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Getting Started

This chapter contains the following topics:

Preparing to Use Job Cost

Setting Up Job Cost

J/C Control Information Options

How to Set Up Cost Categories

Jobs, Sub-jobs, and Change Orders

Setting Up Other modules

Using Other PBS Modules with J/C

Retainage Receivable and Retainage Payable

Overhead Burden and Labor Burden

How to Enter Recognized Profit

Regular Use

Control Information

Cost Category Information

Job Description Information

Cost Item Information

Passport Training and Support

Preparing to Use Job Cost

We assume at this point that you have installed Job Cost on your computer according to the Vision Install Guide or the SQL Install Guide. If any other Passport Business Solutions modules are to be used with Job Cost, these should also be installed by now.

We also assume that you have familiarized yourself with the main features of this module by reading the Understanding Job Cost chapter. If you have not done so, read that chapter now, then return to this chapter.

This chapter covers many topics about Job Cost. You should review this chapter prior to actually setting up Job Cost to become familiar with the basic concepts used in Passport Business Solutions Job Cost and the many features available. As needed, refer to the Diagrams of Job Cost Information Flows at the end of the previous chapter, which will assist you in your understanding.

Additionally, if you are not familiar with job cost accounting, we recommend that you become familiar before reading this chapter.

Setting Up Job Cost

Before using Passport Business Solutions Job Cost, study the PBS general features as described in the System User documentation, and then start Using Job Cost J/C according to the instructions in the Using Job Cost chapter.

Company information is set up for you as part of the installation procedure. Modify Company information to be appropriate for your company. Refer to the Company Information chapter in the PBS Administration documentation for more information.

Follow the steps below to use Job Cost.

You may find it helpful to review the following sections of this chapter prior to using Job Cost on a regular basis:

How to use other Passport Business Solutions modules with J/C

Retainage receivable and retainage payable

Overhead burden and labor burden

How to enter recognized profit into J/C

J/C Control Information Options

This section describes the information that is entered into Job Cost Control information. This information controls the way in which Job Cost works—both internally and with respect to other Passport Business Solutions modules.

Interfaces to Other Modules

The Passport Business Solutions Job Cost is designed to be used by itself or with any combination of these Passport Business Solutions modules:

You can also use Order Entry, Check Reconciliation, Point of Sale and Sales Analysis, but they do not interface directly with J/C.

If you use J/C in conjunction with one of the modules listed above, the two modules communicate and work together through an interface between them.

You are not required to interface to a module merely because you have it installed.

It is in Job Cost Control information that you specify which of these modules to interface to. P/O is an exception; the interface to that module is specified in P/O Control information.

The following descriptions will assist you in determining whether or not each module should be interfaced to Job Cost for your company.

Accounts Payable

Your costs, such as equipment, materials, insurance, and subcontracting, are entered in Accounts Payable as invoices and applied to jobs. The Accounts Payable module transfers cost information to J/C.

Accounts Receivable

Billings for jobs are entered in the Accounts Receivable module as sales. Payments received for jobs are entered as cash receipts. The Accounts Receivable module transfers billing and payment information to J/C.

Invoices can be specified as being for jobs. When these invoices are posted, A/R sales transactions are generated and posted. These A/R transactions will update the amounts billed for jobs in J/C. Additionally, if A/R is used with I/C, then cost items can be entered on Goods line items. When the line item is posted, the cost item will be updated for the cost of the items taken out of inventory.

Inventory Control

If you maintain an inventory of material used on your jobs, you can direct the Inventory Control module to transfer these materials to specific jobs or from individual jobs back into inventory. The Inventory Control module sends cost information to J/C.

Payroll

Labor costs are entered in the Payroll module and applied to jobs. The Payroll module transfers cost information to J/C.

General Ledger

General Journal entries that affect jobs are entered in General Ledger and applied to jobs. The General Ledger module transfers cost information to J/C. G/L is also used to make profit recognized entries. This subject is discussed in the How to Enter Recognized Profit into J/C section.

