Prorject Accounting - Payroll Allocation

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Posted on by lmai

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Hi All,

Can the Payroll Allocation be a COGS account? What is the logic for having this Payroll Allocation account in this field? Is it to reduce the Payroll Expense that the labor is now allocated into the project?Thanks.

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ZvikaR 168 on at

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yes, one of the possible functional "purposes" of payroll allocation is to re-classify payroll expenses from the payroll expense account into the project expense or asset accounts.

another "way" it can be used, for contract labour, is into a balance sheet account to record the liability for paying the labour.

I am not sure in what context you would want to credit COGS when recording hours, so hard to respond to the original question.

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lmai 2,438 on at

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Thank you, Zvika.

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Junaid Idrees on at

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Hi Kim Johnson,

Can you provide more information about what are you trying to achieve from business prespective?

Payroll allocation is expense nature account. You can use payroll allocation account to record # of project hours as debit to project cost account and credit to "payroll allocation account" for the cost of those hours.

OR

It is used to allocate across the salary expenses accounts and You also have to create ledger allocation rule in GL on the same main account(with allocation %) to allocate the expense accordingly.

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Ludwig Reinhard Microsoft Employee on at

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Hello Kim,

Depending on the work done, the payroll allocation account can be a COGS account - for example for people that actively and permanently work on our project.

What I have seen more often is, however, that people used a P&L account that is a bit further down in the income statement; often around the payroll/wage&salaries section.

That is because the account is doing what its name says :-)

It allocates costs from the cost center or department of your employee to the project.

Usually, you will have a voucher that looks similar to:

DR: ProjectCostAccount - CostCenterFromProject

CR: PayrollallocationAccount - CostCenterFromEmployee

Most of the time the ProjectCostAccount is an account that you find in the COGS section of your income statement while the PayrollAllocationAccount is an account that is found near the wage&salaries accounts that you use.

Best regards,

Ludwig

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lmai 2,438 on at

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Thanks, Ludwig. That makes sense.

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