Samolet Group did not spend last year living under a rock* 🪨 (an English phrase, meaning in the dark) so it adapted to the changing environment and implemented a system in place.
Job order costing accounting is the currency of the realm.
When working with accounting systems, it’s essential to take account of how specialized methods like Job Order Costing function.
This account management approach is particularly useful in industries where accounting reports must reflect unique projects or services. By focusing on accounting terms like direct labor, materials, and overhead, this method enables accounting teams to track costs with precision.
Core Components of Job Order Costing
1. Direct Materials (Прямые Материалы)
These are tracked using accounting forms like the materials requisition form, which links raw materials to specific jobs. Costs are recorded in the Work-in-Process (WIP) account* (незавершенное производство (НЗП) — a critical account tool for monitoring unfinished goods.
2. Direct Labor (Прямые Трудовые Затраты)
Labor hours are meticulously logged using timesheets, a practice emphasized in accounting standards. Wages are debited to the WIP account, ensuring alignment with accounting methods for cost attribution.
3. Manufacturing Overhead (Производственные Накладные Расходы)
This includes indirect costs such as utilities* (коммунальные услуги) and depreciation* (амортизация). Accounting associates use a predetermined overhead rate (calculated as estimated overhead costs / estimated activity base) to allocate these expenses. Accounting reviews often highlight challenges like underapplied or overapplied overhead (недопоглощённые/перераспределённые накладные расходы), common accounting issues in dynamic industries.
Когда фактические накладные расходы не совпадают с расчётными (заложенными в стоимость продукции).
Недопоглощённые/ Underapplied Overhead – реальные затраты выше учтённых в себестоимости.
Перераспределённые (избыточные)/ Overapplied Overhead – реальные затраты ниже учтённых в себестоимости.
Practical Applications
Film Production:: Each movie is treated as a separate job* (activity that results in a unique product). Direct materials (props, costumes) and direct labor (directors, editors) are tracked alongside accounting applications for overhead (lighting, software rentals).
Construction:: Accounting platforms help manage accounting steps, from material requisitions to completed accounting reports.
Legal Services:: Accounting notes detail billable* (оплачиваемый) hours and case-specific expenses, adhering to financial accounting principles.
Key Considerations
Less accounting errors occur when using standardized accounting reading materials and accounting text guides.
Managerial accounting teams rely on accounting first principles to ensure compliance with requirements accounting norms.
Trade accounting sectors, such as manufacturing, benefit from accounting exams that test proficiency in cost allocation* (распределение) and accounting standard adherence* (соблюдение).
By integrating accounting methods like Job Order Costing, businesses can address accounting issues while maintaining alignment* (согласованность) with financial accounting and managerial accounting goals.
Whether through accounting reports or accounting review processes, this system ensures costs are traced* (отслеживать) accurately, even in complex accounting applications like film production or custom manufacturing.
Example:: In movies, accounting platforms track direct materials (custom props) and direct labor (editors), while overhead costs (equipment rentals) are allocated using accounting steps tied to production hours—a vital account management practice for staying within budget.
This framework not only enables accounting clarity but also supports completed accounting documentation, critical for audits and accounting standard compliance* («послушание»). By mastering these accounting terms and processes, professionals can navigate accounting issues with confidence, ensuring accurate accounting reports across industries.
I chose Samolet Group as an example of a prominent Russian real estate company.
Let us nail down how job order costing would benefit this company.
Companies, it seems, have never been more efficient than now with all these accounting practices like job order costing — for bespoke and highly customized products or process costing — for identical products and services. A job* (not what you think) is an activity that results in a unique product.
Samolet Group is a public company — they trade stock. Samolet’s strong suit is to provide exceptional building solutions to sophisticated customers.
Samolet has a vast accounting team, including the Chief Financial Officer (CFO), a controller (manages accounting staff), a treasurer (that reports directly to CFO), an internal auditor (confirms financial reports), and a tax accountant, amongst many.
As it goes about accomplishing difficult residential complexes and projects, it is vital to incorporate project-specific cost tracking to treat each job separately and allocate* (распределить) costs based on every job* (активность) done.
It allows them to accurately account for direct materials (recorded in the Work-In-Process (WIP) account), direct labor, and manufacturing overhead costs to ensure transparency and reduce wasted resources. This system would soften the blow if anything goes awry.
Job order costing assesses the profitability of each project and allows them to focus on the lucrative projects to maximize the revenue. Job order costing improves budgeting and forecasting.
No materials or labor hours are to be wasted: the system tracks everything, reducing waste and fitting in timelines, having detailed data at hand.
It is especially paramount when entering new markets and expanding business — Samolet became the Samolet group by acquiring other companies. The accounting system should satisfy the desires of a variety of stakeholders (check out my post on Telegram), which brings me to the next idea.
Job order costing is found to be decent when communicating precise finances to stakeholders, such as clients, investors, or regulators — it clearly outlines the value of each job and it does not get lost in a shuffle of financial data and spells out all costs incurred and provides compliance with industry standards.
It builds trust among stakeholders and shows where the money went. Clients feel strongly about the company that clearly shows what they did and how much money it cost, which serves them well when attempting to make a good impression and maintain a status quo.
For other stakeholders like investors, this accounting method is about what is going on behind the scenes of a business and conveys the idea that the company is mindful about all funds they spend on each project.
Gone are the days when managers — other stakeholders— had to wade through imprecise financial details; now managers can derive insights into whether a particular project needs pursuing in the future or not.