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

  1. 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 include wages paid to technicians for holiday, sick, vacation, or other time off.  Those hours should be charged as a salary expense.