Financial recognition of WIP postings

Hours example: 1 hour time entry on a billable job with a sales price of 200 and a cost price of 60.

(1) Sales price is recognized and activated in balance sheet.
(2) For analytically purposes cost price is posted back and forth. Only in P/L and always amounts to zero.

Material example: 10 iStock photos with a total sales price of 80 and a total cost price of 25.

(1) Sales price is recognized and activated in balance sheet.
(2) For analytically purposes cost price is posted back and forth. Only in P/L and always amounts to zero.

Purchases example: purchases can potentially be activated at sales price thereby recognizing the profit margin immediately.

In this example we look at the very simple case when external purchases are activated at cost price.

(1) Purchases is “parked” in balance sheet until the job closes or the purchase is settled on a partial invoice.

WIP adjustments example: hours are adjusted down 10% = 20

(1) Adjustments can be made to both hours, materials and external purchases, but will generally be posted on the same accounts. Can be setup to post on separate accounts though.

Invoice on Account example

Invoice on Account amount = 1.200

(1) Invoice on Account is “parked” in balance sheet until the job closes.

WIP postings – the accumulated status before job closing

WIP postings – when the job is closed

(1) “Temporary” WIP revenue is reversed.
(2) Invoicing on account and external purchases are realized in P/L

 

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