Overview

Three decisions need to be made to determine your approach to labor costing in Accounting Seed:

1. What source do I want to use for labor costing in the General Ledger? Payroll or Accounting Seed Time Cards?
2. Do I want to use standard or actual costing for salaried employees in my project accounting?
3. Do I want to include burden in my costing rates for project accounting?

1. Labor Costing Source: Payroll vs. Time Cards

Payroll:

This is accomplished by booking a journal entry that debits the appropriate labor expense, benefits, and tax GL accounts.  This data is received from your payroll provider and is the cost of labor in a specific accounting period.

Using a journal entry to record payroll cost will necessitate that you ignore the costing done by Accounting Seed Time Cards for the purposes of financial reporting. The labor costing from Time Cards will still serve as cost data in project job-costing reports and project profitability, however it does not need to be formally reconciled to payroll records.

Pros:

• No reconciliation to payroll is needed
• Labor costing in projects is more flexible and serves as a theoretical view of project profitability 
• Less visibility into individual salary data

Cons:

• Less detail is reported in top-level financials meaning top-level financials will need to include less project specific breakdowns of cost data

Implementation:

• Labor from Time Cards is constructively excluded from General Ledger by posting labor to a dummy GL Account and Contra GL Account. These GL Accounts will be self-balancing in any given Accounting Period and can be excluded or netted together for a zero balance in any financial report. 

Time Cards:

Labor costing from Time Cards is the process by which labor cost is booked to the General Ledger via the posting of Time Cards, and without using the dummy GL and contra GL Accounts as described in the above approach. 

• Top level financials can be very complicated where labor is assigned to multiple GL Accounts, and GL Account variables such as divisions, departments, cost centers and profit centers

• A reconciliation to payroll records is needed on a monthly basis
• Labor costing in projects is less flexible and needs to tie actual expenses incurred

• The Payroll journal entry would debit accrued payroll or an equivalent payroll clearing account and credit cash. Labor costing entries would be configured to Debit GL Expense Accounts for Labor and Credit Accrued or Payroll Clearing.