shop supplies cost is $4. The customer paid $155 and the other $155 is expensed to policy.
Journal: Service Sales - Cash
Entry: |
|
Debit |
Credit |
Account 225 |
Cash Sales |
$155 |
|
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 067-05 |
Policy Work – Parts & Service – Mechanical Department |
$155 |
|
Account 460A |
Sales – Customer Labor – Cars & Light Duty Trucks |
|
$170 |
Account 467 |
Sales – Parts – Mechanical Repair Orders Cars & Light Duty Trucks |
|
$120 |
Account 469 |
Sales – Other Supplies |
|
$5 |
Account 242 |
Inventory – Parts & Accessories |
|
$85 |
Account 242 |
Inventory – Parts & Accessories |
|
$4 |
Account 247A |
Inventory – Work in Process - Mechanical |
|
$50 |
Account 324 |
Sales Taxes Payable |
|
$15 |
Distribution of Expenses
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Departmental Distribution |
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067 Policy Work- Parts & Service |
New Veh. |
Used Veh. |
Lease & Rental |
Mechanical |
Body Shop |
Parts & Access. |
Gen & Admin. |
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01 |
02 |
03 |
05 |
06 |
07 |
09 |
Replace defective parts installed by dealership |
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Total expense |
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Re-do defective service work performed by a technician no longer employed |
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Mechanical work |
Body shop work |
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Reductions in or adjustments to total charges on customer repair orders as a result of customer dissatisfaction with the work done or the amount of total charges |
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Mechanical work |
Body shop work |
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Comments
For the sake of good customer relations, it may be necessary to provide service “free of charge” to complaining customers. There are occasional instances of poor service work or defective parts that give a customer a valid reason to ask for a policy adjustment. Each incident should be handled on a case-by-case basis.
An analysis of Policy Work may show patterns that might be correctable. For example, if one technician has more than an average number of “comebacks”, the technician might need more training, the appropriate tools or cautioned “not to rush” on each repair. Recognizing patterns is the first step toward correcting the underlying problems and controlling Policy Work Expense.