G/L Account Required for Standard Costing & PIT
This document helps explain some of the common accounts that are required for using EIQ in a Standard Costing environment when the transactions will be journalized. Note that some of these accounts may already exist in your current setup. Please carefully review this document to make sure that you have a clear understanding of what is required.
Major GL Account Types
Asset / Inventory Accounts (Balance Sheet) – these accounts are used to hold the inventory value of all purchased and Manufactured Items. They can be setup in the following areas:
- GL Setup Default – allows for a main Inventory Account – recommend that this is an account that should never contain any value in it, this is done to assure that proper setup is being done.
- Cost Element – is used for any purchased items, they will drive the purchase and consumption of the item into and out of this account
- Inventory Item Group – this is an override location for any item that is manufactured. – OPTIONAL
Inventory Item – a specific G/L account can be assigned to a Mfg. Item, this is where the item Std Cost will go into and out of when made, consumed or shipped.
Absorption / Earned Accounts (Offset to expenses Income Statement) – these accounts are used to offset the cost of manufacturing an item. They are used for both labor and overhead and can be broken out depending on how the user configures the system.
- GL Setup Default – is what is used if a cost element does not declare a specific account
Cost Element – is the typical setup and will push the Manufacturing on an item into this account.
COGS / Ship Accounts (Part of COGS – income statement) – is used when shipping an item they can be a bucket account or specific they are used to break out the Cost of Goods Sold when an item is sold
- GL Setup Default – is what is used if an override is not set up.
- Cost Element – is where a G/L Account can be setup to help split up the COGS entry at time of AR Invoicing
Inventory Item Group – allows the user to override the cost elements assigned G/L account
Variance Accounts ---(COGS – income statement) are used when an over/under use of materials, labor or overhead occurs. It is also used when an item is purchased and there is a difference between the standard cost and purchase/invoice price. It is also used when doing specific types of manual adjustments in the system.
- GL Setup Default Accounts – this is the main default when a variance occurs
- Cost Element – allows the user to assign a specific variance account for the element
- Inventory Item Group – override to the Cost Element allows the user to assign specific account for an inventory item group – NOTE MFG. items only.
- Item Level – Overrides the Inventory Item group if used or the cost elements on MFG. Items only – this is specifically for MFG. Items consumption
Note: there are two types of MFG. Variance
- Production Variance – which is hit during usage variance of a raw material
Mfg. Production Variance -- which is hit when usage variance occurs on consumption of a WIP item
- Other Accounts – (COGS – income statement) there is an option to have the system use other variance accounts during cost rolls or Physical – Cycle Counting Variances
It is strongly recommended that the user defines the following for the system to flow the dollars correctly
- Default G/L Accounts – NOT OPTIONAL
- Cost Elements -- Strongly Recommended
Note on the order of how the system determines what G/L Account to use
- Inventory Item – MFG. Items only
- Inventory Item Group – MFG. Items Only
- Cost Element
In other words the system looks at the item first, then if it does not see an override is looks to see if the item belongs to and inventory item group, etc.