Job cost, Payroll & Draws.

My boss was on the payroll only during the fourth quarter of year 2016, when we decided that he should take a payroll for the year. He is the sole owner of the company, so the IRS may give him trouble if he only took out draws. He was paid a lump sum of $30k to represent his entire payroll for the year, but he did not get the funds; instead the funds reduced the balance in his draw account.

This decision messed up the job costing, in my opinion, as they are missing payroll expense for my boss for the first three quarters of the year. We need to use these reports to ascertain the costs of performing a job, for the purpose of quoting new customers with estimates that guarantee a profit for the company.

How can we go back & fix the books, without amending the payroll tax returns? My boss took out about $70k in draws for the year. Maybe there is some way to reclass these draws as expenses other than payroll expense?

First of all, do you have an outside party for whom you're preparing this job costing? If not, just make the adjustments in your analysis of profit when quoting estimates for new customers. There would be nothing in this case that would require you to use "actual" costs when you know there is an adjustment to be made for this $30K expense.

How about a journal entry accruing 3/4 of owner wages in quarters 1-3 and offset 3/4 of the expense recorded in 4Q?

Everything we do for payroll, accounting and tax is done by me, and I am an employee of the company, so we don't outsource.

A journal entry for each quarter would be a good idea, but I don't know how to make it show up in the job cost reports. When i want to pull up a historical cost report for some old job from the past, for the purpose of using it as a guide for creating a new estimate for a similar new job, how will I remember to make the adjustments that u are recommending?

We use Quickbooks software for all of our accounting work, along with spreadsheets as a worksheet showing how I calculate job cost for each job.

...how will I remember to make the adjustments that u are recommending?

I would file that under 'reasons why you make the "big bucks"'.

You imply this is an S-corp, since you talk about both "draws" (distributions) and payroll for the sole owner.

First, you should not prepare payroll for only a single quarter of the year. I would at the very least do one paycheck per quarter, perhaps with the 4th quarter being larger than the others.

Here are some notes from one of Intuit's educational materials for ProAdvisors:

"Creating Job Costing using Journal Entries

Journal entries are easy to use for job costing when you’re using just the Profit & Loss by Job report. If you are using job profitability reports, all journal entry transactions assigned to customers appear as a “no item” line item on these reports because you do not have access to items in the Make Journal Entry window.

This section discusses what to avoid when you choose to create a journal entry with job costs. Always leave the first line blank on a journal entry. When entering a multi-line Journal Entry with Job Costs, whatever is entered on the first line directs how other costs are treated on the Profit & Loss statement."

...how will I remember to make the adjustments that u are recommending?

I would file that under 'reasons why you make the "big bucks"'.

My boss pays me $15.00 an hour.

This section discusses what to avoid when you choose to create a journal entry with job costs. Always leave the first line blank on a journal entry. When entering a multi-line Journal Entry with Job Costs, whatever is entered on the first line directs how other costs are treated on the Profit & Loss statement."[/i]

Could u send me a link to the whole thing please? Thanks Makbo.