Purchase Order

When entering a purchase order in P/O, line items can be specified as being for jobs and the dollar amount of the line item can be distributed to one or more cost items. You can use the Purchase Order Distribution Report to list outstanding P.O.;s by job and cost item. The dollar amounts shown can be optionally transferred directly to the applicable cost items when the report is run. Later, when entering a completion estimate in Completion estimates in J/C, you can use the outstanding P.O. amount stored in the cost item (as transferred from Purchase Order). Outstanding P.O. amounts are used on the Job Status Report to determine the actual costs to date, as discussed in the chapter titled Job Status Report.

If Not All modules are Interfaced

If you are using the Passport Business Solutions G/L, A/P, I/C, and Payroll, then all costs are entered in these modules. Otherwise, you must enter some costs using J/C. For example, if you are not using Payroll, you must enter labor costs using Costing in J/C. If you enter costs in J/C and you are using G/L, then you can update G/L with the debits and credits corresponding to these costs by using Get distributions in G/L.

If you are using A/R, all billings and payments for jobs are entered through A/R. Otherwise, billings and payments are entered using Billing and payment in J/C. If you enter billings and payments in J/C and you are using G/L, then you can update G/L with the debits and credits corresponding to these billings and payments using Get distributions in G/L.

If you are using G/L, then profit recognized transactions are entered through G/L. Otherwise, profit recognized transactions are entered using Billing and payment in J/C. In this case, the debits and credits for profit recognized transactions will appear on the J/C Distribution to G/L report so this information can be transferred to your general ledger. Profit recognized transactions are discussed further in the How to Enter Recognized Profit into J/C section.

Retainage Receivable and Retainage Payable

If your company does not use retainage receivable or retainage payable, then answer N to the question Are you a contractor ?. In this case, the next two questions in Control information regarding retainage receivable and retainage payable will be skipped.

If you answer N to the two questions regarding retainage when setting up the Job Cost system, no mention will ever be made of retainage in your day-to-day use of the system.

If you answer either of these questions Y, you will be asked to enter a retainage amount or percentage when appropriate.

If you use retainage receivable, you can also enter a retainage receivable percentage in Job Cost Control information, which will be used as the default percentage when entering jobs for your customers. You can override this default percentage for any individual job.

Change Orders

A change order is a change to an original contract with a customer, detailing the exact changes to the original specification of a job. The change order has its own set of specifications and price, agreed upon with the customer.

A change order can either increase the job price or decrease the job price (in which case its price would be entered as a negative number.)

In terms of the Passport Business Solutions Job Cost, a change order is entered as follows:

If you do not use change orders in your business, answer N to the question Use change orders ? in Control information. In this case, you will not be allowed to enter change orders into the system.

If you answer Y to the question above, you will be required to enter an extra 3 digit number for each cost item. This three-digit number is zero (000) for cost items of the job itself. For change orders, this number is the number of the change order and is used to distinguish between cost items, which apply to the job itself and cost items, which apply to the change order.

Inactive Files

The inactive files are a separate set of files into which you can store jobs, which have been closed and completed. Refer to the Diagrams of Job Cost Information Flows section in the Understanding Job Cost chapter, which has a diagram that shows the relationship of the active job files to the inactive job files.

Initially you can set this field to N in Control information, as you probably have no such jobs to enter into the system. Later, when you have closed and completed some jobs, you may change this answer to Y.

Cost Categories

A cost category is an aspect of a job or group of jobs for which money might be spent.

You can set up all of the cost categories describing your jobs in Categories, or you can enter the cost categories on a job-by-job basis without referring to any predefined list of cost categories.

If you answer N to the Control information question Use cost category file ?, you will have to manually type in each cost category description when you enter cost items for a job.

If you answer Y, you still have the option to not use the predefined cost categories on individual jobs. For such jobs, you must manually type in the cost category descriptions when setting up the cost items for the job.

For jobs where Cost Categories are used, every cost category number you enter is checked against your predefined cost categories to see that it matches one of them, and the description is displayed automatically.

Labor Burden

Labor burden is the expenses incurred for workers in addition to their actual wages. It includes such things as the employer’s share of FICA (Social Security), federal and state unemployment insurance tax, workers’ compensation insurance premiums, employer-paid union contributions, etc.

Labor burden can be used only when you interface to the Passport Business Solutions Payroll. When wage costs are transferred to the appropriate jobs, the system will automatically calculate labor burden during the transfer. The exact details of how this is done is described in the Overhead Burden and Labor Burden section. Here, we will address how you set up the automatic labor burden feature of the Passport Business Solutions Job Cost.

