I agree with Raymund.

General Ledger accounts are designed and used for the accounting needs while Job Cost accounts are optional accounts used for management. They are used for very different purposes.

General ledger accounts must follow the rules of accounting while job costing account can be anything from none to a very detailed breakdown. Some JC systems even distribute labor burden using some average % to the job costing labor distributions, other use a single account or simply do not track them. As you can see Job costing is not limited by the needs of the General Accounting rules.

It just happens that by combining the recollection of data by using the accounting department resources you avoid duplicating the effort and associated cost.

Usually the accounting department post the general ledger accounts while other departments provide the information about the job costing accounts.

The accounting department provides the service but do not manage the operations, the accounting department prepares the payroll but do not tell people what to do and where, the accounting department does not prepare the estimates for bidding your jobs. Usually they do not understand the technical issues that are related to estimating your jobs. It would be a huge mistake to place the responsibility of job costing on a department that do not understand how to get the numbers not to mention how to use them.

The design of the Job Costing shall be on the Operations Manager and he shall consult other managers as well as the estimating department on the required breakdown that meet the needs for managerial functions in the same way he does not tells accounting what shall be the breakdown for the General Ledger accounts.

Of course, some interaction shall be between accounting and operations regarding the design of the job costing system as the recollection and entering of job costing data will be through the accounting modules such as Payroll, Purchase Orders, and other modules or subsidiary ledgers. No way you can leave out accounting from the discussion, but this does not means that its role will be the governing role with regard to Job Costing.

I have seen some articles defining Job Costing as a subsidiary ledger, but in the Construction Industry it is kind of a subsidiary ledger created from many other subsidiary ledgers. So which one is subsidiary to which? It is a parallel system that is key to management of operations but not key to the accounting functions.

It is not uncommon for some contractors to have no job costing system at all but they all must have some form of accounting. A painting contractor that 98% of its activities are painting needs not to have job costing accounts other perhaps than a single account per job, the need is defined by operational needs.

With regard to Job Costing do not underestimate the value of the Accounting department, it is not limited to providing the service but will use it for control purposes, can help to prevent theft unless theft comes from within the accounting department.

Best regards,

Rafael

Hi Raymund,

Cost Accountant/Cost Engineer/Procurement Engineer  should combined decide this.Cost Engineer Can decide to which code to allocate in ERP ,Accoutant can monitor it, Procurement/store can purshase & issue  it

Thansk & Regards

Sankar Viijayan

Finance & Accountancy, they should initially be set up in whichever system a companies uses to manage budgets and capture costs i.e. SAP FI/CO  etc.

Planning software is not suitable for controling accounts.

Hi Raymund,

I agree with your opinion and there should be only one keeper to avoid any misunderstanding. Based on experience, Project Controls normally is the owner and keeper of the Cost Code of Accounts.

Regards,

Daniel