This the most detailed methodology for recording the labour/labor variances. All the variances are recorded in this method.
Ledger Accounts Used
The ledger accounts used for recording the transactions are
 Labour/Labor Rate of Pay Variance a/c (LRPV)
 Labour/Labor Mix/GangComposition Variance a/c (LMV/GCV)
 Labour/Labor Yield Variance a/c (LYV/LSEV/LSUV)
 Labour/Labor Net Efficiency/Usage Variance a/c (LEV/LUV_{(N)})
 Labour/Labor Idle Time Variance a/c (LITV)
 Labour/Labor Gross Efficiency/Usage Variance a/c (LEV/LUV_{(G)})
 Labour/Labor Cost Variance a/c (LCV)
Rate of Pay Variance
The Rate of Pay variance is identified and recorded at the time the wages are being recorded in the cost ledgers.
The transactions with regard to accounting for labour/labor rate of pay variance would be:
 Recording Labour/Labor Rate of Pay Variance.
 Transferring the Normal part of the variance to the relevant accounts.
 Transferring the abnormal part of the variance to "LCV a/c".
When the Variance is Adverse
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
WLC a/c
LRPV a/c
To GLA a/c

Dr Dr 
– – – 
xxx xxx 
xxx 
[For the wages paid and payable and the adverse rate of pay variance thereon identified and recorded at the time of recording wages in the cost ledgers.]

02. 
– 
WIPC a/c
FGLC a/c
COS a/c
To LRPV a/c

Dr Dr Dr 
– – – – 
xxx xxx xxx 
xxx 
[For the transfer/adjustment of normal part of the adverse rate of pay variance to the relevant accounts.]

03. 
– 
LCV a/c
To LRPV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of abnormal part of the unfavorable rate of pay variance to the Labour/Labor Cost Variance account.]

When the Variance is Favorable
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
WLC a/c
To GLA a/c
To LRPV a/c

Dr 
– – – 
xxx 
xxx xxx 
[For the wages paid or payable and the favourable price variance thereon identified and recorded at the time of recording wages in cost ledgers.]

02. 
– 
LRPV a/c
To WIP a/c
To FGLC a/c
To COS a/c

Dr 
– – – – 
xxx 
xxx xxx xxx 
[For the transfer/adjustment of normal part of the favorable rate of pay variance to the relevant accounts.]

03. 
– 
LRPV a/c
To LCV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of abnormal part of the favourable rate of pay variance to the "LCV a/c".]

Idle Time Variance
The Idle time variance is identified and recorded at the time the wages are being seggregated as to direct or indirect. They may also be identified when the factory overheads are being absorbed into production as well as during and on the completion of the production process.
The following transactions can be identified with regard to accounting for labour/labor rate of pay variance.
 Recording Labour/Labor Idle Time Variance.
 Transferring the variance to "LCV a/c".
When the Variance is Adverse
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
LITV a/c
To WLC a/c

Dr 
– – 
xxx 
xxx 
[For the abnormal loss of idle time not allocated either as direct or indirect wages identified and recorded from the wage ledger control account.]

(Or) 
– 
LITV a/c
To FOHC a/c

Dr 
– – 
xxx 
xxx 
[For the abnormal loss of idle time from the labor time allocated as indirect labour to factory identified and recorded from the factory overhead control account.]

(Or) 
– 
LITV a/c
To WIP a/c

Dr 
– – 
xxx 
xxx 
[For the abnormal loss of idle time from the labor time allocated as direct labour identified and recorded from the work in progress control account.]

02. 
– 
LCV a/c
To LITV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of idle time variance to the Labour/Labor Cost Variance account.]

When the Variance is Favorable
This variance is always negative or unfavorable and cannot be positive or favoourable.
Mix/GangComposition Variance
This may be identified at the time of allocating labour/labor time as to direct and indirect. It is generally identified and recorded after the production is completed i.e. at the time of transfer of completed production to finished goods stock.
Except for the point at which the variance is recorded, the transactions relating to these two variances need similar entries for recording.
 Recording Mix/GangComposition Variance.
 Transferring the normal part of the variances to the relevant accounts.
 Transferring the abnormal part of the variances to "LEV/LUV a/c".
When the Variance is Adverse
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
WIP a/c
FOHC a/c
LMV/GCV a/c
To WLC a/c

Dr Dr Dr 
– – – – 
xxx xxx xxx 
xxx 
[For the value of direct and indirect labour/labor and the adverse mix variance thereon identified and recorded at the time of allocation of labour/labor cost.]

(Or) 
– 
FGLC a/c
LMV/GCV a/c
To WIP a/c

Dr Dr 
– – – 
xxx xxx 
xxx 
[For the value of goods produced and the adverse labour/labor mix variance thereon identified and recorded at the time of completion of production.]