If you want to use this automatic labor burden calculation capability, you must enter two fields in Job Cost Control information.

The fields entered here are simply defaults, which can be used when entering a job. You can select a different type, rate, or percentage for a specific job.

Overhead Burden

Overhead burden is all overhead expenses except for the additional expenses for labor due to employer paid taxes, pension and union benefits, etc. Overhead burden could include wages to office personnel, office supplies, rent and utilities of the home office. These are not direct job costs because they occur whether a specific job is underway or not.

You can have Job Cost automatically calculate the overhead burden. The exact details of how this is done is described in the Overhead Burden and Labor Burden section. Here, we will address how you set up the automatic overhead burden feature of the Passport Business Solutions Job Cost.

You have three options for the method (type) to be used for calculating overhead burden.

First, it can be a percentage of labor cost. Second, it can be a rate per labor hour. In these options, overhead burden is only calculated on labor entries. Third, it can be a percentage of the overall job costs, i.e., all costs that are entered for a job, are multiplied by a percentage to get the overhead burden.

You enter into Control information both the method you wish to use for the automatic overhead burden calculation and the percentage or rate for that method. Your entries in Control information are only defaults. You can change the method, percentage or rate when entering a specific job.

Each job must have a cost item into which the calculated labor burden can be stored automatically by the software. In each job description you must specify a category number for overhead burden. This category number is the category number for the cost item into which the calculated labor burden will be stored. This field is required in the job description to enable the software to verify that you have entered a cost item for the automatic burden calculation. It also ensures that the software knows which cost item is to be used for the automatic overhead burden calculation. A default for this category number is entered into J/C Control information. This default (called Ovhd burd categ in J/C Control information) can be used when entering a job description.

The cost item for overhead burden must be set up to be a non-direct cost of the job. Whether a cost item is a direct or non-direct cost of the job is determined by the cost-type associated with the cost item. Cost-types can be set up as either direct or non-direct in Job Cost Control information, as discussed later in this section.

G/L account defaults

The following default accounts are entered into Control information:

A/R acct #

This account is used as a default in Billing and payment when billings and payments are entered directly into Job Cost.

Ret recvbl acct #

This account is used as a default in Billing and payment when billings and payments are entered directly into Job Cost and retainage receivable is being used in Job Cost. It is also used by the Passport Business Solutions Accounts Receivable when a sales entry is distributed to jobs and there is a retainage amount for the sale.

A/P acct #

This account is used as a default in Costing when costs are entered directly into Job Cost.

Ret paybl acct #

This account is used as a default in Costing when costs are entered directly into Job Cost and retainage payable is being used in Job Cost. It is also used by the Passport Business Solutions Accounts Payable when a payable entry is distributed to jobs and there is a retainage amount for the payable.

Cash acct #

This account is used as a default when payments are entered directly into Job Cost using Billing and payment.

Cost acct #

This account is used as a default when entering cost items using Cost items for jobs.

Billing acct #

This account is used as a default when entering the billing account for a specific job using Job descriptions.

Cost types

Cost types are the broad classifications of types of costs that go into all of your jobs.

When entering cost categories using Categories, you must assign each category a cost type. There are four cost types built into Job Cost: labor, materials, subcontracts, and profit. These are assigned numbers in J/C. The numbers are 1, 2, 3, and 9 respectively. You can define up to five additional cost types for such things as equipment costs, general administrative costs, different types of materials, etc. None of these are required. You can define them to tailor Job Cost to your particular business.

Additionally, you can define any of these five additional cost types as either a direct cost or a non-direct cost. Amounts entered for the non-direct cost types are tracked in Job Cost, but are always shown separately from the direct costs. For example, you can use one of these cost types for indirect overhead burden, and thus you can track the overhead you have incurred for a job separately from direct costs.

How to Set Up Cost Categories

A cost category is an aspect of a job or group of jobs for which money might be spent. Cost categories define in a fairly detailed way the types of work or costs that go into one or more of your jobs. Examples of cost categories are: rough carpentry, plumbing, heating, air conditioning, etc. Cost categories are more detailed than cost types, and can be broken down into even more detailed categories if desired, until a very fine level of detail is reached.

