665 Adjustment - Cost of Labor Sales

665 Adjustment – Cost of Labor Sales - Mechanical

Cost of Sales

Fixed Operations

Cost of Sales Synopsis

Account 665 is established to record the amount of adjustment required to reconcile Work in Process to the actual amount of labor on open repair orders.

Debits

Credits

Monthly adjustment of Account 247, Work In Process - Labor, to agree with the schedule of the cost of labor sales on mechanical repair orders in process

Example 1

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

Note:

1. This adjustment represents the cost of mechanical technicians’ compensation for productive time, which was not applied on repair orders.

2. This account should not have a credit balance. If it does, it is an indication of incorrect costing procedures.

3. Transactions, which are related, should be recorded in separate sub-accounts. Sub-accounts serve to keep records organized for future analysis and auditing. The sub-accounts in these examples are designated by a letter following the account number (suffix). Please refer to your DSP's instructions for establishing sub-accounts.