Question

What purpose do Job Cost Sheets serve? How do they relate to the balance sheet? How do they relate to the income statement? What should we be able to do with the Job Cost Sheets and the financial statements?

Answer 1

Job cost sheets serve the purpose of recording all the costs that go into a particular job. The sheet compiles all the cost. This helps in keeping record the expenses incurred in case of a particular job. The accounting department is responsible for preparing the same and includes all the manufacturing cost. It shows job name product name, start date, end date and number of units completed. It serves as a accounting record as well. The sheet includes material requisitioned, material consumed, direct labour hours, labour rate per hour, manufacturing overhead rate, time tickets, etc.

Job cost sheet shows all cost. The ledgers of these costs are placed in Balance sheet. Thus outstanding payable in respect of each job can be found out from Balance sheet. Also, not all the jobs get completed as on balance sheet date, thus the closing inventory which comprises of raw materials, work in progress and finished goods are shown in Balance sheet. Thus, all records of job cost sheet can be reconciled through balance sheet.

Job cist sheet places all the expenses which are finally compiled together to make profit and loss statement. Income statement includes income from all the sources. Thus income from all the jobs can be found out. Similarly, expenses of all the jobs can also be found out from income statement. The cost under job cost sheet and in income statement should match. This can be used to found out any discrepancy in costs. Also, not all jobs will be profitable. Thus one to one correlation is possible with income and expense to find out which job is profitable and which is not. Thus it helps in decision making.

Job cost sheet are a accounting record. We should be able to correlate the costs as in job cost sheet and income statement. The overhead applied should match with the overheads in income statement. The opening closing stock should be checked out. Job cost sheet acts as an important tool to find out discrepancy and misreporting in case of expenses. The expense in job cost sheet should match with the ones in income statement. Any inflation deflation in the same can be found out. Such relation should be used. Also, job cost sheet preparation enables keeping track of expenses. Any hike in expenses can be found out in day to day basis rather than being found out at the end of the job.

Thus job cost sheet is an important tool for accounting purpose.