I have an engineering firm who wants to start using a WIP account. Walk me through how that would all be set up in QB Desktop? From what I have read, you need to set up items list accounts and current asset account for WIP. When I create invoices for time and expenses, how would the unbilled invoices pull into WIP until they are actually invoiced to customers? Once invoiced, the income statement should then should show the income and COGS for that invoice.
Allow me to share some insights about handling Work in Progress (WIP) or Construction in Progress (CIP) in QuickBooks Desktop (QBDT).
There are multiple steps we can do to handle WIP in QBDT. The scenario I'll be providing below assumes that all revenue and costs will be tracked as assets(for costs) and liabilities (for revenues) until the end of the job, when they’ll be transferred to income and expense accounts.
First, set up a new account called WIP as other current asset from the Chart of Accounts. Then, change the expense account on your service items to the asset account you've created. You also have to add two Other Charge items:
Transfer out of WIP - with WIP as the account and note in the description that the amount should be positive
Transfer into COS - with COS as the account and note in the description that the amount should be negative
Once completed, make sure to use the Items tab instead of the Expenses tab on all your transactions.
To help you handle WIP accordingly and check for ways on how to track unbilled invoices pull into WIP until they are actually invoiced to customers, I suggested consulting with a professional accountant. Also, you can consider checking the answers provided by our Community Champion in this thread as additional reference.
Post again if you have any other questions. I'm always here to help. Have a good day!