Debit Balance in Accrued Liabilities--help

[Schlotzsky]

I've got several accounts with a normal credit balance displaying an overall debit balance.

Account is used to accrue service payroll for mechanics. Mechanic clocks in on a P.O., it credits the account and debits WIP. When payroll hits, it debits. We accrue payroll at the end of the month. Can't figure out anywhere where anything has gone wrong. Any thoughts?

 

[Triest123]

I've got several accounts with a normal credit balance displaying an overall debit balance.

Account is used to accrue service payroll for mechanics. Mechanic clocks in on a P.O., it credits the account and debits WIP. When payroll hits, it debits. We accrue payroll at the end of the month. Can't figure out anywhere where anything has gone wrong. Any thoughts?

Dr Wages $100,000
Cr Accrued Wages $100,000
To record the direct labour for the current month

Dr WIP $100,000
Cr Wages $100,000
Being transferred the direct labour to the WIP

You can see that the wages account is closed, and the accrued wages a/c is
a credit balance.

Dr Accrued Wages $100,000
Cr Bank $100,000
Being paid for the wages

 

[Schlotzsky]

Dr Wages $100,000
Cr Accrued Wages $100,000
To record the direct labour for the current month

Dr WIP $100,000
Cr Wages $100,000
Being transferred the direct labour to the WIP

You can see that the wages account is closed, and the accrued wages a/c is
a credit balance.

Dr Accrued Wages $100,000
Cr Bank $100,000
Being paid for the wages

Right, that's how it should work. For whatever reason, We're Accruing for, for example, $1,000 and paying out $1,250. Not sure how that could be, as our payroll system is ironclad.

 

[Triest123]

Right, that's how it should work. For whatever reason, We're Accruing for, for example, $1,000 and paying out $1,250. Not sure how that could be, as our payroll system is ironclad.

=> Probably, you are making a provision of $1,000 (i.e. an estimated amount)
for the wages, hence understating the actual wages (i.e. the amount you actually paid out)

 

[Schlotzsky]

=> Probably, you are making a provision of $1,000 (i.e. an estimated amount)
for the wages, hence understating the actual wages (i.e. the amount you actually paid out)

But the $1,000 is derived directly from the mechanics time on the repair order.

Mechanic A clocks in on Repair Order 1 for one hour and makes $10 an hour. Debit labor in process, credit accrued service payable $10. RO is billed, debit cost of sales labor $10 credit labor in process $10. Payroll pays Mechanic A $10, debit accrued service payble $10 credit cash.


labor in process..........10.00
Accrued Service Payable.............10.00

Cost of Sales Labor.....10.00
Labor in Process.........................10.00

Accrued Service Payable....10.00
Cash..........................................10.00

And accrued service should either have a credit balance or a zero balance, depending on payroll and how much work is done/billed.