Accounting for the Collection and Allocation of General Manufacturing Costs

1.3.3.3 Accounting for the collection and allocation of general production costs

 Concept: General production costs are costs used to manage and serve the production process, including: Salary costs and deductions based on factory employees' salaries, material costs, tool and equipment costs, fixed asset depreciation costs, and other costs related to production activities.

Manufacturing overhead allocation method

For general production costs related to many products, services... in the workshop, it is necessary to allocate these costs to each cost-bearing object according to appropriate criteria. Accountants base on original documents to allocate general production costs to each related object.

Maybe you are interested!

The criteria used to allocate general manufacturing costs are:

 Allocate general production costs according to standards.

 Allocate general production costs based on standard or actual production hours.

 Allocate general production costs by construction machine shift.

 Allocate general manufacturing costs based on labor costs.

 Allocate general production costs according to raw material costs and labor costs.

To determine the allocation level for each cost object, we often use the following formula:

Actual production costs

General manufacturing overhead allocation level

for each object

arising during the period

Total units of allocated objects (calculated according to criteria)

selected)

Number of units of each x object (in units)

selected criteria)

 Documents used: Salary payment sheet, warehouse delivery note, other related documents...

 Account used: Account 627 "General production costs" Content and structure of this account:

Debit: General manufacturing costs incurred.

Credit side: - Reductions in general production costs.

- Transfer of general production costs.

Account 627 has no ending balance and is opened in detail for each project and project item.

Account 627 has 6 sub-accounts:

- Account 6271: Workshop staff costs.

- Account 6272: Material costs.

- Account 6273: Production tool costs.

- Account 6274: Fixed asset depreciation expenses.

- Account 6277: Cost of outsourced services.

- Account 6278: Other expenses in cash.

Accounting method:

 Salary payable to production staff, accountant records: Debit account 6271 - Workshop staff costs

Credit account 334 - Payable to employees

 Deduct social insurance, health insurance, union funds, and unemployment insurance of manufacturing employees into production costs, record:

Debit account 6271 - Workshop staff costs Credit account 338 - Other payables

 When issuing materials to the workshop, the accountant records: Debit account 6272 - Material costs

Credit account 152 - Raw materials

 When issuing tools and equipment to the workshop, the accountant records: Debit account 142, 242, 627

Credit account 153 - Tools and equipment

 Depreciation of fixed assets in the production workshop department, accountant records: Debit account 6274 - Depreciation expenses of fixed assets in the production workshop

Credit account - 214 - Depreciation of fixed assets

 Costs of electricity, water, telephone,... used in the production workshop department, record: Debit account 6277 - Cost of purchased external services

Have accounts 331, 335, 111, 112

 Advance deduction for repair costs of fixed assets used in the production workshop, accountant records: Debit account 6278 - Other expenses in cash

Credit account 335 - Expenses payable

 When general production costs decrease, accountants record: Debit accounts 111, 112, 138

Credit account 627 - General production costs

 At the end of the period, calculate and allocate general production costs, accountants record: Debit account 154 - Unfinished production and business costs

Debit account 632 - Cost of goods sold (unallocated fixed general manufacturing costs) Credit account 627 - General manufacturing costs

Diagram 1.3: Diagram of accounting for general production costs according to the regular declaration method

Account 334, 338

Account 627

Account 111,112,138

(1)

(7)

Account 142,152,153

Account 632

(2)

(8)

Account 214

(3)

Account 154

TK 111, 112,

335…

(9)

(4)

Account 111, 112

Account 133

(5)

(6)

Note :

(1): Salary and salary deductions of workshop staff (2): Export of materials, tools and equipment

(3): Fixed asset depreciation

(4): Costs of electricity, water, repairs, outsourcing... (5): VAT

(6): Other cash expenses

(7): Production cost reductions

(8): General production costs exceed normal levels (9): Carryover of general production costs

1.3.3.4 Accounting for the collection and allocation of construction machinery costs

 Concept: Is the cost of construction machines to perform construction and installation work by machine.

Method of allocating costs of construction machinery use

Due to the characteristics of the construction industry, a construction machine can be used for many projects in one accounting period. Therefore, it is necessary to allocate the cost of using construction machines to each related object.

Construction machine usage costs are allocated to construction objects using appropriate methods based on the number of machine shifts or actual service volume.

The formula for allocating construction machinery costs is commonly used as follows:

Total cost of use

Expenditure allocation level

machine usage fee = construction

for each object

Construction machinery generated during the period

Total allocation criteria (estimated cost of construction machinery usage, number of machine shifts)

construction conversion)

Allocation criteria

x cost of using construction machinery of each

object

 Documents used: Salary payment sheet, warehouse delivery note, other related documents...

 Account used: Account 623 "Construction machinery costs" Content and structure of this account:

Debit: Construction machinery costs incurred.

