The Overhead concept is used in cost accounting in the same way as the G/L account concept in accounting.
Overheads are used to apply debit balances of G/L accounts to material costs through transfer accounts. The application is performed by recording credits for transfer accounts and debits for finished goods. However, costs should be accumulated on cost centers first to be applied to finished goods.
Information and fields on Overhead records and their relative functions are:
Unit: The unit of the overhead. For instance, kW for electricity expenses.
Transfer Account Code / Overhead Pool: Indicates the account code to which the cost generated on the overhead will be integrated at accounting side, and the overhead pool (if applicable).
Budget Difference Overhead Pool: Indicates the account code and overhead pool (if applicable) to be used to track budget differences occurred in accordance with standards after incurred overhead applications.
Capacity Difference Overhead Pool: Indicates the account code and overhead pool (if applicable) to be used to track capacity differences occurred in accordance with standards after incurred overhead applications.
Efficiency Difference Overhead Pool: Indicates the account code and overhead pool (if applicable) to be used to track efficiency variances occurred in accordance with standards after incurred overhead applications.
The G/L Accounts option located in the right mouse button menu of overhead records is used to specify the G/L account from which the overhead will transfer debit balances. Overheads can call values from multiple accounts; however, a G/L account can be linked only to one overhead.
Overheads are used to apply debit balances on G/L accounts related to overheads to materials using transfer accounts. The option is located in the Main Records menu of the Cost Accounting section. Options located in the right mouse button menu and buttons of the Overheads window are used to define overheads and to perform transactions on recorded cards. The options and functions of this window are:
| New | Used to create new overheads. |
| Update | Used to change overhead information. |
| Delete | Used to delete overhead records. Only the records with passive status can be deleted. |
| View | Used to view overhead definitions without making changes. |
| Copy | Used to copy overhead information to an empty card and to generate quick records. |
| Database Extensions | Used for user defined database extension forms. |
| Multiple Delete | Used to delete the selected records in batch. |
| G/L Accounts | Used to record G/L accounts related to the selected overhead. |
| Print (Label) | Used to print overhead information on label form. |
| Print (Letter) | Used to print overhead information on letterform. |
| Record Information | Used to display the user who first recorded and last updated the overhead, and the time of these transactions. |
| Number of Records | Used to display the number of recorded overheads. |
| Refresh | Used to display the overhead records window with most current information. |
| Back to Defaults | Used to display the overhead records window with predefined dimensions. |
Overheads Window
The Overheads window is used to define information regarding overheads to be used in cost accounts. These records are used to transfer overheads from G/L accounts into related costs. The fields and functions of the Overheads window are:
Code: The overhead code used in operations.
Description: The name or description of the overhead.
Aux. Code: A secondary coding field used to group overhead records. The aux. code can be used as a filter in reports.
Authorization Code: The authorization code of the overhead.
Unit: This field is used to specify the transaction unit of overheads.
Status: Indicates the usage status of the overhead record. The status field has two options: Active and Passive. Records with passive status cannot be used in transactions.
Group Code: This field is used to relate an overhead card to a defined overhead group. Group codes are listed with description information. Overhead groups are defined by using Overhead Groups option located under Administration / Definitions menu. Users can group overheads, and view work orders and production orders in detail according under these groups in planned/actual cost calculation windows.
Transfer Account Code: The account code of the overhead in General Ledger. This is the transfer account in which a credit is recorded for overheads related to G/L slip lines resulting from cost assignment to finished goods. This account is also a debit account to which overheads to be applied from other accounts at the end of a certain period are transferred. The appropriate code is selected on the Chart of Account window accessed by clicking on "..." icon.
Budget Difference Account Code: The account used to track budget differences between actual overheads assigned to production orders and estimated overheads. The appropriate code is selected on the Chart of Account window accessed by clicking on "..." icon.
Capacity Difference Account Code: The G/L account used to track capacity variances resulting from incurred overhead applications. The appropriate code is selected on the Chart of Account window accessed by clicking on "..." icon.
Efficiency Difference Account Code: The G/L account used to track efficiency variances. The appropriate code is selected on the Chart of Account window accessed by clicking on "..." icon.
The Overhead is recorded by clicking "Save" button. Definitions are listed on the Overhead Records window with Code, Description, Aux. Code and Unit fields.
Overhead G/L Accounts
The option used to specify G/L accounts related to the overhead. G/L codes are used to specify amounts accumulated on which accounts will be recorded as expenses through the transfer account at the end of period.
Each account related to the overhead is specified on a separate line. The Chart of Account is opened by clicking "..." icon located on the Account Code and Account Description fields, and the required account is selected. Overheads can be associated with multiple accounts; however, a G/L account can be linked with only one overhead.