Labor Applied Account

[LR]

H,

We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.

Thank you.

LR

[Richard Whaley -- MVP 2006-2008]

The lack of good documentation is the reason we publish our books. This
material is covered in Manufacturing Cost Accounting for Dynamics GP
available from our site.

BUT......

This account is credited when labor is reported to a manufacturing order.
The amount credited to this account is debited to WIP (work in process).
When the finished good is received into inventory, an amount (depending on
the valuation method of the finished item) is credited to WIP and debited to
Inventory Asset. When the MO is closed, any remaining amounts in WIP are
debited to variances.

As for the Labor Absorbed account, it is also a contra account to your labor
expense account. When payroll is calculated, the labor expense for the
manufacturing team is debited to a Direct Labor Expense account. The Labor
Absorbed should be a different account but close in number to the Direct
Labor Expense account. The difference between the two accounts is UnAbsorbed
Direct Labor (a calculated value, not a real account) and represents one of
the components of shop overhead.

What are you doing for Overhead absorption?

Hope this helps.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users

Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
H,
We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.
Thank you.
LR

[LR]

Thanks Richard. You referred to a Labor Absorbed account, where is this
account setup? We are not using GP Payroll module. Do you know what happens
to the credit posting to Labor Applied account? Is it posting later offset by
another?

Thanks.
LR

Post by Richard Whaley -- MVP 2006-2008
The lack of good documentation is the reason we publish our books. This
material is covered in Manufacturing Cost Accounting for Dynamics GP
available from our site.
BUT......
This account is credited when labor is reported to a manufacturing order.
The amount credited to this account is debited to WIP (work in process).
When the finished good is received into inventory, an amount (depending on
the valuation method of the finished item) is credited to WIP and debited to
Inventory Asset. When the MO is closed, any remaining amounts in WIP are
debited to variances.
As for the Labor Absorbed account, it is also a contra account to your labor
expense account. When payroll is calculated, the labor expense for the
manufacturing team is debited to a Direct Labor Expense account. The Labor
Absorbed should be a different account but close in number to the Direct
Labor Expense account. The difference between the two accounts is UnAbsorbed
Direct Labor (a calculated value, not a real account) and represents one of
the components of shop overhead.
What are you doing for Overhead absorption?
Hope this helps.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
H,
We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.
Thank you.
LR

[Richard Whaley -- MVP 2006-2008]

Sorry...Labor Applied = Labo Absorbed

You do not need to use the GP Payroll module. But you should have some
payroll direct labor accounts where you post the expense of manufacturing
labor. The Labor Applied/Labor Absorbed account is a contra expense account,
reducing the expense by absorbing the cost of labor into the production costs
of the product and ultimately moving it to an Asset to be sold.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users

Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
Thanks Richard. You referred to a Labor Absorbed account, where is this
account setup? We are not using GP Payroll module. Do you know what happens
to the credit posting to Labor Applied account? Is it posting later offset by
another?
Thanks.
LR

Post by Richard Whaley -- MVP 2006-2008
The lack of good documentation is the reason we publish our books. This
material is covered in Manufacturing Cost Accounting for Dynamics GP
available from our site.
BUT......
This account is credited when labor is reported to a manufacturing order.
The amount credited to this account is debited to WIP (work in process).
When the finished good is received into inventory, an amount (depending on
the valuation method of the finished item) is credited to WIP and debited to
Inventory Asset. When the MO is closed, any remaining amounts in WIP are
debited to variances.
As for the Labor Absorbed account, it is also a contra account to your labor
expense account. When payroll is calculated, the labor expense for the
manufacturing team is debited to a Direct Labor Expense account. The Labor
Absorbed should be a different account but close in number to the Direct
Labor Expense account. The difference between the two accounts is UnAbsorbed
Direct Labor (a calculated value, not a real account) and represents one of
the components of shop overhead.
What are you doing for Overhead absorption?
Hope this helps.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
H,
We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.
Thank you.
LR

[LR]

One final question, if the Labor Applied account is contra-expense account,
then it should be a P&L account type, right? In GP example I saw in Fabrikam,
it was a balance sheet account.

LR.

Post by Richard Whaley -- MVP 2006-2008
Sorry...Labor Applied = Labo Absorbed
You do not need to use the GP Payroll module. But you should have some
payroll direct labor accounts where you post the expense of manufacturing
labor. The Labor Applied/Labor Absorbed account is a contra expense account,
reducing the expense by absorbing the cost of labor into the production costs
of the product and ultimately moving it to an Asset to be sold.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
Thanks Richard. You referred to a Labor Absorbed account, where is this
account setup? We are not using GP Payroll module. Do you know what happens
to the credit posting to Labor Applied account? Is it posting later offset by
another?
Thanks.
LR

