WIP Accounting for Construction

Damien1 · ‎June 18, 2020

Hi everyone,

I have a problem/question regarding WIP accounting for construction & long term contracts.

With the new revenue recognition guidelines we needed to switch to completed contract method for LT contracts. So all work, materials, etc is moved to a current asset account Construction in Progress (CIP) or WIP until the job completed and we can recognize the revenue.

My problem is, if we send an invoice for a draw, progress billing, etc before the project is complete (before we recognize revenue) it will create a receivable, but that work is already in CIP/WIP and will show an incorrect amount of current assets because it is essentially doubling up an already recorded current asset.

What is the correct way to handle that or work around?

Is anyone able to help me through this?

Thank you,

Damien

Ashley H · ‎June 18, 2020

Thanks for reaching out to the Community, @Damien1.

To receive the best answer to your question, I recommend reaching back out to your accountant. They'll be able to provide you with the most accurate accounting information about WIP for your unique business. If you don't have an accountant, no worries. You can visit our site to find a ProAdvisor to help you with any accounting questions that you may have.

If you have any other questions or concerns, please don't hesitate to ask. Enjoy the rest of your evening.

Damien1 · ‎June 18, 2020

Thanks Ashley,

But with all the solutions for problems the community has provided over time I feel they will be able to provide me some guidance.

Thanks,

Damien

DylanMiller77 · ‎October 17, 2021

curious to hear what your answer was Damien1. Holler at me, I'm in the same position as you. [email address removed]

@Damien1 wrote:
Thanks Ashley,
But with all the solutions for problems the community has provided over time I feel they will be able to provide me some guidance.

Thanks,
Damien

Quackbook · ‎July 21, 2022

Don't count on it.

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WIP Accounting for Construction