need tutorial for handling WIP in QBO

WIP is accumulating costs in an asset account. Once the project is complete and sold, then the costs in the asset account are moved to the P&L, an expense account.

Invoicing is another issue entirely. Sales tax is calculated and collected with the invoice - no choice there. The issue with sales tax is to find out whether the state requires sales tax reporting on accrual or cash basis, it is not up to the business it is up to the state. If it is accrual basis (the majority are accrual) then if you invoice the customer for the whole job, say $35K, then sales tax on that amount is due and payable that reporting period - that you accept time payments, progress payments, does not change that requirement.

You asked about WIP; not Earned Revenue, but Accumulated Costs = Work In Progress.

Let's break this down a bit:

"What we would like to do is post expenses to asset accounts in the GL"

By using Product/Services, and not Multiple asset accounts.  You only need one WIP account. Like these examples:

Law firm = Advanced Costs = WIP Other Current Asset

Flipper or Builder of spec project = Construction in Progress = CIP Other Current Asset

This way, for example, those construction people can list Windows/Doors, Electrical, Flooring, Appliances; All of which can be used on Estimate, Purchase orders, Bills, Checks, credit card charge entries, and all of which allow you to manage Quantity and all of which end up in WIP.

"and customer receipts to a liability account in the GL."

Again, use Products/Services. Make a Service Item for Customer Prepayment, link it to Liability, and use it on a Sales Receipt. Use it later on a credit memo to apply to the invoice for actual charges. This allows you to see everything as related to Customer Name, not as brute force manual accounting using Journal Entries. Use Customer Name and Vendor Name related transactions for everything.

And this is not quite right, either: "ONce each job is finished, we want to declare the income by journal entries out of the WIP into the income statement."

The Sale is not from WIP. The Sale is the Gross Revenue event = Income happens here. Then, WIP is evaluated for determining Costs, as COGS. You can do this with a Bill for a vendor name = WIP, if you also want to list the Product/Services that went into WIP.

And this gives you the Gross Sales minus the COGS = the profit event.

You also need to manage the Customer Liability by Name, making a custom report total by name. When you see names at 0, you reconcile that account. You only and always use an Ending Balance of 0. You clear only the transactions for the name(s) that is at 0. You make two versions of this report: one is titled All Activity and one is filtered on Cleared = No and titled Current Balances.

You do the same thing for the WIP account; reconcile to 0 once you know you offset a WIP balance to COGS (or inventory). Example: I might have 4 "lots" of manufacturing production overseas. All of this is WIP. Once I receive my delivery of products, I would "remove" WIP to Inventory, and fully cost the inventory as Products, Packaging, Broker Fees, Freight, Pallets, and Import Duties, but only for this production run. So, not All of WIP is part of my "Close WIP" process, each time. Specific costs incurred that relate to this specific production run means I still see a Balance in WIP. But I am only and always trying to verify and prove I offset all appropriate and specific accumulated costs = only reconcile using an ending balance of 0, clearing only the values that are proven to be offset correctly. Or, fix my entries and try again.

Hope that helps.

Further comment: For a Law Firm, advanced costs is Never offset to anything. The Invoicing of the costs incurred, as Billable entries, will Clear (offset) the value from Other Current Asset, already. In a law firm, advanced costs are never expense and their reimbursement is never income. Only Fees are income for the law firm.

So, all that matters, is that you Map what you need, you set up Products, Noninventory, Service, and Other Charge to manage the flow, and you control using them on Name-based transactions. That summarizes WIP management.

Hi,

I have a problem in tracking our WIP & I guess that due to not setting the accounts probably, can yo please share with details/information or video of how to set the projects and track the WIP

Hi,

I have a problem in tracking my WIP & I guess that related to a wrong accounting setup, can you please share with me details/ information or videos of how setup projects & tracking the WIP accordingly.

We are a consultancy firm which is like the Law firm.

How would you relate WIP to construction as with the LAW example.  I have a question of if you set up a WIP acct, It is a single account that all transaction go into. Also, can you still create invoices and receive payments normal way in Quickbooks desktop. Need help with these questions. Please