I'm trying to account for labour costs, please help

I’m a sole trader who manufactures and sells items. I’m trying to figure out how to account for the cost of manufacturing my items. I thought about creating a purchase invoice for the time spent, but couldn’t find a category related to labour. I know that wages etc are tagged through the bank accounts, but what if I haven’t paid those costs yet?

You can use code 6000 Productive Labour or 6001 Cost of Sales Labour for any direct labour expense invoices

Thank you, I’m now debiting 6000 and crediting 1001 :smile:

When accounting for raw materials used, would it be right to create a new account called Raw Materials, debit it and credit 1001 Stock?

No no, dont touch stock account codes yet. they are for year end journals of closing stock

when you buy material you need to create a supplier first, then create purchase invoice and nominal code for debit should be 5000 General Purchases or if imported material 5001 Materials Imported

similar procedure for your direct labour cost (not your time) cost of your sub-contractors, if you are running payroll then you can account for direct wages in to 6000 Productive Labour

Okay, thanks… So how do I account for materials used? And stock sold? Should Stock 1001 decrease when General Sales 4000 increases?

once you reach your year end date, you need to do physical stock count and value it at lower of cost or NRV (net realizable value) then do a journal entry as follows, let say your closing stock cost is 500

Dr stock 1001Stock £500

Cr 5201 Closing Stock £500

To keep track of your inventory movement you might need another software depending if it involves barcode scanning or not or simple excel sheet