How does a timesheet work?

Definition

A timesheet is the record of hours a person worked in a period. On the books, this is support for payroll and job costing, not a ledger account of its own.

A CPA office collects one from each staffer before Friday's pay run. Those hours become wages, and the client columns become the cost on each job.

Accrual or cash basis does not change what the record is. It still shows who worked, how long, and which file or task the hours belong to.

This record is the proof of time. It is not the paycheck, and it is not the journal that later posts the wages.

Where it shows up

P&L: Related to the wage and job cost those hours become.

Balance Sheet: Related to accrued wages the hours support.

See also: Billable Hours · Job Costing · Payroll Register

When you look at your Income Statement, you will not see a printed timesheet line. You see wage cost and the cost sitting on each job; this record is how you prove the hours behind those amounts.

A long sheet with high totals means a heavy week. A short sheet means fewer hours, a holiday, or time that has not been turned in yet.

The Balance Sheet also does not list the record. Related amounts show up as accrued payroll when hours have been earned and not yet paid.

On the Statement of Cash Flows, the payday deposit is the cash event. The timesheet is how you prove the hours that became that deposit.

Keep each sheet with the run the way you keep a source document with an invoice. Anyone proving Friday's wages or a client's cost should be able to open the page.

How it works

Hours go in first, usually by day and by person. Salary staff still turn in time when the office costs work by client.

Each hour is tagged to a file, a task, or an internal code. Client time becomes the hours that can be billed; admin time stays with the office.

The pay run reads the hours next. Hourly staff are paid from the totals; salary staff use the same sheet so the office can still cost the jobs.

Stay with the hours for this period. A utilization report is a later reading of the same time; this page is the record that captured the hours.

Direct labor is the wage for people who deliver the client work. The timesheet is how those hours are split off from front-desk and admin time.

Job costing then puts those hours on each file. A fully burdened labor rate can turn the hours into an all-in cost, but the sheet itself is still just the time.

After the week closes, missing sheets are a cutoff problem. Hours that belong to this week and arrive late still have to land in this week's pay and this week's jobs.

The payroll register is posted from the approved totals. If a sheet does not match the register, the pay run or the job file is incomplete.

Example

Lumen CPA is a three-person office that bills most of its work by the hour. Each staffer turns in a weekly timesheet on Thursday.

This week's three sheets add to 120 hours. Ninety of those hours are tagged to client files; thirty hours are admin, review, and office time.

The bookkeeper does not invent those hours in the pay file. The sheets are the list; payroll and the job files only copy the totals.

Friday's wages follow the 120 hours. The ninety client hours also land on the three open files so each return or review carries its own staff cost.

Lumen files the week's sheets with the pay run. Anyone tying a client's invoice to staff time should be able to open the page and see the hours.

There is no ledger account named timesheet. The record stays in the week folder; the accounts it supports are wages, accrued payroll, and the cost on each job.

Common mix-ups

A timesheet is not the payroll register. The sheet is the hours; the register is the pay-run list of gross pay, deductions, and take-home pay.

A timesheet is not the same as billable hours. Billable hours are the slice that can be charged to a client; this record also holds admin and other time.

A timesheet is not a ledger account. You do not debit or credit it; you keep it as the support that proves the wages and the job cost you did post.

Related terms

• Billable Hours: Hours worked that can be charged to a client.
• Direct Labor: Wages for the people who directly make the product or deliver the service.
• Job Costing: Tracking revenue and cost for each individual job, project, or order.
• Payroll Register: The per-run report listing each employee's gross pay, deductions, and take-home pay.
• Utilization Rate: The share of available hours that are billable.
• Gross Wages: Total pay earned by an employee before withholdings.
• Source Document: The original receipt, bill, or statement that supports an entry.
• Fully Burdened Labor Rate: The all-in hourly cost of an employee including burden.