Credit: - Reductions in construction equipment costs.

- Carry over construction equipment costs.

Account 623 has no ending balance and is opened in detail for each project and project item.

Account 623 has 6 sub-accounts:

- Account 6231: Labor costs.

- Account 6232: Material costs.

- Account 6233: Production tool costs.

- Account 6234: Depreciation costs of construction machinery.

- Account 6237: External purchase costs.

- Account 6238: Other expenses in cash.

Accounting method:

 Salary payable to workers operating vehicles and construction machines, accountant records: Debit account 6231 - Labor costs for using machines

Credit account 334 - Payable to employees

 Exporting materials for construction machinery, accountant records:

Debit account 6232 - Cost of materials used for vehicles and construction machinery Credit account 152 - Raw materials

 Exporting tools and equipment for construction machinery, accountants record: Debit account 142, 242, 623

Credit account 153 - Tools and equipment

 Depreciation of fixed assets of construction machinery, accountant records: Debit account 6234 - Depreciation costs of vehicles and construction machinery

Credit account 214 - Depreciation of fixed assets

 Costs of electricity, water, telephone... for construction machinery, accountant records: Debit account 6237 - Cost of purchased external services

Have accounts 331, 335, 111, 112

 When there is a decrease in construction machine costs, the accountant records: Debit account 111, 112, 138

Credit account 623 - Construction machinery costs

 At the end of the period, calculate and allocate construction machine costs, accountants record: Debit account 154 - Work in progress costs

Debit account 632 - Cost of goods sold (cost of using construction machinery exceeding normal level)

Credit account 623 - Construction machinery costs

Diagram 1.4: Diagram of accounting for total construction machinery costs using the regular declaration method

Account 334

Account 623

Account 111,112, 138

(1)

(7)

Account 142,152,153

(2)

Account 632

(8)

Account 214

(3)

Account 154

Account 111, 112, 331…

(4)

(9)

Account 111, 112

Account 133

(5)

(6)

Note :

(1): Salary of workers operating vehicles and construction machines

(2): Export of materials, tools and equipment for construction vehicles and machines (3): Depreciation costs for construction vehicles and machines

(4): Cost of outsourced services such as: electricity, water, repair, outsourcing, etc. (5): Other cash costs

(6): VAT

(7): Construction machinery reductions

(8): Cost of using construction machinery exceeding normal level (9): Carryover of construction machinery costs

1.3.3.5 Accounting for losses during construction and installation

1.3.3.5.1 Damage caused by demolition and re-construction

During the construction process, there are works or parts of the work that must be demolished and redone due to natural disasters, fires, contractor errors such as design modifications, or possibly caused by the contractor.

The value of the damage caused by demolition and rework is the difference between the value of the volume that must be demolished and the value of the recovered materials.

The value of the volume of demolition and rework includes the costs of materials, labor and material costs, costs of using construction machinery, general production costs spent to build that construction volume and the costs incurred to demolish that volume.

The value of the damage to be broken and rebuilt can be handled as follows:

 If caused by natural disasters, it is considered an extraordinary loss.

 If caused by the contractor, the contractor must compensate for the damage, and the contractor is considered to have completed the work volume and handed it over for consumption.

 If caused by the contractor, it can be included in the cost price or included in the unusual damage after deducting the value of the compensation for the damage to the offender and the value of the recovered scrap.

Figure 1.5: Accounting diagram for damage caused by breakage and rework during production

Account 154

Account 632

(2)

TK 152, 111

(3)

Account 138 (1388), 334

(1)

(4)

Account 1381

(7)

(5)

(6)

Account 811

(8)

(9)

Note :

(1): At the end of the period, transfer of production and business costs: costs of raw materials, costs of labor, costs of using construction machinery, production costs

(2): Value of damage caused by the contractor (3): Value of scrap recovered to reduce damage (4): Value of damage to be compensated

(5): Pending Damages (6): Processing Damage Value (7): Claiming Compensation

(8): Abnormal hole

(9): The value of the damage included in the extraordinary loss

1.3.3.5.2 Production stoppage damage

Production stoppage damage is damage caused by suspending production for a certain period of time, which can be caused by weather, supply of materials, construction machinery and other reasons.

Damages arising from production stoppage include wages payable during production stoppage, value of raw materials, fuel, and costs incurred during production stoppage.

In case of seasonal or planned work stoppage, the enterprise must make an estimate of costs during the work stoppage and deduct the cost of production stoppage from the enterprise's production and business operating expenses.

At the end of the accounting year or when the project is completed and handed over, the accountant determines the difference between the pre-deducted amount and the actual costs incurred. If the pre-deducted costs are greater than the actual costs incurred, a reversing entry must be made to record the difference.

Comment