473 Internal Labor

473 Internal Labor – Body Shop

Sales

Fixed Operations

Sales Synopsis

Account 473 is established to record the amount of Internal Body Shop Paint & Labor performed and sold to other departments.

Debits

Credits

Internal selling price of reconditioning used vehicles
Internal selling price of dealer policy work
Internal selling price of repairing company-owned vehicles
Internal selling price of maintaining used vehicles in salable condition
Internal selling price of repairing customers’ vehicles damaged due to employee negligence, for which an employee is not charged

673 Internal Labor – Body Shop

Cost of Sales

Fixed Operations

Cost of Sales Synopsis

Account 673 is established to record the Cost of Sales of Internal Body Shop Paint & Labor sold above.

Debits

Credits

Cost of Body Shop Paint & Labor sold to customers sold to other Departments

Example 1

Record the body shop repair order of $ $565 for work performed on a company vehicle. The internal labor is $140. The parts sale is $394. The paint and body shop materials are $31 and the sales tax is $21. The cost of labor is $60. The parts cost is $315 and the paint and body shop materials cost is $28.

Journal: Internal Sales

Entry:		Debit	Credit
Account 051-05	Company Vehicle Expense – Mechanical Department	$565
Account 673	Cost of Sales – Internal Labor – Paint & Body	$60
Account 679	Cost of Sales – Paint & Body Shop Materials	$28
Account 681	Cost of Sales – Parts – Internal	$315
Account 242	Inventory – Parts & Accessories		$315
Account 245	Inventory – Paint & Body Shop Materials		$28
Account 247B	Inventory – Work in Process – Body Shop		$60
Account 473	Sales – Internal Labor – Paint & Body		$140
Account 479	Sales – Paint & Body Shop Materials		$31
Account 481	Sales – Parts – Internal		$394

Example 1A

If state and local tax regulations require the payment of sales or excise tax on Internal Sales, then the following example applies. The amount of sales tax incurred is $21. Professional accounting and tax advice should be obtained regarding the proper handling of tax matters.

Journal: Internal Sales

Entry:		Debit	Credit
Account 051-05	Company Vehicle Expense – Mechanical Department	$586
Account 673	Cost of Sales – Internal Labor – Paint & Body	$60
Account 679	Cost of Sales – Paint & Body Shop Materials	$28
Account 681	Cost of Sales – Parts – Internal	$315
Account 242	Inventory – Parts & Accessories		$315
Account 245	Inventory – Paint & Body Shop Materials		$28
Account 247B	Inventory – Work in Process – Body Shop		$60
Account 324	Sales Taxes Payable		$21
Account 473	Sales – Internal Labor – Paint & Body		$140
Account 479	Sales – Paint & Body Shop Materials		$31
Account 481	Sales – Parts – Internal		$394

Note:

It is recommended that whenever practicable labor sales be costed on actual basis because material losses of productive time may be concealed by the inaccuracies inherent in percentage costing methods. Such inaccuracies can result from failure to update costing percentages when changes occur in the compensation of technicians and in the structural of selling prices of labor, and other reasons.

Assure that Repair Order templates, and accounting are set up correctly by the DSP and maintained whenever technicians have payroll changes. Technician incentives or bonuses should be considered cost of labor sales and debited to A/C 665 and 675 as applicable. However, holiday, vacation, and sick pay should not be charged to Cost of Labor Sales, but as a non-productive wage expense in A/C 24 - Absentee Compensation.

Before closing each month, assure that the balance in A/C 247 - Work in Process, matches the total cost of labor on open (unclosed) R.O.'s, any difference should be adjusted to A/C 665 or 675 - Labor Adjustment.