Applying Overhead to Jobs
You can apply overhead to your jobs by using the General Journal entry window. The original transactions are not applied to jobs because these expenses are not associated with any one job. To apply overhead to a job without overstating the expense
- Post the debit to the expense account and assign the appropriate job, phase, and cost code.
- Then, post the same amount as a credit to the expense account without assigning a job, phase, and cost code.
This ensures that you have not affected the expense account balance, but have applied the overhead to the job. Applying a debit to a job not only applies the expense to the job, but also creates a reimbursable expense that can be applied to a customer invoice, so you can bill your customers for your overhead expenses.
Graphic Example
For an example, if you have posted transactions to recognize the following overhead expenses, you would have a total of $2700 that should be applied to your jobs. When entering the expense transaction, it could be applied in part to each job, but that could be a difficult and time-consuming task.
|
Telephone |
$675.00 |
|
Electricity |
$1225.00 |
|
Gas |
$495.00 |
|
Miscellaneous Office |
$305.00 |
|
Total Overhead |
$2700.00 |
Instead, enter one General Journal transaction to apply the expense to your jobs. To do this without overstating your expenses, make the entry as shown below.
|
Account No. |
Description |
Debit |
Credit |
Job |
|---|---|---|---|---|
|
89000 |
Overhead Distribution |
900.00 |
CHAPMAN-01, ADMIN |
|
|
89000 |
Overhead Distribution |
900.00 |
HENSLEY-01, ADMIN |
|
|
89000 |
Overhead Distribution |
900.00 |
SHARP-01, ADMIN |
|
|
89000 |
Overhead Distribution |
2700.00 |
Entered in this way, you will create a "wash" for your general ledger account balances, while adding $900.00 in expenses to each of the jobs listed in the Job column.
Step-by-step instructions for applying overhead to jobs
Determine the total amount of overhead expense that you want to apply to your jobs and the amount you want to apply to each job.
- Select Tasks > General Journal Entry.
- Enter the Date.
- Enter a Reference.
- For the first line item, select an expense account used for tracking these overhead transactions. Remember: the total debited and credited to this account will be the same, creating a wash.
- Enter a Description for the line item.
- Enter the amount that you want to add to the expense of the job for overhead in the Debit column.
- Enter the Job, Phase, and Cost Code that you have created for overhead expenses.
- Repeat steps 4-7 for each job to which you want to add overhead expenses.
- Balance the transaction by entering a final line item using the same Account ID, and crediting the total of all debits. Do NOT enter a job ID in this line.
- Save the transaction.