![]() Each of the compensated absence accounts (holiday and PTO at a minimum), and.In setting up QuickBooks, payroll items must be created to represent each of the labor accounts to which an employee can charge time, including: The payroll item is a data field which, in QuickBooks, stands in lieu of identifying the general ledger labor account. The third and fourth data points relate to direct labor. All time data must include the name of the employee, and a payroll item. In order for QuickBooks to execute a labor distribution transaction based on time data, at least two, and possibly four, specific data points used for classifying time data must be captured and populated into the QuickBooks timekeeping database. Smaller start-ups may use the old-fashioned manual data entry method to populate QuickBooks with timekeeping data. Most contractors will capture time data in a web-based timekeeping application, then utilize a data import methodology to automatically populate QuickBooks with employee time data. That time data must be brought into QuickBooks. To distribute labor costs in QuickBooks, time data must be captured by a timekeeping system. ![]() Direct labor costs must be further distributed among final cost objectives.įinal cost objectives may be contracts or more granular, such as task, contract line item numbers, or units of production.These include direct labor, compensated absence accounts such as holiday time and paid-time-off, overhead labor, G&A labor, and bid & proposal labor. Labor costs must be distributed among various general ledger accounts.There are two main concepts to understand in order to properly configure QuickBooks to distribute labor costs: This detail may be traced to timesheets and payroll records, and validated vis-a-vis allowability of charges and work authorizations.Ĭonfiguring QuickBooks for Labor Distribution Labor category (for direct labor charges).A Labor Distribution Report supports this audit trail by showing how labor costs recorded in the timekeeping system for a particular payroll cycle are distributed to cost objectives.Ī Labor Distribution Report like the one in ICAT will show the following direct labor charge detail for each contract, and indirect labor charge detail for each indirect account that accumulates labor charges: An auditor will verify the contractor’s labor distribution records reconcile with timekeeping/payroll records, and reconcile to labor subsidiary and general ledger accounts. To satisfy the SF1408 criteria, labor costs must be distributed across multiple general ledger accounts within the QuickBooks accounting system using the payroll function in QuickBooks. Indirect labor costs for overhead or G&A type activities accumulate in the appropriate indirect labor account in the general ledger.Īll labor costs must be charged to the appropriate cost objective. The 43 hours of direct labor costs are charged to the contract, while the 40 hours of PTO represent an indirect labor cost. All labor hours for this employee, in this pay period, are charged as direct labor on the contract.Īnother employee worked 43 hours on the contract one week, and took 40 hours of PTO the second week. Labor distribution records reconcile to payroll and timesheet data, and to job cost and general ledgers.įor example, one employee logs 80 hours in a 2-week cycle on a single contract. Requirements for Labor Distributionįirst, what are we trying to achieve to support DCAA compliance? A labor distribution system accurately documents direct and indirect labor hours and costs by employee, by cost objectives or contracts, and by indirect accounts. We’ll explain how to get started in this article. To satisfy the requirement of SF1408 Item 2f, QuickBooks Desktop editions can be configured to distribute labor costs based on time data, whether or not you use QuickBooks' payroll service. How you execute your timekeeping function.Your labor distribution system will be dependent on two main factors: A labor distribution system that charges direct and indirect labor to the appropriate cost objectives.
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