Standard Costing
for Equipment
Journal Entries & Chart of Accounts Guide
Standard costing separates the cost of equipment use from the variability of maintenance and fuel. Jobs get charged a consistent hourly rate, while actual equipment costs are tracked separately and trued up through a company-level variance.
View the Guide ↓How This Works
The goal is simple: keep job profitability consistent without letting a repair-heavy month or fuel spike distort individual job results.
Apply a Standard Rate
Charge each job a set hourly equipment rate based on actual equipment usage.
Record Actual Costs
Fuel, repairs, depreciation, insurance, and similar costs stay in their normal equipment expense accounts.
True Up the Difference
At period-end, compare applied equipment cost to actual cost and record the difference as an equipment rate variance.
Chart of Accounts Setup
Set up these accounts before running standard costing for equipment.
Entry 1
Charging Equipment to a Job
Every time equipment is used on a job, charge that job at your standard hourly rate.
Excavator used 40 hours on Job #204 at $32.50 per hour.
This entry is usually created through your job-costing module, equipment logs, or time tracking rather than as a manual journal entry.
Entry 2
Recording Actual Equipment Costs
Actual equipment bills hit their normal expense accounts, not the individual job.
Entry 3
Clearing the Variance
At month-end or quarter-end, compare the amount applied to jobs against the actual equipment cost.
If applied equipment cost is greater than actual cost, the variance entry reverses and Equipment Rate Variance is credited.
Where the Variance Lands
Keep job reports clean. Keep the equipment variance at the company level.
Equipment Rate Variance typically flows to the income statement as a period cost instead of being allocated back to individual jobs.
That means job-cost reports continue showing the consistent standard rate, while the company still sees whether equipment is running above or below the standard overall.
Monthly Checklist
Post equipment hours to jobs at the standard rate.
Post actual bills to the correct equipment expense accounts.
At period close, run the variance entry to clear Equipment Clearing against actual costs.
Confirm the Equipment Clearing account balance equals $0.
Equipment Clearing should always land at $0 after the period-end entry. If it does not, something was not posted correctly.
In Plain Terms
Charge the job a set equipment rate per hour.
Record real fuel, repair, depreciation, and other costs as they occur.
Clear the difference at period-end and record whatever remains as variance.
This guide is a template for internal use. Consult your accounting software documentation and controller for your specific setup.