We strongly suggest that you observe these guidelines as you set up your own cost categories:

Suppose you have a major grouping of 30000 for CONCRETE, a minor grouping of 31000 for CONCRETE FORMWORK, and need to number cost categories for CONCRETE FORMWORK—LABOR and CONCRETE FORMWORK—MATERIAL.

The LABOR cost type is 1 and the MATERIAL cost type is 2, so you can assign category number 31001 to CONCRETE FORMWORK—LABOR, and category number 31002 to CONCRETE FORMWORK—MATERIAL.

Jobs, Sub-jobs, and Change Orders

This section gives an overview of jobs, sub-jobs, and change orders as used in the Passport Business Solutions Job Cost.

Jobs

A job is the overall, complete piece of work a business agrees to do for a customer. It usually has several parts and on large construction projects can have several hundred different cost items.

In the Passport Business Solutions Job Cost, a job is identified by a seven-character job number.

Sub-jobs

Depending on the size and type of your business, you may want to break down some of your jobs into major subdivisions or phases and track costs and billings separately for each such subdivision. Job Cost provides a three-digit sub-job number for this purpose.

Change orders

If you enter a change order for a job and the job is broken into sub-jobs, the change order must apply to one of the sub-jobs. If you have a change order that applies to more than one sub-job, you will have to enter it as a separate change order for each applicable sub-job. For example, if it applies to three sub-jobs, you must enter three separate change orders.

How jobs are entered into J/C

To enter a particular job or sub-job into Job Cost, you must first enter basic information in Job descriptions. This includes the job number you assigned to the job, the title of the job, and the total price of the job, as well as other information described in the chapter titled Job Descriptions.

If a job is not broken into sub-jobs when it is first entered, you cannot break the job into sub-jobs at a later time. You must decide whether the job will or will not have sub-jobs when you begin entering the job.

When a job is broken into sub-jobs, every cost item for the job must be a cost item for a sub-job.

Cost items for jobs

Cost items are the specific categories of work that go into this particular job. Each cost item has a category number and an estimated or budgeted cost.

You must enter every cost item that goes into the job, as well as separate cost items for overhead and for profit. These two items must be accounted for when determining the overall price of the job.

The sum of all these estimated costs for the cost items of a job must add up to the price of the job. The same applies to any sub-job entered: the estimated costs must add up to the total price of the sub-job.

Entering additional job description

You can enter as many as 10 lines of 75 characters each of additional description to describe or comment upon a job or any cost item of a job.

This feature lets you enter information about a job or its parts not included in the usual information kept for the job.

Examples are a description of the property (for contractors), a detailed description of the job, special circumstances about the job, the name of the foreman, the name of the architect, and special information about a cost item or vendor.

How to activate a job

Job Cost does not let you enter actual costs for a job unless it is active. Activate checks the sum of estimated (budgeted) costs to verify that this sum matches the job price. It also checks other items. If everything checks out OK, the job becomes active. If something does not add up properly or is otherwise incorrect, the job is not activated and you will receive a printout showing why the job cannot be activated. Refer to the Job Descriptions chapter for more information.

Setting Up Other modules

If you are using other Passport Business Solutions modules with J/C, certain steps must be taken in those Passport Business Solutions modules to ensure that information is transferred properly into J/C.

Setting up A/P

If you are using the Passport Business Solutions A/P module, enter all your regular material suppliers and subcontractors into Vendors, including the ones that you will be using on the jobs now entered into Job Cost.

Setting up A/R

If you are using the Passport Business Solutions A/R, follow the steps below to set up A/R Control information, enter customers, and set up the tax.:

Setting up Payroll

If you are using the Passport Business Solutions Payroll, follow the steps below to set up Payroll:

If all labor costs for an employee or laborer are distributed to jobs, your answer in the Wage acct field in Employees is not important. Unless you specify otherwise in Time worked, wage costs for a job will be distributed to the accounts specified in the applicable labor cost items in J/C.

Setting up I/C

If you are using the Passport Business Solutions Inventory Control, there are no special requirements for setting it up. Be sure that you understand the I/C Control information options explained in the Control Information chapter of the I/C User documentation.

