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3 Accounting For Labor

This document discusses accounting for labor costs, including direct and indirect labor. It describes three common wage plans: hourly rate plans, piece rate plans, and modified wage plans. It also summarizes the key aspects of labor cost control, including maintaining payroll records and employees' earnings records to properly record payroll transactions.

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Ronn Robby Rosales
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183 views

3 Accounting For Labor

This document discusses accounting for labor costs, including direct and indirect labor. It describes three common wage plans: hourly rate plans, piece rate plans, and modified wage plans. It also summarizes the key aspects of labor cost control, including maintaining payroll records and employees' earnings records to properly record payroll transactions.

Uploaded by

Ronn Robby Rosales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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UNIVERSITY OF SANTO TOMAS

College of Commerce and Business Administration


Acct 4 – Cost Accounting

ACCOUNTING FOR LABOR


I. Introduction
- Labor – divided into two

- Direct labor – “touch” labor – costs directly traceable to an


individual job; examples—machinists, assemblers, work to
convert raw materials into finished goods

- Indirect labor are labor costs not directly traceable to a specific


job. These are “support costs” of producing the produc.
Examples—salaries and wages of the production manager,
department supervisor, forklift operator, factory janitor and all
support jobs who worked during the period.

II. Wage Plans


- Hourly rate plan – multiplying the number of hours worked by
the established rate per hour; no incentive for a high level of
productivity; being paid for just being on the job.

- Piece Rate plan – for companies that give high priority to output
produced; based the earnings on the company’s quantity of
production; it may encourage employees to sacrifice quality by
producing huge volumes and maximizing their earnings.

- Modified wage plans – base hourly wage if a worker does not


reach an established quota. If the quota is exceeded, an
additional payment per piece shall be made.
Journal entry to record the distribution of payroll into production:

WIP-------------xxx
FOH------------xxx
Payroll----------------xxx

III. Labor Cost Control

a. Payroll Function - completing and maintaining the:


i. The payroll records
ii. Employees’ Earnings records
iii. Payroll Summaries
- Within a single accounting department or outsourced

b. Payroll Records

- Assembles and summarizes each period’s payroll data and


serves as a subsidiary record for the preparation of a general
journal entry:

Payroll ----xxx
Tax Withheld---------------xxx
SSS---------------------------xxx
Pag-ibig---------------------xxx
Philhealth------------------xxx
Wages Payable----------xxx

c. Employees’ Earnings Records

- cumulative record of employees’ earnings


- Payment of net earnings – cash envelopes, checks, credit on
ATM Savings accounts
- Journal entry:

Wages Payable----------xxx
Cash--------------------------xxx

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