02. 
– 
WIPC a/c
FGLC a/c
To LMV/GCV a/c

Dr Dr 
– – – 
xxx xxx 
xxx 
[For the transfer/adjustment of normal part of the adverse mix variance to the relevant accounts.]

03. 
– 
LUV/LEV a/c
To LMV/GCV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of abnormal part of the unfavorable mix variance to the Labour/Labor Efficiency/Usage Variance account.]

When the Variance is Favorable
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
WIP a/c
FOHC a/c
To WLC a/c
To LMV/GCV a/c

Dr 
– – – – 
xxx xxx 
xxx xxx 
[For the value of direct and indirect labour/labor and the favourable mix/gangcomposition variance thereon identified and recorded at the time of allocation of labour/labor cost.]

(Or) 
– 
FGLC a/c
To WIP a/c
To LMV/GCV a/c

Dr 
– – – 
xxx 
xxx xxx 
[For the value of goods produced and the favorable mix/gangcomposition variance thereon identified and recorded at the time of completion of production.]

02. 
– 
LMV/GCV a/c
To WIP a/c
To FGLC a/c
To COS a/c

Dr 
– – – – 
xxx 
xxx xxx xxx 
[For the transfer/adjustment of normal part of the favorable mix/gangcomposition variance to the relevant accounts.]

03. 
– 
LMV/GCV a/c
To LUV/LEV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of abnormal part of the favourable mix/gangcomposition variance to the Labour/Labor Usage/Efficiency Variance account.]

Yield Variance
This is identified and recorded after the production is completed i.e. at the time of transfer of completed production to finished goods stock.
Except for the point at which the variance is recorded, the transactions relating to these two variances need similar entries for recording.
 Recording Yield Variance.
 Transferring the normal part of the variances to the relevant accounts.
 Transferring the abnormal part of the variances to "LEV/LUV a/c".
When the Variance is Adverse
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
FGLC a/c
LYV a/c
To WIP a/c

Dr Dr 
– – – 
xxx xxx 
xxx 
[For the value of goods produced and the adverse yield variance thereon identified and recorded at the time of completion of production.]

02. 
– 
WIPC a/c
FGLC a/c
COS a/c
To LYV a/c

Dr Dr Dr 
– – – – 
xxx xxx xxx 
xxx 
[For the transfer/adjustment of normal part of the adverse yield variance to the relevant accounts.]

03. 
– 
MUV a/c
To LYV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of abnormal part of the unfavorable yield variance to the Labour/Labor Efficiency/Usage Variance account.]

When the Variance is Favorable
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
FGLC a/c
To WIP a/c
To LYV a/c

Dr 
– – – 
xxx 
xxx xxx 
[For the value of goods produced and the favourable/favorable yield variance thereon identified and recorded at the time of completion of production.]

02. 
– 
LYV a/c
To WIP a/c
To FGLC a/c
To COS a/c

Dr 
– – – – 
xxx 
xxx xxx xxx 
[For the transfer/adjustment of normal part of the favorable yield variance to the relevant accounts.]

03. 
– 
LYV a/c
To LUV a/c

Dr 
– – 
xxx 
xxx 
[For the transfer of abnormal part of the favourable yield variance to the Labour/Labor Usage/Efficiency Variance account.]

Usage/Efficiency Variance
Where it is a Consolidation Account
The total variance in the Usage/Efficiency Variance account represents abnormal variance. This is to be transferred to the Cost Variance account.
There is only one transaction in such a case.
 Transferring Abnormal Variance to Cost Variance Account.
When the Variance is Adverse
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
LCV a/c
To LEV/LUV a/c

Dr 
– – 
xxx 
xxx 
[For the total adverse usage variance transferred to cost variance account.]

When the Variance is Favorable
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
LEV/LUV a/c
To LCV a/c

Dr 
– – 
xxx 
xxx 
[For the total favourable/favorable usage variance transferred to cost variance account.]

Cost Variance
Where it is a Consolidation Account
The total variance in the Cost Variance account represents abnormal variance. This is to be transferred to the Costing Profit and Loss account.
There is only one transaction in such a case.
 Transferring Abnormal Variance to Costing Profit and Loss Account.
When the Variance is Adverse
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
C P&L a/c
To LCV a/c

Dr 
– – 
xxx 
xxx 
[For the total adverse cost variance transferred to costing profit and loss account.]

When the Variance is Favorable
Journal in the books of M/s __ for the period from ____ to _____

Date 
V/R No. 
Particulars 
L/F 
Debit Amount (in Rs) 
Credit Amount (in Rs) 
01. 
– 
LCV a/c
To C P&L a/c

Dr 
– – 
xxx 
xxx 
[For the total favourable/favorable cost variance transferred to costing profit and loss account.]
