Labor burden and the general ledger

When you calculate amounts for labor burden during Payroll Entry or Select for Payroll Entry, Sage 50 will create distributions to your general ledger. The two accounts that are debited and credited are specified on the Labor Burden tab in Job Defaults. The Labor Burden Cost of Sales Account will be debited for labor burden; and the Applied Labor Burden Account will be credited.

Depending on how you process labor burden for your income statement, these fields will be filled differently. Here are three examples:

• If you want labor burden to debit cost of sales on your income statement and you apply expenses for labor such as employer-paid taxes, health insurance, and so on, to expense accounts, then your Labor Burden Cost of Sales Account will be a Cost of Sales account and the Applied Labor Burden Account should be a contra expense account that will carry a credit balance and reduce expenses. In this way, when you calculate labor burden during payroll entry, Sage 50 will credit your expense account and debit the cost of sales, moving labor burden so that it will affect your gross profit.
• If you want labor burden to debit cost of sales and you already apply tax and insurance expenses to cost of sales when you enter them, then both the Labor Burden Cost of Sales and Applied Labor Burden accounts will be the same, creating a "wash," in which the same account is debited and credited by the same amount.
• If you want your tax and insurance expenses to remain in the expense category of your income statement, then you will create a wash on the Labor Burden tab of Job Defaults.