Work In Progress Accounting

Work-in-progress accounting is a common function used in job costing. The idea and benefit of WIP accounting is to have your income and expenses reported in the same period for large jobs. If a job spans for multiple months, expenses and income will most likely be accounted for in different periods. WIP accounting eliminates this by moving all of the money at once when you close the job.

Preliminary setup:

1. Go into Company | System Setup | Accounting and place a checkmark in the “Enable Work-in-Progress Accounting” checkbox.

2. Go into Company | Enter Chart of Accounts and create your asset and liability WIP accounts. When setting up the asset and liability accounts, make sure that you place a checkmark in the WIP Enabled checkbox and select the closing account you want it to go to when the job is closed.

3. Associate the different items (billing codes, wage items, etc.) to the proper WIP accounts.

Note: The Sales Invoicing screen should not be used to enter in parts for job using Work in Progress accounting. The Sales Invoicing screen is incapable of posting the cost of goods material general ledger account number and Work in Progress materials balance sheet account number.

Using Work-in-Progress accounting:

1. Create a job by going to Customer Info | Enter Jobs.

2. Through normal accounting operations, get money into your WIP accounts. You can do this through the Inventory Job Transfer module, Sales Invoicing (using billing codes), direct journal entries, etc.

3. View the Job Report (Detail) under Company | Reports | Job Reports and then verify that the balance shown is correct.

Job Report (Detail)

4. When you set the status of the job to Closed in Setup Jobs, it will move the money from the WIP account to the closing account through a journal entry pop-up screen. This will show you exactly how much money was moved during the closing and which accounts were affected.

Closing Journal Entry

5. View the Job Report (Detail) again. The first line (blue dot) is the amount in the WIP account and the 2nd line (red dot) is the amount in the closing account. The amount in the WIP account should be $0.00 (if all money was transferred) and it should now be in the closing account.

Job Report (Detail)

Issues you might encounter using WIP:

1. Issue: Job cost reports entries appearing as “Unclassified”

Resolution: This is the result of entering items to the job without a job type and a job class. Upon entering costs to a job, a job class can be entered as well as a job type to track and categorize the costs on your job reports. When entering in income and costs to a job you can choose the job type on your entry and or in your sale billing codes and it will classify that cost entry as material, equipment, labor, subcontractor, permits or other types. When making your entries for your jobs you also have the option to further break down that entry into a job class. You can setup job classed by going to Company | Enter Job Classes. Using job classes on your entries are optional and do nothing but provide greater breakdowns on your job reports if needed. A good example of when to use a job class would be when entering payroll for your labor and you might want to see different categories of labor on your jobs such as Start up Labor, Duct Labor, Finish Labor, Electric Labor, Foreman Labor etc. Of course if you choose not to enter in costs for a job without using at least the job type then it will be difficult for you to analyze many of job reports as costs will be seen as a lump sum.

2. Issue: Open Job Reports totals (when using Work in Progress Accounting) do not balance with the Work in Progress balance sheet accounts in your financials.

Resolution: Jobs that have been closed once and additional entries made may need to be closed again.

3. Issue: Job cost reports (when using progressive billing) do not have the correct for balances.

Resolution: If change outs are entered in the progressive billing screen they may be appearing improperly due to an incorrect configuration in System Setup | Progressive Billing. The billing codes that are being used for change orders are most likely the same billing codes that are being used for labor, material and other on the sales invoice. To correct this you’ll need to enter in new billing codes for change outs in Enter Billing Codes and then go to Company | System Setup |Progressive Billing and enter new change out billing codes. Delete the sales invoice and re-enter.

How do I get to this screen?