I’m quite confused. Our Labor Cost for our manufacturing process is outsourced. We buy the raw materials and our labor is done by a third-party contractor. Our practice is to pay the contractor in advance before the production.
So initially, we create invoice for the advance payment and recorded as follows:
Prepayments to contractors – Debit
Accounts Payable/Cash – Credit
However, when we do the stock entry at the end of the month, to record the portion of the expired prepayments as part of the additional cost, i can’t add entry anymore.
We have to reflect the portion of the Labor Cost on the project as well. The entry must reflect be:
Work-In-Progress - Debit
Prepayments to Contractor – Credit
I tried to do JE instead of including it as part of the Additional Cost in the Stock Entry. But I also can’t add.
How can I reflect the Labor Cost as part of the consumed cost of the Work-In-Progress Inventory?