Direct Labor Cost

Hi there, @CDamiani.

You'll want to open the payroll item settings and ensure to post all payroll expenses to the right account. Let me guide you through the steps.

1. In your QuickBooks Desktop, go to the Lists menu.
2. Select the Payroll Item List.
3. Find and open the payroll item.
4. Click Next to open the Agency for employee-paid liability section.
5. Under the Liability account field, select the appropriate account (Direct Labor Cost) from the drop-down.
6. Click Next until you can select Finish.

I'm adding this article for more details: Edit a payroll item.

Also, I'd recommend seeking help with your accountant so they can offer you some advice on correct accounts to use.

Just in case, you can run and customize payroll reports, here's an article you can read for the detailed steps and information: Customize payroll and employee reports.

Please post a reply below if you have additional questions with your payroll expenses. I'll be more than happy to assist you again. Have a great day and take care always.

The way to do this is to set up new earnings items that use the other desired accounts (compared to the one used by default) and then use them on the appropriate employees.

So, for  some employees you might use an item associated with direct labor expense, others an item associated with indirect labor, and for others you could even use both items if that is appropriate and then split the time between them.

Hello there, @Donnaevans.

Thank you for providing more details about your concern and for utilizing your tools to come up with the solution you have right now. 

I agree that you can set up an account under Direct and Indirect Labor Costs and associate it with whatever account you want depending on your business. 

On the other hand, you can also track your labor costs and profitability in QuickBooks Online by utilizing the project feature. You can add project income, expenses, and labor costs, and run project-specific reports from a single dashboard. If needed, you can also add old transactions to new or ongoing projects. 

Let me show you how to create a new project. 

1. Go to Projects and select New Project.
2. In the Project name field, enter the name of the project.
3. Select the project customer from the Customer dropdown.
4. Add any notes or details about the project in the Notes field.
5. Select Save. 

Once done, you can add both new and existing transactions to the project. For more information on how to use projects, refer to these articles: 

• Set up and create projects in QuickBooks Online.
• Track hourly and labor costs and profitability by projects in QuickBooks Online.

However, I'd still recommend consulting your accountant if you're unsure of how to handle this. Your accountant will provide suggestions based on what's suitable for your business and manage it properly. If you don't have one, you can find through this link: Find an accountant. 

If you're already set, you might want to modify your reports to view the specific data you need. You can read through this article: Customize reports in QuickBooks Online. 

Let me know if you have other concerns about handling your accounts in QuickBooks Online. I'm just a reply away. Have a great day!