One of DBA's major benefits is that it gives you a true manufacturing accounting system. All transactions related to sales, jobs, purchasing, and inventory, post to the DBA general ledger.

The DBA general ledger is supplied with a standard chart of accounts that is optimized for a manufacturing company. You simply cross-reference each of your existing accounts to its equivalent account in DBA and add your own accounts where needed.

In a true manufacturing accounting system like DBA, direct labor and manufacturing overhead costs are not immediately expensed. Instead, these costs are absorbed into job costs as you report job labor hours, and ultimately become part of each item's inventory cost as jobs get completed. Only when you sell the item are labor and overhead costs realized as a portion of the item's cost of goods sold.

Absorption costing of labor and overhead conforms to GAAP and IRS guidelines and aligns your revenues and costs so that you get accurate gross profit reporting without distortions.

Establishing hourly rates for absorbed labor and overhead is done here in the Shop Rates screen. The program compares actual costs for a recent date range with reported job hours and calculates an overall shop labor rate and overall shop overhead rate. These shop rates are then applied to your work centers, where they can be factored up or down for any exceptions.

Absorption costing of labor and overhead gives you an accurate work in process inventory, shown here on the Balance Sheet. Efficient manufacturing is measured by how much WIP and on hand inventory is required to support your sales. If you cannot accurately measure work in process, you have no means for measuring your progress.

Another benefit of the DBA general ledger is that your operational people are never exposed to accounting decisions. All accounting setup is done in advance here in the Account Assignments screen, under the control of your accounting department. Your non-accounting people can freely add items, customers, and suppliers, and enter sales orders and generate jobs and purchase orders without ever having to specify GL accounts.

When it comes to financial applications, you have two accounting configuration options: using the DBA Financial modules, or our Financial Transfer option.

With the DBA Financials option, DBA's integrated financial modules are used for receivables, payables, banking, and general ledger. Payroll is processed outside of DBA, typically by a payroll service provider. Each pay period, summarized payroll account totals are posted to the general ledger by journal entry or the payroll import utility.

With the Financial Transfer option, your existing accounting system is used for receivables, payables, banking, and overall general ledger. Payroll is processed by your accounting system's payroll module or an outside service provider. On a daily basis, customer invoices and PO-related supplier invoices generated in DBA are entered or imported into your accounting system in a one-line voucher format. At each period end, DBA account totals are cross-referenced and posted to your general ledger by a journal entry or journal import.

The financial transfer is designed for minimal data entry, which makes it practical for use with any accounting system, with or without a data import capability.

Financial applications have no effect on the core manufacturing system, which has its own general ledger. So no matter which system you use for financial accounting, DBA assures that your manufacturing accounting will be done properly, with a complete audit trail maintained in the DBA general ledger.

The sample company supplied with the free evaluation system is configured to show you the DBA financial modules.

Two other videos in our video library deal with accounting issues.

If you are considering the Financial Transfer option and want more details on how it is set up and used, see our Financial Transfer Option video.

For an extended discussion on payroll issues, see our Using Payroll with DBA video.

Proper manufacturing accounting, with absorption costing of labor and overhead and the ability to accurately measure work in process, is essential to your manufacturing efficiency. DBA gives you a true manufacturing accounting system that works with the DBA financial modules or those in your existing accounting system.