Post by Richard Whaley -- MVP 2006-2008
The lack of good documentation is the reason we publish our books. This
material is covered in Manufacturing Cost Accounting for Dynamics GP
available from our site.
BUT......
This account is credited when labor is reported to a manufacturing order.
The amount credited to this account is debited to WIP (work in process).
When the finished good is received into inventory, an amount (depending on
the valuation method of the finished item) is credited to WIP and debited to
Inventory Asset. When the MO is closed, any remaining amounts in WIP are
debited to variances.
As for the Labor Absorbed account, it is also a contra account to your labor
expense account. When payroll is calculated, the labor expense for the
manufacturing team is debited to a Direct Labor Expense account. The Labor
Absorbed should be a different account but close in number to the Direct
Labor Expense account. The difference between the two accounts is UnAbsorbed
Direct Labor (a calculated value, not a real account) and represents one of
the components of shop overhead.
What are you doing for Overhead absorption?
Hope this helps.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
H,
We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.
Thank you.
LR

[Richard Whaley -- MVP 2006-2008]

You are correct, the Fabrikam data is wrong.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users

Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
One final question, if the Labor Applied account is contra-expense account,
then it should be a P&L account type, right? In GP example I saw in Fabrikam,
it was a balance sheet account.
LR.

Post by Richard Whaley -- MVP 2006-2008
Sorry...Labor Applied = Labo Absorbed
You do not need to use the GP Payroll module. But you should have some
payroll direct labor accounts where you post the expense of manufacturing
labor. The Labor Applied/Labor Absorbed account is a contra expense account,
reducing the expense by absorbing the cost of labor into the production costs
of the product and ultimately moving it to an Asset to be sold.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
Thanks Richard. You referred to a Labor Absorbed account, where is this
account setup? We are not using GP Payroll module. Do you know what happens
to the credit posting to Labor Applied account? Is it posting later offset by
another?
Thanks.
LR

Post by Richard Whaley -- MVP 2006-2008
The lack of good documentation is the reason we publish our books. This
material is covered in Manufacturing Cost Accounting for Dynamics GP
available from our site.
BUT......
This account is credited when labor is reported to a manufacturing order.
The amount credited to this account is debited to WIP (work in process).
When the finished good is received into inventory, an amount (depending on
the valuation method of the finished item) is credited to WIP and debited to
Inventory Asset. When the MO is closed, any remaining amounts in WIP are
debited to variances.
As for the Labor Absorbed account, it is also a contra account to your labor
expense account. When payroll is calculated, the labor expense for the
manufacturing team is debited to a Direct Labor Expense account. The Labor
Absorbed should be a different account but close in number to the Direct
Labor Expense account. The difference between the two accounts is UnAbsorbed
Direct Labor (a calculated value, not a real account) and represents one of
the components of shop overhead.
What are you doing for Overhead absorption?
Hope this helps.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
H,
We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.
Thank you.
LR

[LR]

Thanks Richard. This is very helpful.

LR

Post by Richard Whaley -- MVP 2006-2008
Sorry...Labor Applied = Labo Absorbed
You do not need to use the GP Payroll module. But you should have some
payroll direct labor accounts where you post the expense of manufacturing
labor. The Labor Applied/Labor Absorbed account is a contra expense account,
reducing the expense by absorbing the cost of labor into the production costs
of the product and ultimately moving it to an Asset to be sold.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
Thanks Richard. You referred to a Labor Absorbed account, where is this
account setup? We are not using GP Payroll module. Do you know what happens
to the credit posting to Labor Applied account? Is it posting later offset by
another?
Thanks.
LR

Post by Richard Whaley -- MVP 2006-2008
The lack of good documentation is the reason we publish our books. This
material is covered in Manufacturing Cost Accounting for Dynamics GP
available from our site.
BUT......
This account is credited when labor is reported to a manufacturing order.
The amount credited to this account is debited to WIP (work in process).
When the finished good is received into inventory, an amount (depending on
the valuation method of the finished item) is credited to WIP and debited to
Inventory Asset. When the MO is closed, any remaining amounts in WIP are
debited to variances.
As for the Labor Absorbed account, it is also a contra account to your labor
expense account. When payroll is calculated, the labor expense for the
manufacturing team is debited to a Direct Labor Expense account. The Labor
Absorbed should be a different account but close in number to the Direct
Labor Expense account. The difference between the two accounts is UnAbsorbed
Direct Labor (a calculated value, not a real account) and represents one of
the components of shop overhead.
What are you doing for Overhead absorption?
Hope this helps.
--
Richard L. Whaley
Author / Consultant / MVP 2006-2008
Documentation for Software Users
Get our Free Tips and Tricks Newsletter and check out our books at
http://www.AccoladePublications.com

Post by LR
H,
We have noticed the Labor Applied account setup for our Manufacturing labor
codes gets credited when labor data is collected. When is the offsetting
entry posted? Can someone please explain the entries to this account. I
couldn't find any explanations for this account in the manual.
Thank you.
LR