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WIP accounting period close/open journal process

What is the correct period end and period open journal process

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Hi All,

I would appreciate some clarity on the correct treatment of WIP for a professional services firm.

The Project starts in April ends in June and 10K is added to the WIP each month with an invoice raised in Month 3 (June) at completion of the project.

Are the journal entries below correct?

Or do we need to reverse out the WIP accrual in the following month? i.e. reverse our April's WIP journal in May at month open and then May's WIP journal in June at month open ? If so what is the journal entry and why do we do this?

 

Is the April month end journal

DR 10k WIP

CR10k Sales revenue

 

Project continues in May with a further £10K worth of hours billed

DR 10k WIP

CR10k Sales revenue

 

Project is completed and delivered at 30 June with a further 10k of time costs added

DR 30K AR

CR 20 WIP

CR sales 10k

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By daniel_
08th May 2019 10:58

Either is fine but it depends how many projects you have.

Personally I'd prepare a schedule for each month's WIP project by project.

CR Sales DR WIP on the last day of each month with the total of the projects and reverse it on the first day of the following month.

Then just invoice as normal and the adjusting entries should take care of themselves.

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