Labor Expenses in Job Costing

QuickBooks users who track costs by job or project are, or should be, concerned about properly recording every cost. Sometimes, as a business owner investigates their QuickBooks file, searching for unaccounted for job costs, they find a problem with payroll.

Payroll in QuickBooks can be allocated to various jobs/projects. But what about related costs like payroll taxes?

In our sample QuickBooks file for Rock Castle Construction, let’s set up a new job. We’ll use the customer Kristy Abercrombie and call the job “Blog Project.”

We will send employees to work on the project. We will enter their time on the weekly time sheet. We will create the paychecks and see how those costs are tracked on a Job Profitability report.

Our employee works on the Blog Project for forty hours. We’ll create a paycheck for him and view the cost to the project.

Above is a screenshot of the earnings portion of Gregg Schneider’s paycheck. He worked on three different jobs during the pay period. The third line lists the time spent on the blog project.

As you can see, Gregg makes 17.25 per hour and worked on our fictional job for forty hours. That’s a total of $690.00 in costs for the project. Let’s see how that expense affects the Job Profitability report.

The cost to the project for Gregg’s time is $696.56. The extra 6.56 is for workers’ compensation insurance. That’s a very low rate, but workers’ compensation tracking in QuickBooks is a topic for another day.

The question for today is, what about payroll taxes? Aren’t those a cost of doing the job as well?

They are. And if you see this in your QuickBooks company file, the fix is easy.

The setting is in Preferences, in the Payroll & Employees section. Simply check the box, “Job Costing, Class, and Item Tracking for paycheck expenses.”

Now, with this new preference setting, let’s void Gregg’s payroll check and re-create it.

Then we’ll take another look at that Job Profitability report.

Same amount of time worked. Same gross wages of $690.00.

But now, with payroll tax expense included as a job cost, the expense to the project is $789.72.

Don’t forget. When tracking costs by project, we must be vigilant and track every identifiable cost for accurate reporting and better bidding in the future.

 Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330
954-414-1524
hector@garciacpa.com

Hector Garcia

Hector Garcia

Hector Garcia is a CPA and QuickBooks Consultant.
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