We currently have item assemblies that contain a service item for labor. The assembly consists of the raw material parts and also a specific "item" that we created that reflects the cost of assembly. The cost for this labor is billed to us by an outside warehouse and does not affect our payroll at all. My question is: when we pull up an invoice and ctrl+y to see the transaction journal, the labor cost does not flow through to this report. We've found where this cost is reflected on a "custom transaction detail report" but are wondering if we can somehow see it on the report for the specific invoice.
Hi there, @RKN,
Thanks for getting in touch with us today. I can share some information about the Transaction Journal report.
The Transaction Journal displays the information for the current transaction you open including the accounts affected by assembly. The entries displayed on the report determines the posting of the transaction for auditing and report purposes.
At the moment, QuickBooks uses the weighted average cost to determine the value of your inventory and the amount debited to COGS when you sell your inventory. Since we're unable to customize the report to add a column for your Cost, you're able to view the average cost hitting the COGS account. Please see illustration:
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Please let me know if you have any other questions. I'll be happy to answer for you. have a good one.
Thanks for your response Jen. Yes, I agree with your illustrations and am glad that you are seeing what we see on our end. What doesn't make sense to me is that the transaction should affect the labor account also, so why does it not appear on the transaction journal and is there any way to add the labor account activities to the transaction journal?
Glad to hear again from you, @RKN.
Allow me to provide additional details on how QuickBooks Desktop handles your Transaction Journal.
When running a Transaction journal for general assembly that has a service item on it, it should look like this:
The service account denotes the labor cost of the assembly. You may want to review how this specific item is set on your end before it was included in the inventory assembly. Make sure to put a check mark on This service is used in assemblies or is performed by a contractor or partner.
Also, make sure to indicate the proper Expense and Income account to determine the specific account in Chart of Accounts where it will be recorded.
That's it! Please don't hesitate to click the Reply button if you have other questions about generating your Transaction Journal Report. I'm here to help.
Thank you for your response. This is what we would like to see, however it is not showing up on my report. I've created a new item exactly as you've shown with no luck. I've even called the QB help line. They've done exactly this in the Sample Company that QB provides and it doesn't show in the sample file either. Do you have any other ideas?
I've attached a snip of the Transaction Journal from the QB Sample Company.
First, QB does NOT use weighted average, it uses an arithmetical mean average. A weighted average is like when you were in school and tests were so much of the final grade, quizzes so much and home work so much - THAT is a weighted average.
QB uses total / qty = average, simple average or arithmetical mean average
I do not recommend using non inventory or service type items in an assembly.
The way it work when you do.
1. you pay for the outside costs using an expense account
2. that same expense account is listed on the item
3. you do the math and calculate how much of that total cost is part of ONE assembly item and enter that amount in the cost block of the item
4. When you build the assembly, the function will TAKE that cost out of the expense account and add it to the assembly item cost.
The pitfalls of using a non inventory or service item in an assembly
You must do the calculation in step 3 each time you pay for outside processing again - and if you did not build enough assembly item with the old cost, that is a whole new problem since cost is still in the expense account
If you set the cost on the item screen too high - building the assembly item will decrease the balance in the expense account more than it should, eventually driving the balance negative - a negative expense is additional income.
I do this differently than Rustler; for one thing, this Invested Cost being held until production means it is never posted to Expense. That makes it WIP = Work In Process, Other Current Asset on the Balance sheet and never hitting the P&L. It hits the P&L later as part of COGS for what is sold. And what got sold needs to have been Fully Costed.
You can use the Service item in the Build, but that Service item links to the WIP = Other Current Asset account. That also requires that you listed this on the Purchase for that outside labor. And that also requires you have a Known Cost per unit. If all of that applies, then you can put that cost on the Edit Item (not a two sided item). The build will then use that Value, and the account the item is linked to, WIP, will be reduced when you Build.
Another, more flexible, method is to still list the Service Item on the purchase, linked to WIP. Now the Build does not use it. You can Build. Then, you will use the Inventory Adjustment function. You will Increase the Value for what you just put on hand from that build, by "investing" the WIP value that you know went into this Production Run. Top left, the WIP account is where you pull from, for the amount you know is in WIP for this production run.
Make one Other Current Asset account and use it for WIP as Outside Labor, Broker Fees, Import duties and Pallet/Shipping costs for a production run. Use a different Other Current Asset for Raw Materials. It's the same concept, but now you have some clarity for where you put something you incur, temporarily, until you invested it in something produced and on hand.