Setting up G/L

Certain accounts must be set up in your Chart of Accounts when you use Passport Business Solutions Job Cost. If you are using the Passport Business Solutions G/L, then these accounts would be entered using Chart of Accounts in G/L, and copied to Valid G/L Accounts for use by Job Cost and other Passport Business Solutions modules. If you are not using the Passport Business Solutions G/L, these accounts are entered into the Valid G/L Accounts.

The following accounts are required:

Defaults for each of these accounts are entered in Job Cost Control information. If you only have one of each type of account, then you will always use these defaults when entering jobs, cost items, cost transactions, billing transactions, and payment transactions.

Other accounts that you may need in your Chart of Accounts include the following:

This account is used to handle overbilling when the percentage-of-completion method of accounting is used.

This is a contra-expense account, which is used when labor expenses are allocated to jobs. See the Overhead Burden and Labor Burden section for further discussion of this account.

This is a revenue account used for recognized profit.

Of course, you should consult with your accountant when setting up Job Cost to ensure that you have your Chart of Accounts set up properly.

Using Other PBS Modules with J/C

As discussed earlier, J/C can be used with many of the other the Passport Business Solutions modules. Because of this flexibility, the module, which should be used to enter a certain type of transaction depends upon the actual set of modules being used by your company. The purpose of this section is to clarify which module should be used to enter each type of transaction.

Job Costs

If you are using the Passport Business Solutions General Ledger, Accounts Payable, Inventory Control, and Payroll modules, none of your job costs will be entered directly into Job Cost. They will all be entered in the other Passport Business Solutions modules. Otherwise, you will be entering some costs through Costing in Job Cost.

Enter costs as indicated below.

Labor Costs

In Payroll, enter the hours that apply to your jobs through Time worked and Adjustments. If you are not using Payroll, enter these costs in J/C using Costing.

Material Costs

Several cases are possible, depending on which combination of modules you are using. Details are in the A/P, P/O, I/C, O/E, and A/R User documentation.

Then transfer material costs to jobs through I/C Inventory (transaction type J).

If you want received goods to remain in your inventory until needed, specify in P/O Purchase orders that the line item is for Inventory use. When received, enter P/O Receivings. If the item is received without a purchase order, answer Y in Receivings to Is this item for inventory ?. When ready to use the item, transfer material costs to jobs through I/C Inventory (transaction type J).

If you want to be able to receive goods into inventory at your job site, set up that site as a deliver-to location for the duration of the contract. Do this using I/C Facilities or P/O Deliver-to locations.

If your you want received goods to go directly to a job without passing through your inventory, specify in P/O Purchase Orders that the line item is for Job use. When received, enter P/O Receivings. If the item is received without a purchase order, answer N in Receivings to Is this item for inventory ?. Material costs will be transferred when you enter invoices for these receivings in A/P Payables.

If you use this method and are also using serialized inventory, you will not be prompted to enter serial numbers in Receivings even when the item allows (or requires) serialization at time of receipt. This is because these units never form part of your inventory. Moreover, it is not assumed that the operator entering the receivings is authorized to determine which particular unit is assigned to which job.

You may nevertheless want to maintain serial number control on such units (for warranty and return purposes). If so, you can assign a serial number and a customer number to each such unit via I/C Serial maintenance. The unit will be shown with a status of Sold, even though it never went through your inventory.

Line items in A/R Invoices can be associated with jobs. When an invoice is posted, the type J transactions to transfer the material costs will automatically be created.

Subcontract Costs

Enter these through A/P Payables. If you are not using A/P, enter these costs in J/C Costing.

Other Direct Costs

Enter other costs such as equipment and administrative costs using A/P Payables. If you are not using A/P, enter these costs in J/C Costing.

Overhead Costs

If you have set up a job so that overhead burden is calculated automatically, then overhead burden is calculated as direct costs are applied to jobs. This calculated overhead burden does not automatically affect the Passport Business Solutions General Ledger. Instead, it is collected in the overhead burden cost item records for your jobs and is printed on your reports. Refer to the Overhead Burden and Labor Burden section for a more detailed discussion of overhead burden.

Labor Burden

If you are using the automatic labor burden calculation feature, the labor burden will be calculated in Payroll for each distribution of wages to a job. However, it will be kept separately, and it will not show up as part of actual job costs until you have made a separate general journal entry for it in General Ledger. It does not automatically affect General Ledger until you make this entry. See the Overhead Burden and Labor Burden section.

