By Joe Woodard, AccountingWEB QuickBooks columnist
The Profit & Loss by Job report shows all of the income and expenses you have assigned to Jobs on Checks, Bills, Invoices, Journal Entries, etc. However, the totals on the Profit & Loss by Job report may not agree to the totals on the Profit & Loss. There are two primary reasons:
- The income statement activity is not assigned to a Customer or Job name. Transactions coded to the income statement that do not include a job name do not appear on the Profit & Loss by Job report.
- The income statement activity is assigned to a name record other than a Customer or Job. The Profit & Loss by Job report shows columns for the Customers and/or Jobs only – not for any other type of name like vendors, other names or employees.
The Primary Issue: If you do not assign all income statement activity to a Customer or Job, QuickBooks does not display the income or expense on the Profit & Loss by Job report. This causes the Profit & Loss by Job to show different totals than the Profit & Loss. It is critical for these two reports to agree.
Note: Some businesses are only interested in tying these two reports through Gross Profit. This section assumes you want all of the balances on these two reports to tie, including operating expenses. You can adjust the steps to omit overhead/expense lines as necessary.
The Strategy behind the Workaround: The Profit & Loss by Job report doesn’t tie to the Profit & Loss unless every post to income and expense refers to a Customer or Job. As a result, you must total the Profit & Loss by some other criteria – one that shows the columns for the Customers/Jobs but also include transactions not posted to a Customer or Job.
Tip: If you use the P&L by Job report in your company, create a Customer name called “Overhead.” Use the “Overhead” Job name for expenses that are not tied to a specific Job like Office Supplies and Administrative Salaries. By doing so it is much easier to identify the transactions with no Job name (entered incorrectly) using the steps in this section.
If you or your client does not use Premier/Enterprise Solutions Contractor Edition or Accountant Edition you cannot perform the steps in this section. Proceed to Option 2 below.
By default the Expenses Not Assigned to Jobs report includes purchase forms only (e.g. Bills, Check, Credit Card Charges, etc.). There are other settings that limit the amount of information you will see on the report as well. You need to modify this report so that it will show you more transactions in your file that are not assigned to jobs. Perform the following steps to modify the report:
- Remove the Transaction Type filter
- Filter the report by account for “All Income/Expense Accounts.” This account filter will include Cost of Goods Sold accounts as well. As an alternative you can filter the report for Income and Cost of Goods type accounts – if you are tying Gross Profit by Job to company-wide Gross Profit (rather than Net Income).
- Remove the Detail Level filter so that the report will show all detail levels – as opposed to “All Except Summary.”
Double-click each transaction on the report and assign a Customer or Job name. If the transaction is a discount taken on a bill (recorded on the Pay Bills window) you cannot assign a customer or job name. See Step 5 Option B in the section below for more information.
Note: If Paychecks do not include job information, the payroll expenses not assigned to jobs (e.g., gross wages, payroll taxes, SUTA expense, FUTA expense, etc.) will not show on this report. This is true even if you remove the transaction type filter to include all transaction types. As a result, Net Income on the Profit & Loss by Job may be significantly different from Net Income on the Profit & Loss. You can use Option 2 below to find the transactions you cannot locate using the Expenses Not Assigned to Jobs report.
You may need or prefer to use this option for three reasons:
- You and/or the client have an edition of QuickBooks that does not include the Expenses Not Assigned to Jobs report.
- The modified Expenses Not Assigned to Jobs report described in Option 1 above does not fully show the discrepancy between the Profit & Loss and the Profit & Loss by Job.
- You prefer to work from a summary report that shows the total balances so you can enter a summary journal entry to make the Profit & Loss tie to the Profit & Loss by Job (see Step 5 Option B below for more information).
Perform the following steps to create a Profit & Loss report that shows all Income Statement balances that are not assigned to jobs:
- Create a Profit & Loss Standard report.
- Filter the report by Customer:Job.
- QuickBooks displays a “No name” column in the far right column of the report, just to the left of the total. Double-click each amount in the “No name” column and assign the transaction to a Customer:Job name.
Note: This column is not on the default Profit & Loss by Job report. It only appears when you open a Profit & Loss Standard report and then total the report by Customer:Job.
- If the totals on this report still do not agree to the Profit & Loss, total the report by “Payee.” You will notice that the report totals now agree to the Profit & Loss. However, there are still balances without a job name. To locate these balances, filter the report by Name for “All Vendors.”
Note:When you total by Payee, transactions without a Job name show by the Vendor, Employee or Other Name record you used on the transaction. When you filter by name for “All Vendors,” the report will include only those transactions for vendors that are also not assigned to a job name. Though it is counter-intuitive, when you drill down on these balances and assign a job name to the transactions, QuickBooks will remove the amount from this report – even though the report is totaled by Payee instead of Customer:Job.
- Double-click on balances that show on this report and assign the appropriate Customer or Job name. If the expense is overhead, use a Customer called “overhead.”
