Thursday, April 4, 2013

Know About The Accounting For Wages From Cost Accountants Online

For each department or cost center, wage sheets or pay-rolls are prepared separately. In esteem of every department or cost center, the total (gross) of all pay-roll or wages sheet points to the wages for the exacting wage period.

If process costing, analysis of wages is not crucial as the processes are signified by the cost centers & hence the labour cost of a specific process is constituted by the wages of that cost center.

In the case of job costing, consistent with each job order or standing order, the arrangement of the piece or time records is essential. For the purpose of measuring the amount of wages of a particular wage era which are chargeable to a variety of job accounts & overhead accounts, a wage analysis or wages conceptual is used.

Wages chargeable to job accounts are direct wages while those chargeable to overhead accounts are not direct wages. For a wage period, the understanding must be done of the total of direct & indirect wages shown in the wages analysis with the gross total wages as stated by pay-rolls or wage sheets of that wage period.
The records used for the reason of making analysis of wages are job cards, piece work cards, pay-rolls, idle time cards etc.

Behavior of Overtime Wages in Cost Accounts:
Overtime wage consists in 2 fractions: - 
(a) Payment made at normal rate 
(b) Payment made at extra rate over the normal rate i.e. the overtime premium.

 The treatment of overtime wages depends upon the conditions in which it arises:-
(a) Where because of general pressure of work overtime is caused, the payment made at common rate should be debited to the job order or standing order number on which the employee has been employed & the premium should be charged to the overhead account of the department. 

(b) Where in particular at the customer’s request the overtime is worked to expedite release, in that case total payment should be charged to the job as direct wage. 

(c) Where because of delay of work in another department, overtime work has to be assumed in a department, the overtime premium should be charged to the section by which delay had been caused.

(d) Where a seasonal industry takes on overtime work so that it can cope with busy season work, the overtime premium should be charged to general overhead or alternatively, may be debited to deferred overhead account & throughout the cycle gets absorbed by the production. 

(e) Where so as to avail special market opportunity, overtime work has to be taken on, because the market cost which will be received shall be high, the entire payment should be charged to production as direct wage.

(f) Where because of abnormal conditions akin to major breakdown, natural calamity, and prolonged power cut etc., overtime job has to be undertaken; it should not be measured for cost accounts. On the divergent, in that case, the overtime wage should be accused to costing profit & loss account.

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