Entering Payments and Billings

If you are using A/R:

If you are not using A/R, enter billings and payments for jobs using Billing and payment in Job Cost.

Entering Recognized Profit

If you are using G/L and you use the percentage-of-completion method of contract accounting, enter recognized profit through General journal in G/L. Such entries have a special source code—PFTREC—which identifies them.

If you are not using the Passport Business Solutions G/L, enter recognized profit through Billing and payment in Job Cost.

Recognized profit entered either in G/L or using Billing and payment will not automatically show up on the Job Status Report. In order for profit to show up on the Job Status Report, you must also enter a cost for this same profit amount, for the profit cost item for the job. Do this through Costing.

Refer to the How to Enter Recognized Profit in J/C section for a more detailed discussion of how to handle recognized profit.

NOTE: It is not necessary to enter recognized profit if you use the completed contract method of accounting.

Interfacing Costs from A/P, PR, and I/C

When costs are entered for jobs in Passport’s PBS Payroll, Accounts Payable, and Inventory Control modules, these costs are transferred to jobs as follows:

A/R and G/L Interface to J/C

When billings and payments for jobs are entered and posted in A/R, and profit recognized entries are entered and posted in G/L, jobs are updated automatically. Because Job Cost does not keep period-to-date accumulations for your job’s billings and payments, these transactions directly update jobs when they are posted in A/R and G/L.

Do not post billings and payments for the next period in A/R until you have printed the Job Profitability Report for the current period.

Profit recognized transactions should be entered as described in the How to Enter Recognized Profit into J/C section. Refer to the Guide to Daily Operations chapter.

When cost entries for jobs are entered and posted in G/L they are also immediately posted to jobs. The purpose of such entries is to make adjustments to cost items. For example, if you posted a cost to the wrong cost item, you could adjust this by first entering a debit which references the cost item which needs to be increased and then entering a credit which references the cost item which needs to be decreased. In each entry in General journal, the same G/L account should be used. This will have no effect on General Ledger, but will result in a shift of costs from one cost item to another to make the adjustment.

Retainage Receivable and Retainage Payable

This section covers how to handle retainage receivable in A/R and retainage payable in A/P.

Accounts Receivable

When there is a retainage amount for an invoice, this amount is distributed as a debit to the retainage receivable account specified in J/C Control information. The remainder of the invoice amount is distributed as a debit to the accounts receivable account.

The A/R open item for this invoice does not include the retainage amount because the retainage is not yet due. This ensures that your A/R Aging Report is accurate.

When you are ready to bill the customer for the full retained amount, you must enter a separate, new invoice for the customer. This invoice is for the full retainage amount. Do not, however, distribute this invoice to the job, as it was already applied to the job previously. This point is essential to keeping accurate records. Leave the job number for the entry blank. Distribute the full amount of this invoice to the retainage receivable account.

When this invoice is posted, it will have no effect on your job. However, it will turn the retainage receivable into a regular item, and it will now show up as an A/R open item and be aged properly on the A/R Aging report. Refer to the A/R User documentation for more information.

Accounts Payable

If there is a retainage amount on a vendor invoice, this amount is distributed as a credit to the retainage payable account specified in J/C Control information. The remainder of the invoice is distributed as a credit to the accounts payable account.

The original invoice amount on the A/P Open Item record (created when the invoice is posted) does not include the retainage amount because the retainage is not yet due. This ensures that your Aged Open Items Report is accurate.

When a vendor completes his work for you, and you receive an invoice for the full retainage due, you must enter a new, separate voucher. This voucher is for the full retainage amount. The voucher is entered as a regular retainage now due voucher. This is a special voucher type in A/P which is only available when A/P is interfaced to Job Cost. Refer to the Payables chapter in the A/P User documentation for a full discussion of all the options available to handle retainage now due transactions.

Overhead Burden and Labor Burden

As described earlier in this chapter, Job Cost will calculate two types of burden: overhead burden and labor burden. This section explains how these burdens are calculated by the Passport Business Solutions Job Cost.

Overhead Burden

When a cost transaction is posted (using Costing), the software will calculate an overhead amount based on the transaction. The amount is calculated as per the method to be used for overhead burden as specified in the job description. The cost item for overhead burden is updated with this amount during the posting run.

