WMS - Workshop Manufacturing Suspense

 WMS – Workshop Manufacturing Suspense

• A Capital Suspense Head of Account

 

• Plan Head 7200 – Manufacturing Suspense 

• What is WMS: 

 Entire process of Collecting, valuating, analyzing and booking of charges for doing the job or work and 

 Watching the settlement of all accounts is collectively known as WMS A/C. 

 In IR Workshops – Repair & Maintenance of various kinds of Rolling Stock – Maintain WMS A/c

 In Production Units – Building / Creating the various kinds of Assets i.e., Rolling Stock – Maintain WMS A/c

 These units maintain WMS account for the purpose of recording and clearance of expenditure pertaining to both for Plan Heads and Revenue. 

• Necessity : 

 Railways are a commercial concern.

 

 Costs incurred in Workshops (i.e., POH cost of Coaches/Wagons ultimately accounted to erstwhile Demand No.06) affect maintenance (i.e., OWE – Ordinary Working Expenses) costs of running the Railways. 

 Any extravagance in workshops is likely to tell upon the operating costs resulting in erosion of profits.  

 It is therefore, necessary to have proper cost control over expenses incurred in a Workshop. 

 For this purpose, a Suspense Head of account i.e., WMS is needed under which all expenses in a Workshop are accumulated and analyzed so as to pinpoint sources of waste and efficiency. 

• Simple Example of WMS:  

 Furniture manufacturing shop manufacturers different wooden items such as Chairs, Tables, Stools, Cupboards etc. 

 If the Total expenses for manufacturing 50 Tables, 200 Chairs, 500 Stools, 100 Cupboards are Rupees Eight Lakhs, is it possible to find out the cost per Chair or Table or stool or cupboard ?  

 It’s impossible to find the cost per each item. Why because the same labour involved in the manufacture of all items.  The same factory or workplace used for all articles.  That is Rent, Factory Lighting.  Material i.e., Wood also common for all articles. 

 Unless all the costs are segregated as per Work order system and analyse.  

 That is called, process of Workshop Manufacturing Suspense to find the cost of the items manufactured or POHed in the Workshops / Production Units.

• Inputs (Debits) 

1. Labour

2. Material

3. Contractual payments

4. Direct Purchases

5. Overhead costs

• Outputs (Credits)  

1. POH of Rolling stock of Home Railway and Foreign Rlys.

2. Works executed for other Depts.

3.Other Manufacturing activities (captive consumption)

• Closing Balance (Always Debit) 

 

 Represents opening balance plus debits minus credits. 

Workshops Ideal Percentage

Of Closing Balance

Repair 3 % of Gross Credits

Manufacturing 6 % of Gross Credits

 Closing Balance  (Part II of Outturn Statement) Consists of : 

i. Works in progress

ii. works completed and awaiting acceptance

iii. material on the shop floor 

iv. Under / Over Charges due to Average Hourly rates & due to on cost rates

 

• Reconciliation of WMS balances with General Books and Workshop Account Current.

• Review of Closing Balance  

1. All items are current and authorized 

2. Details consist of nothing else except unfinished jobs and finished jobs awaiting acceptance.

3. No Credit items

4. For Deposit works – Advance payment is received and extra charges, if any accepted by the party.

5. No inefficient balances & under/over charges are timely cleared and no long outstanding dues 

WGR – Workshop General Register: 

• Detailed Subsidiary Register of WMS  

• Statement of work-order-wise, shop-wise analysis

 

• Incorporating   details of direct Labour, Stores, Incentive bonus, on costs (labour & stores) 

• Generated in EDP Centre, by merging SMS, Incentive bonus, Timesheets Programs.

• For the above purpose, Average labour hourly rates (on quarterly basis) and on cost percentages at pre-determined rates (yearly) are advised to EDP Centre.

