FACCTS Accounting System - Application Notes

Jobcost Concepts

The job costing function of the FACCTS General Accounting System is implemented as separate menu items within the system and also as optional data entry screens within the G/L, A/R, and A/P subsystems. Data from these subsystems flows to the jobcost subsystem in much the same way as data from A/R and A/P flow to the general ledger.

A FACCTS job is an accounting entity; typically, this will reflect some discrete business activity for which a separate profit or loss can be calculated. As an example, purchasing, re-furbishing, and then selling a piece of machinery might constitute a job. Another example would be the designing, writing, selling and installing of a custom programming project.

A job, then, typically has a series of activities performed on its behalf. These activities may generate revenue or incur expense. The point of the job cost system is to provide an analysis of this revenue and expense leading to analysis of the net profit on the job.

In the traditional sense, departments are groups of people who perform similar functions or work in a similar area of responsibility. In FACCTS job costing, "department" is often used with the same meaning, but this is not necessary. A FACCTS job costing department is an arbitrary division for accounting purposes. In the case of the job representing the machine given above, a department might be "sales" or "machine shop". One could also set up departments such as "new machines" and "used machines" to provide a breakdown of revenue, costs, and profit for these two types of business.

Categories are used to provide another dimension of analysis of revenue and costs. Typical categories might be "telephone", "entertainment", "parts", "sales income", and "machine purchase". Thus, on a given job several different departments might have charged expenses in the same category, and each department will typically charge expenses in several categories.

The basic information on each job such as job name, customer, start date, budget and responsible department is entered into the system in the jobcost subsystem. The descriptions of departments and categories are also entered here. The actual detailed data, however, comes from other parts of the system.

Each time a manual journal entry, a receivables invoice, or a payables invoice is entered into the respective subsystem, the user is given the opportunity to enter jobcost data. As an example, assume that we are entering a payables invoice from a local supplier of hardware. The general ledger distribution for the invoice may be to a single account ("hardware purchases"), while the invoice in fact covers items that were used by different departments on different jobs. A jobcost line item would be entered for each item purchased, giving the job number, the department responsible for the expenditure, and the category of the expenditure.

Once the basic departments and categories are established, jobs are entered as they become known. There are three reports available to aid in the analysis of the jobcost data, reporting by job, by department, and by category.

This report gives details of all jobcosted data for each job for the selected period. It can be used to analyze performance on each job and calculate the actual revenue, expense, and profit. These are compared on the report to the budget established for the job. A re-cap of expense and revenue by category for each job allows quick identification of problem areas and potential savings. This report can also be used to provide the necessary backup data for billing on "cost plus" jobs.

This report shows all jobcosted data by department, across all jobs. It provides a look at the operation of each department and its profitability. A re-cap of all data by category gives another dimension to the jobcost data.

This is similar to the report by department except it reverses the two dimensions. Jobcost data is shown by category across all jobs, with the re-cap at the end being by department. This allows analysis of the details of expenditures in each category as well as the revenue contribution of each type of activity.

A job is given a completion date when there is no more effect to be expended on the job and no new purchases or revenue is expected. Because many vendors bill on relatively long cycles (monthly), however, there may be payables invoices that do not arrive until after the job is completed. During the period that the job is completed but not closed, expenses and revenue can still be entered. When the job is finally closed, no more accounting entries can affect the job.

Using the jobcost facility should allow use of a much simpler general ledger chart of accounts. Without jobcosting, many companies have developed a complex chart of accounts that can now be simplified. Any general ledger account whose title includes a description of a single job can now be eliminated; all such accounts should be "collapsed" into a single account for each expense or revenue type. As an example, accounts for "Travel Expense on Job 1" and "Travel Expense on Job 2" should be replaced by a single account called simply "Travel Expense". The distinction between the two jobs will be handled by the jobcost facility. The result of this re-organization should be a much simpler chart of accounts.