For example, suppose a cost transaction is being posted for $1000 to cost item 6108-000-000. Assuming that overhead burden is being calculated as a percent of job cost and that the percentage being used is 10%, then $100 will be added to the overhead burden cost item for the job. Refer to the J/C Control Information Options section for an explanation of how the software locates the cost item for overhead burden.

If overhead burden is being calculated based on a percentage of labor costs or a rate per labor hour, then the overhead is only calculated if the cost item is for labor. This is determined by the cost-type for the cost item, which must be set to LABOR in order for overhead to be calculated in these cases.

As the overhead burden cost item is a non-direct cost of the job, there are no debits and credits associated with the cost which is added to the overhead burden cost item. To show such costs in your General Ledger, you would have to make a separate journal entry, using the Passport Business Solutions G/L or your manual ledger.

Labor Burden

The automatic labor burden calculation is only available if you are using the Passport Business Solutions Payroll.

When Payroll transactions are posted, job related costs are stored in Job Details. A labor burden amount is calculated for each job related cost. This calculation is performed per the labor burden calculation method set up in the job description.

Payroll only calculates the labor burden. In order to apply the labor burden to the job, follow the steps below:

Post Labor Burden Using the Passport Business Solutions G/L

Enter and post General Journal transactions to apply the labor burden (from the Payroll by Job # Report printed earlier). Assuming that a positive cost amount needs to be applied, the debit entry would be to your cost account for the job and the debit entry would reference the labor burden cost item for the job. Refer to the General Journal [with Job Cost] chapter in the General Ledger User documentation.

The credit entry would be to a contra-expense account. This could be named Allocated labor burden, or whatever name your accountant recommends. The net effect of these transactions is to shift the labor expense from the general labor expense section of your P&L statement into the Cost of Jobs section of your financial statement. Since the cost item for labor burden is referenced on the debit side, the cost item will be increased when the General Journal entry is posted. (In General Journal, debits increase cost items, while credits reduce cost items.)

Post Labor Burden If Not Using the Passport Business Solutions G/L

Enter and post a Costing transaction for the amount of the labor burden (as shown on the Payroll by Job # Report printed earlier). The cost item to use is the cost item you have set up for labor burden for the job.

Since the labor burden cost item is a direct cost of the job, you will need to enter debits and credits for this amount in Costing.

Assuming that a positive cost amount needs to be applied, the debit entry would be to your cost account for the job. The credit entry would be to a contra-expense account. This could be named Allocated labor burden, or whatever name your accountant recommends. The net effect of these distributions is to shift the labor expense from the general labor expense section of your P&L statement into the Cost of Jobs section of your financial statement.

Overhead Burden Calculation Considerations

If overhead burden is being calculated based on all job costs, then overhead burden will be calculated in step 3 above on the labor burden amount. In other words, administrative overhead burden will be calculated on the labor burden. This occurs because labor burden is a cost item of the job and, as described earlier, overhead burden is calculated on applicable costs at the time the costs are posted.

If overhead burden is being calculated based only on labor costs, then overhead burden would not be calculated on the labor burden amount because the cost type for the labor burden cost item would not be designated as being of type LABOR. It would be given a user-defined non-direct cost type, as provided for in Job Cost Control information.

How to Enter Recognized Profit

In the Job Cost module, recognized profit is the amount of profit that you recognize for accounting purposes in a period. It differs from estimated or expected profit. Recognize is an accounting term meaning to record in your General Ledger. When profit is recognized, it then shows up on your P&L Statement, and not before.

Using the percentage-of-completion method of accounting for a job, profit is recognized based on the percent of the job that is complete at the end of an accounting period. This differs from the completed job method of accounting, where the entire profit is recognized all at once, when the job is 100% complete.

For example, although Job #3 is not complete by Dec 31, profit based on current estimates is $30,000, so a recognized profit transaction is entered for that amount.

When profit is recognized on a job, you must enter it into the Job Cost system so that certain reports will print accurate information regarding the job.

Job Status Report

This report shows all cost items for a job. A cost item for profit is always entered for a job. This is done so that the sum of the actual cost items, plus the profit cost item will equal the price of the job (which is the price quoted to the customer).