When you apply a discount using the Pay Bills window, QuickBooks does not allow you to assign a Customer:Job name. To assign these discounts to the applicable Jobs you have two options:
Option 1: Use Bill Credits instead of Vendor Discounts to reduce the amount you owe the Vendor. Unlike Vendor Discounts, Bill Credits allow you to assign a Customer:Job name. Also, Bill Credits allow you to post to the both the Account(s) and Item(s) you used on the Bill. In some situations it is best to post the discount from the Vendor to the same Items you used when recording the Bill, if the Bill contains Item records.
Option 2: Create a Journal Entry to adjust the account you use to track Vendor Discounts as shown below. Notice the credit and the debit are to the same Account, but the debit uses the vendor name and the credit uses the Customer:Job name. You would reverse the debits and credits to assign Costs and Expenses to jobs. The credit will then show on the Profit & Loss by Job report. There is not net impact on the Profit & Loss.
Tip: If there are numerous transactions not assigned to Jobs, you could use the Journal Entry method in the note above to assign balances to various Jobs as of the adjustment date (e.g. 12/31). However, it is best to edit each individual transaction to include a Customer or Job name so the daily and monthly reports will be accurate throughout the year, not just as of the date of your adjustment. As necessary, enlist the client’s help to assign these transactions to Jobs.
- After all of the balances on the report you created in Step 4 are assigned to jobs, filter the report by name for “All Other Names,” and repeat Step 5 above for any amounts that show on the report.
- After all of the balances on the report you created in Step 6 are assigned to jobs, filter the report by name for “All Employees” and repeat Step 5 above for any amounts that show on the report.
Tip: Payroll Expenses like Gross Wages, Payroll Taxes, Federal Unemployment and State Unemployment will show in employee columns if Paycheck doesn’t include a Customer or Job name. The most common cause is administrative salaries –administrative Employees for whom you do not use job-specific timesheet detail when creating Paychecks. You can edit each Paycheck to include the “overhead” Job or you can use Journal Entries entered monthly to assign the total wages and payroll taxes to the overhead Job – as shown in Step 5 Option B above.
- After all of the balances on the report you created in Step 7 are assigned to jobs, remove the name filter and total the report by Customer:Job. Make sure the totals of the report agree to the company-wide Profit & Loss.
Note: Some businesses tie only Gross Profit on the Profit & Loss to Gross Profit on the Profit & Loss by Job. If the amount on the report with no name is an Expense, Other Expense or Other Income type account, there is no attempt to reconcile the discrepancy. These businesses conclude that Job Cost reports are really designed to track profitability by job, not net income by job. As a result, any amount below Gross Profit is irrelevant to the Profit & Loss by Job report.
Even if you perform all of the steps above and even if the Profit & loss by Job agrees to the Profit & Loss, there still may be a discrepancy between the balances on the Profit & Loss by Job and the Job Profitability report. The Job Profitability report posts some transactions differently from the P&L by Job and in some cases excludes transactions even if they are assigned to a customer/job name.
Consider the following when tying the Job Profitability Summary Report to the Profit & Loss:
- Inventory adjustments do not show on the Job Profitability Summary Report even if there is a customer/job name assigned.
- The Job Profitability Report considers not only the type of account to which a transaction posts but also the type of transaction. For example:
- Bills, Bill Credits, Checks, Credit Card Charges and Credit Card Credits that debit income will increase costs on the Job Profitability Report instead of decreasing revenue. The result is an overstatement in both Costs and Revenue. Overall profitability is not impacted. To quickly locate these transactions double-click the total costs on the Job Profitability Report. Then, filter by account for “All Ordinary Income Accounts.”
- Invoices, Sales Receipts, Credit Memos and Deposits that credit Cost of Goods Sold will increase revenue on the Job Profitability Report instead of decreasing costs. The result is an overstatement in both Costs and Revenue. Overall profitability is not impacted. Exception: When sales forms debit Costs of Goods Sold through the use of an Inventory Item these debits will show in the Costs column of the Job Profitability Summary report. To quickly locate these transactions, double-click total Revenue on the report and filter by account for All Cost-of-Sales Accounts. (Tip: Include expense accounts if you think some job costs are recorded as expenses.)
Note: Even if the Profit & Loss by Job report agrees to the Job Profitability Report, both reports may still contain incomplete information. Use all of the steps in this article (not just those in this section) to make sure all income statement transactions are properly coded to a customer or job name.
About the author
Joe Woodard is an Advanced Certified QuickBooks ProAdvisor and Intuit Solution Provider who has taught over 20,000 QuickBooks consultants across the country. Joe works with Intuit, state CPA societies, and Atlanta-area CPA firms to present advanced QuickBooks instruction to accounting professionals and software consultants. Joe has earned a unique relationship with Intuit as a trainer, consultant and author. Joe has built two successful accounting software consulting practices: the first in New Orleans, Louisiana and the second in Atlanta, Georgia – Creative Financial Software (CFS). In addition to consulting with small businesses, CFS provides advisory services to CPA firms and other QuickBooks ProAdvisors/Intuit Solution Providers across the country -- helping them to better service their clients who use Intuit products. Joe recently hosted the first annual Scaling New Heights QuickBooks conference in Atlanta.