Applying Overhead to Jobs
You can apply overhead to your jobs by using the General Journal entry
window. The original transactions are not applied to jobs because these
expenses are not associated with any one job. To apply overhead to a job
without overstating the expense
- Post the debit to the expense account and assign
the appropriate job, phase, and cost code.
- Then, post the same amount as a credit to the
expense account without assigning a job, phase, and cost code.
This ensures that you have not affected the expense account balance,
but have applied the overhead to the job. Applying a debit to a job not
only applies the expense to the job, but also creates a reimbursable expense
that can be applied to a customer invoice, so you can bill your customers
for your overhead expenses.
Graphic Example
For an example, if you have posted transactions to recognize the following
overhead expenses, you would have a total of $2700 that should be applied
to your jobs. When entering the expense transaction, it could be applied
in part to each job, but that could be a difficult and time-consuming
task.
|
Telephone
|
$675.00
|
|
Electricity
|
$1225.00
|
|
Gas
|
$495.00
|
|
Miscellaneous Office
|
$305.00
|
|
Total Overhead
|
$2700.00
|
Instead, enter one General Journal transaction to apply the expense
to your jobs. To do this without overstating your expenses, make the entry
as shown below.
|
89000
|
Overhead Distribution
|
900.00
|
|
CHAPMAN-01, ADMIN
|
|
89000
|
Overhead Distribution
|
900.00
|
|
HENSLEY-01, ADMIN
|
|
89000
|
Overhead Distribution
|
900.00
|
|
SHARP-01, ADMIN
|
|
89000
|
Overhead Distribution
|
|
2700.00
|
|
Entered in this way, you will create a "wash" for your general
ledger account balances, while adding $900.00 in expenses to each of the
jobs listed in the Job column.
Step-by-step instructions for applying overhead to jobs
Determine the total amount of overhead expense that you want to apply
to your jobs and the amount you want to apply to each job.
- Select Tasks
> General Journal Entry.
- Enter the Date.
- Enter a Reference.
- For the first line
item, select an expense account used for tracking these overhead transactions.
Remember: the total debited and credited to this account will be the same,
creating a wash.
- Enter a Description
for the line item.
- Enter the amount
that you want to add to the expense of the job for overhead in the Debit column.
- Enter the Job, Phase, and Cost
Code that you have created for overhead expenses.
- Repeat steps 4-7
for each job to which you want to add overhead expenses.
- Balance the transaction
by entering a final line item using the same Account ID, and crediting
the total of all debits. Do NOT enter a job ID in this line.
- Save the transaction.
What do you want to do next?