Scrapped parts and redone work in a workshop's costs
How a workshop accounts for parts scrapped and jobs redone at its own cost, and how to tell a normal level of spoilage from an abnormal loss.
By Achekam · · 5 min read · For Automotive businesses in South Africa, Nigeria, Kenya
Every workshop throws parts away and redoes some work for free. A gasket tears during fitting. An oil seal leaks two days after a service and the car comes back. A batch of pattern brake pads squeals and every set has to be replaced. The customer is not charged for any of it, and rightly so. But somebody pays, and if the books do not show where, the workshop cannot tell whether its comeback rate is acceptable or quietly eating its margin.
Accountants have a useful distinction for this: normal spoilage and abnormal loss. Applying it to a workshop's scrap bin and comeback jobs makes the cost visible, and tells the owner when something has gone wrong rather than merely happened.
Normal spoilage and abnormal loss
AccountingTools defines job costing as accumulating the costs of materials, labour and overhead for a specific job. In that setting, it explains, normal spoilage or scrap is charged to an overhead cost pool for later allocation, while abnormal amounts are charged directly to cost of goods sold. Its guide to job costing explains how the overhead pool and the direct charges work together.
The logic is simple. Some waste is a predictable part of doing the work: if a certain amount of scrap happens on every kind of job, it is a cost of running the workshop, spread across the work done. Waste beyond that level is not a cost of doing the work properly. It is a loss, and hiding it inside overhead would make every job look slightly more expensive instead of showing the one event that caused it.
In workshop terms:
| Normal | Abnormal |
|---|---|
| A gasket torn now and then during fitting | A whole batch of faulty parts scrapped at once |
| An occasional comeback for a minor leak | A run of comebacks traced to one technician or one supplier |
| Consumables used up in the ordinary course | Parts damaged when a vehicle falls from a hoist |
The workshop decides where the line sits, based on its own experience, and writes it down so the same decision is made each month.
Comebacks: redoing a job at no charge
A comeback costs labour and often parts. The parts may be new ones fitted to replace faulty ones; the labour is a technician's time on a job that earns nothing.
AccountingTools explains that labour directly traceable to a job is charged to that job as direct labour, while other labour is recorded in an overhead cost pool as indirect labour and allocated to open jobs. A technician's time on a comeback is traceable, but not to a job that will be invoiced. Treating it as indirect labour, and keeping it in its own account, is what keeps it visible. If it is buried in ordinary workshop wages, the owner sees only that productivity looks low, not why.
Keeping redo labour and parts visible
A few habits make the cost of comebacks measurable:
- Open a comeback job card for every redo, linked to the original job, so the history is clear.
- Record the technician's hours on the comeback card exactly as on a paid job.
- Record the parts used on the comeback, whether new parts or the cost of parts scrapped.
- Note the cause: workmanship, faulty part, misdiagnosis, or customer misuse.
- Review the comeback cards monthly by technician, by supplier and by type of job.
The cause note is what lets a normal comeback be told apart from an abnormal one. Several comebacks in a month from the same batch of parts is a supplier problem, and probably a claim against the supplier.
Stock that goes in the bin
Parts scrapped from stock, whether damaged in the store, past their shelf life, or superseded and unsaleable, are a loss of inventory. Under IAS 2, the amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period in which the write-down or loss occurs. The cost belongs in the month the part was scrapped, not left on the balance sheet until a stock count happens to catch it.
Accounts and journals in Achekam
Each business in Achekam has its own double-entry ledger with a standard chart of accounts created when the books first open, and accounts can be added, renamed or switched off. Add a few accounts that match the distinction:
- Comeback labour, for technician time on redone work.
- Scrap and spoilage, normal, for the routine level of waste.
- Abnormal stock losses, for events beyond the normal level.
One limit matters here. In Achekam, stock counts, wastage, transfers and opening quantities do not post to the general ledger; only till sales and till returns move the inventory account. So scrapping a part in the stock records does not, on its own, take its cost out of inventory in the books. At month end, total the cost of parts scrapped and of parts used on comebacks, and post a manual journal for each category: debit the relevant expense account, credit inventory. For comeback labour, a journal moving the hours' cost from workshop wages to the comeback labour account does the same job.
Achekam refuses a journal that does not balance or that is dated in a closed month, and a posted journal can be corrected only by a reversal. Post these journals as part of the month-end routine, before the month is closed.
What the numbers tell you
Once comebacks and scrap have their own accounts, the management accounts start answering useful questions. Is comeback labour rising as a share of workshop wages? Did abnormal losses spike in a month when a new supplier was used? Is normal scrap stable, or creeping up?
None of these needs a sophisticated costing system. It needs the costs to be put somewhere they can be seen. For how parts and labour margins compare, see parts margin versus labour; for the costing principles behind this article, read job costing basics.
A workshop that knows what its redone work costs can decide whether to accept it, fix it or claim it back. One that does not will simply wonder why the margin is thinner than it should be.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
