JOB Work For Gold Processing a case studt | job work accounting in tally

12_Job_work_reg

In this business case study we have considered the business process of Gold jewellery making/polishing etc. This work is outsourced and in Tally’s language ( a Job Work Out ) is issued.
Let us say we are into the gold business and we need to convert the raw gold into a processed- one- Jewellery.
We will see the steps as:-
This raw gold is transferred to the job worker 1.
This Job worker works and processes it and sends it back to us.

The payment to the job worker is based on the no of gms he converts from Raw Gold into Jewellery. The general trend is 50 Rs /gm. ( Although most jewellery shops might tell you it is much higher and may charge the end user rates as high as 300 /gm- also known as making charge)

At this time, we should also be able to see our liability towards the job worker and the input credit that we get in case the job worker charges the service tax. ( since the service tax may /may not be charged we have taken the case where it is being charged, for your actual scenario you may ignore it)

Also, when Raw gold is passed on to the job worker, he will also give some scrap and only say 90% of the raw gold gets converted into Jewellery. this remaining 10% gold is to be returned back to the manufacturer or ( in this case to us).

this raw gold will be sold in the market at slightly lower rate.

We have understood the process here, now let us see how this is solved in tally,

job work accounting in tally

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Item masters created as :-

For the item Jewellery – we have made the BOM as :-

job work accounting in tally

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job work accounting in tally

www.tallynine.com

1) Issuing out a Job Work Out Order :-
Note the various things we have mentioned here,

Party name – Job worker 1 ( service receiver -YES)
Order No- this helps us track the order JW/GOLD/01
Qty- Since payment to the Job worker will be made based on qty so we have mentioned the rate of job work in the order voucher itself.
Let us see the different types of bills that we may issue to the job worker I have shown them side by side
You choose  the one which suites your business

job work accounting in tally

www.tallynine.com

the first is one is a simple format print ( ALT P and then F12) while the second one is a regular or where ( ALT P and then F12) and simple format is “NO”

Now the step 2 is:- transfer of Raw Gold out of our Godowns to the job worker for processing.

before we could issue a material out voucher we need to create a voucher type for Material out of RAW Material

go to Accounts–> Voucher Type –> Create –> Material OUT ( RM) and remember to put it under material out and then put the Use for Job work as Yes and For Job work in as NO

The two voucher types created are as follows.

job work accounting in tally

www.tallynine.com

Now we will issue a material out voucher as raw material is to be transferred out. Please note that Tally automatically keeps note of the the Job work out order number.  In this case JW/GOLD/01.

job work accounting in tally

www.tallynine.com

Once this material is issued out. we can issue a purchase order based on the assumption that out of 10 gms of raw gold only 8 gms will be converted into pure jewellery.

this is issued for the reason so that when the actual billing is done, we can refer as to how much the job worker had said , he would generate out of 10 gms of raw gold.

Gold job processing

www.tallynine.com

Now let us say the first delivery is received where instead of 8 the job worker delivers 7 orders and would deliver the remaining one gm the next day. ( i used this just to show that you can also receive in parts)

The delivery of 7 items is received as:-

job work accounting in tally

www.tallynine.com

now after a day that’s on the 3rd we get the final delivery of remaining 1gm along with the scrap.
the entry is shown as :-

job work accounting in tally

www.tallynine.com

Now once the Finished Goods are received, the most important part is that of making the purchase to be shown as a purchase of service , unlike the purchase of items as was shown in the Purchase order. This is the most crucial step as we dont want to show it on the profit & loss account as an item, so we copy the purchase order no and tag it by copying & pasting ( Ctrl-ALT-C), (Ctrl-Alt-V)

Please note that the purhcase voucher would be issued in the Acct invoice mode and not the item mode because we are purchasing a service from a service provider here.( Press ALT-i) to toggle between item mode and acct invoice mode.

job work accounting in tally

www.tallynine.com

Now for the purchase ledger ( purchase of services ) the subform is filled manually with the amount Rs. 400 as this can be seen from the purchase order.  Don;t select the Purchase order number because in the PO we had selected items , here we are selecting the purchase as a service ledger, so there will be a mismatch. The PO is used just for our information and calculation.

job work accounting in tally

www.tallynine.com

the remaining Purchase voucher is made as

A good method of tagging the PO and Purchase is to copy the ref no of the PO and paste it at the Purchase voucher reference.

job work accounting in tally

www.tallynine.com

Now let us view a report as :-

job work accounting in tally

www.tallynine.com

Now Payment is made to the Job worker for his services as

job work accounting in tally

www.tallynine.com

Now we see the P&L Account and see that it correctly shows the purchase of services from a job worker.

job work accounting in tally

www.tallynine.com

And the stock summary shows :-

job work accounting in tally

www.tallynine.com

the stock summary does not show the Raw gold as it has been consumed to form Jewellery and scrap.

This way you may maintain your gold business through Tally.

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About the author /


Hi Just like you, I am one of the souls on EARTH who has a desire to be able to maintain my accounts accurately and be most efficient in using the powerful features of Tally. Currently I work as an accountant at a firm in Durgapur. I am a Tally lover and would be happy to solve your queries related to Tally, however I may not be able to reply to all the queries instantly but will surely try to solve them and give u a solution( provided I get free time from my daily work :) )

1 Comment

  1. Rajeev Yadav

    sir,
    ask me for bank reconciliation

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