In order for the amount of profit recognized for the job to show up properly on the Job Status Report, you must enter and post a transaction for the profit cost item using Costing. Since the cost type for this cost item is PROFIT, and cost items of this type are always non-direct costs of the job, no debit or credit is entered with the transaction. Thus, this transaction is simply a memo transaction, which is made so that profit will show up properly on the Job Status Report.

Profitability Report

This report shows the amount of profit, which can be recognized on a job for the current period. The calculations made by this report are described in full in the Reports chapter and should be reviewed by you and your accountant.

This report assumes that you are using the percentage-of-completion method of accounting for your jobs and the Cumulative Catch-up method of revising completion estimates. If you are recognizing profit on your jobs on a completed jobs basis, this report is not relevant to your business.

In order for this report to show the amount of profit that can be recognized for the current period, the software must know what profit has already been recognized for the job.

Each Job Description record contains a field (not shown on the screen) which contains the profit previously recognized for the job. If the job bills for sub-jobs, then each Sub-Job Description record contains a field (not shown on the screen) which contains the profit recognized on that sub-job.

In order for the Profitability Report to accurately report on the profit to be recognized, you must post transactions which update the profit recognized field in the job description record (or Sub-Job Description records, if appropriate) each period which reflect the net increase or decrease in profit for the job for that period. The procedure for doing this is described below. The point at which you use this procedure is described in the Guide to Daily Operations chapter.

If Using the Passport Business Solutions General Ledger

Assuming that there is a net increase in profit on the job for the period, enter a General Journal transaction, which references the job, but does not reference a cost item. The entry should be a credit and the Source of the transaction will be displayed as PFTREC (Profit Recognized) automatically.

The account credited should be a revenue account for the job. Consult with your accountant for the exact account to use. The debit should be to the billings account for the job, as entered in the Job Description record. The debit side should not reference the job. These two entries shift the increase in profit from your billing account to your revenue account, while increasing the profit recognized field in the Job description record (or sub-job description record).

If you have a net decrease in profit on the job for the period (but a profit overall on the job), the debit side would reference the job and would not reference a cost item. The software will display PFTREC for the Source of the transaction. The account debited would be your revenue account. The credit side would be to a billings over cost account (or whatever account your accountant recommends) and would not reference the job. The net effect is reduce your profit from jobs and reflect this amount as an overbilling (or as your accountant recommends) while decreasing the profit recognized amount stored in the Job Description record.

NOTE: If you are incurring an overall loss on the job, do not make profit recognized entries. Consult with your accountant as to the correct General Ledger entries that should be made in this situation.

If Not Using the Passport Business Solutions General Ledger

Enter a profit recognized transaction using Billing and Payment. Assuming that there is a net increase in profit on the job for the period, the account credited should be revenue account for the job. Consult with your accountant for the exact account to use. The debit should be to the billings account for the job, as entered in the Job Description record. These two entries shift the increase in profit from your billing account to your revenue account, while increasing the profit recognized field in Job Description record (or sub-job description record).

If you have a net decrease in profit on the job for the period (but a profit overall on the job), the account debited would be your revenue account. The credit side would be to a billings over cost account (or whatever account your accountant recommends). The net effect is reduce your profit from jobs and reflect this amount as an overbilling (or as your accountant recommends) while decreasing the profit recognized amount stored in the Job Description record.

Regular Use

When start-up is complete, you will be ready to use this module on a regular basis.

Daily and monthly checklists are in the Guide to Daily Operations chapter.

The remaining chapters show you how to:

The Utility chapter describes four selections not used in the regular routine of entering information on jobs or reporting on jobs:

There is a chapter in the PBS Administration documentation that explains how to initialize (create from scratch) your J/C data. You may never need this function, but it is referenced just in case.

Control Information

Control information is provided in the lists below.

The table below lets you define information for cost type.

Cost Category Information

The table below provides lets you enter information about the cost category

.

Job Description Information

The table below lets you enter information about your jobs.

Cost Item Information

The following table lets you enter information for cost items.

Passport Training and Support

If you have problems with this software module, contact your dealer or authorized consultant.

For the name and location of a Passport dealer or an authorized consultant near you, contact Passport at 1-800-969-7900.

If you wish to receive support directly from Passport, please call our End User Support Department at 1-800-969-7900.

You can contact your own dealer for training; however, if your dealer does not offer training, contact Passport at 1-800-969-7900.