What happens when I post WIP? [in-depth guide]
Below demonstrates what occurs when posting 'work in progress' based on the transaction type.
Each section provides WIP posting detail before & after a billing cycle. To help with clarity, each transaction type is examined on its own. Each transaction type group will display the effects on financial reports.
Each transaction type section is organized to show 4 transactions in 'unbilled' vs. 'bill cycle complete' status. The timing is to demonstrate Month 1: unbilled transactions (transactions remained unbilled after the months billing cycle) >>Month 2: transaction is billed, marked as billed, written off or transferred.
The billing actions taken were done in the following month for demonstration purposes. The billing action taken can occur at any time in a following period and may be posted out of WIP independent of each other.
NOTE: Transferred transactions will always have 2 WIP transactions following a transfer: one to show the transfer WIP out from project A and one to show the transfer WIP in to project B. The transfer date becomes the 'transaction date' for project B. This is to keep the financial data correct for the selected date range.
1) Unbilled transactions:
- WIP posting detail
- WIP analysis report
- Corporate P&L
- Balance sheet
- Trial balance
2) Transactions following billing cycle:
- WIP posting detail
- WIP analysis report
- Corporate P&L
- Balance sheet
- Trial balance
GL tracking pptions
The WIP tracking accounts used in the following examples are setup via Menu > Admin/manager > System setting > GL settings > GL tracking options: Work in progress tracking
Individual
Labor
Debit | Credit | |
WIP agency time (asset) | X | |
WIP agency time Adj (income) | X |
Debit | Credit | |
WIP agency time adjustment (income) | X | |
WIP agency time (asset) | X |
Debit | Credit | |
Labor Write off (contra income) | X | |
WIP agency time (asset) | X |
Default labor WIP GL accounts
Labor: Prior to billing cycle
WIP posting detail
WIP analysis report
Corp P&L: NOTE: unbilled labor is tracked to an 'other income account'.
Balance sheet: NOTE: the unbilled time posted to a 'current asset account'
Labor following billing cycle
Posting detail: NOTE: the transaction transfer shows a 'marked as billed' amount and a 'labor in' amount. This is due to the original transaction. The transaction from the original project needs to be cleared from that project on the "date of transfer" to keep the Project/client P&L reports accurate.
WIP analysis: all transactions have posted out of WIP other than the transferred transaction that remains 'unbilled' but in a new project.
Corp P&L: NOTE: $135 was billed: $405 is reversed out of the 'other income account'. This leaves a balance of $135 in the 'other income account' as the transfer transaction remains 'unbilled'.
Debit | Credit | |
WIP production expenses (asset) | X | |
ITEM expense account (COGS) | X |
Debit | Credit | |
ITEM expense account (COGS) | X | |
WIP production expenses (Asset) | X |
Debit | Credit | |
WIP production write off (COGS) | X | |
WIP production expenses (asset) | X |
Debit | Credit | |
WIP other expenses (asset) | X | |
Rebillable expenses (income) | X |
Debit | Credit | |
Rebillable expenses (income) | X | |
WIP other expenses (asset) | X |
Debit | Credit | |
WIP expense write off (COGS) | X | |
WIP other expenses (asset) | X |
Debit | Credit | |
WIP media invoice accrual (asset) | X | |
ITEM expense account (COGS) | X |
Debit | Credit | |
ITEM expense account (COGS) | X | |
WIP media invoice accrual (Asset) | X |
Debit | Credit | |
WIP media write off (COGS) | X | |
WIP media invoice accrual (Asset) | X |
Debit | Credit | |
LABOR: WIP agency (asset) | X | |
VENDOR INVOICE: WIP production expenses (asset) | X | |
MISC COST/EXP RPT-BASED VENDOR INVOICE: WIP other expenses (asset) | X | |
MEDIA VENDOR INVOICE: WIP media invoice accrual (asset) | X | |
LABOR: WIP agency time Adj (income) | X | |
VENDOR INVOICE/EXP RPT-BASED VENDOR INVOICE: ITEM expense account (COGS) | X | |
MISC COST: Rebillable expenses (income) | X | |
MEDIA VENDOR INVOICE: ITEM expense account (COGS) | X | |
Debit | Credit | |
LABOR: WIP agency time adjustment (income) | X | |
VENDOR INVOICE/EXP RPT-BASED VENDOR INVOICE: ITEM expense account (COGS) | X | |
MISC COST: Rebillable expenses (income) | X | |
MEDIA VENDOR INVOICE: ITEM expense account (COGS) | X | |
LABOR: WIP agency (asset) | X | |
VENDOR INVOICE: WIP production expenses (asset) | X | |
MISC COST/EXP RPT-BASED VENDOR INVOICE: WIP other expenses (asset) | X | |
MEDIA VENDOR INVOICE: WIP media invoice accrual (asset) | X | |
Debit | Credit | |
LABOR: Labor write off (Contra income) | X | |
VENDOR INVOICE: WIP production write off (COGS) | X | |
MISC COST/EXP RPT-BASED VENDOR INVOICE: WIP expense write off (COGS) | X | |
MEDIA VENDOR INVOICE: WIP media write off (COGS) | X | |
LABOR: WIP agency time (asset) | X | |
VENDOR INVOICE: WIP production expenses (asset) | X | |
MISC COST/EXP RPT-BASED VENDOR INVOICE: WIP other expenses (asset) | X | |
MEDIA VENDOR INVOICE: WIP media invoice accrual (asset) | X | |