 

Calculation of various Debits

 

• Labour Charges  -  Hours booked  x Average Hourly Rates, Quarterly  (Sources are Timesheets & LAP Statements) 

 

• Incentive – Time Saved x Incentive Rates  (Source: Job Cards & Gate Attendance Hours) 

• Material charges – distributed as per Work Order System ( Source: Issue Notes) 

• On Cost charges – (Pre-determined rates - Yearly) 

On Cost Charges 

• The expenditure cannot be directly allocated to the product or service

 

• Can only be apportioned on some logical basis 

• Another name is “Overheads” 

• Total – 3 types 

1. SOC – Shop On Cost  

 

2. GOC – General On Cost 

3. AOC – Administrative On Cost   /  POC – Proforma On Cost

Outturn Statements 

• Part I and Part II Outturn Statements are prepared from WGR 

• Part I – Completed works and adjusted in the Same Month

• Part II – Works awaiting adjustment and Works in Progress (WMS Closing Balance)  

WMS Specimen Budget for the year 2020-21 of XYZ Railway 

SN	Debits	Inner column	Amount (Rs.)		SN	Credits	Inner column	Amount (Rs.)
A	Opening Balance as on 01.04.2020
	i) Works in Progress	15
	ii) Amount outstanding for realisation – scrap	5
	iii) Bills to be raised for completed works	10
	Total (i + ii + iii)	30	30
B	Debits during the year (2020-21)				E	Credits during the Year (2020 -21)
	i) Wages to Labour	120				i) To Works	35
	ii) Material -Stores suspense (Depots)	100				ii) To Stores Suspense	15
	iii) Materials - Direct purchases	75				iii) To Revenue Demands of Home Railway (Labour & Materials)	130
	iv) Materials – Adjustments	15				iv) To Revenue Demands of Foreign Railways (Labour & Materials	125
	v) Contracts	10				v) To RSP - Rolling Stock Programme	20
	vi) Energy charges (Electricity)	5				vi) To Deposit Works for outsiders	5
	Total ( i to vi )	325	325			Total ( i to vi)	330	330
C	Deduct for Issues from WMS to Services/Works - within the Demand (2020-21)				F	Deduct for Issues within the Demand		(-) 50
	i) Issues to Works	35
	ii) Issues to Stores Suspense	15
	Total ( i + ii )	50	(-) 50
D	Total Debits during the Year (2020-21)   B – C	325 – 50	275		G	Total Credits during the Year (2020-21)  E -F	330 – 50	280
					H	Closing Balance as on 31.03.2021
						i) Works in Progress	15
						ii) Amount outstanding for realisation	5
						Iii ) Bills to be raised for completed works	5
						Total ( i + ii + iii)	25	25
E	Grand Total ( Opening Balance + Total Debits during the Year)	30 + 275	305		I	Grand Total (Total Credits during the year + Closing Balance)	280 + 25	305

• Budget Allotment  - WMS -7200   -   Rs. 275  (Total Debits during the year) 

 

• Credits should be shown as Footnotes under Demands for Grants

• The principle is Gross Budgeting. 

What is Deduct Entry?  

• To avoid double budgeting under Capital Budget (erstwhile Demand No.16), transfers from Plan Head 7200 to Plan Head 7100 and Plan Head 2100 are deducted from the Gross Budgeting i.e. On Debits side as well as Credit side. 

 

• Because other side, the Budgeting is already done on Stores Suspense Plan Head 7100 and Rolling Stock Plan Head 2100 . 

• Thus, Issues within erstwhile Demand No.16 i.e., from WMS to Stores Plan Head and RSP Plan Head are deducted from the Gross Debits as well as from Gross Credits. 

 

Key Takeaways: 

1. Capital Suspense Head

 

2. Plan Head 7200 – Manufacturing Suspense

3. 3% ideal closing balance – Repair Workshops

4. 6 % ideal closing balance – Production Units

5. Outturn Statement in Two parts – Part I and Part II

6. Outturn Statement Part II – Closing balance of WMS 

7. WGR is Detailed Subsidiary Register of WMS

8. Outturn Statement is prepared From WGR 

9. On Cost charges are divided into 3 kinds i.e., Shop on cost , General on Cost and Administrative on Cost. 

10. Deduct entry is required to avoid Double budgeting under erstwhile Demand No.16  i.e., from Plan Head 7200 to Plan Head 7100 & Plan Head 2100.

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