How do I adjust for billings which are charged to income before the costs are invoiced? Do I credit the WIP asset account or set up a WIP liability account?
There could possibly be a negative number in the unbilled column. This means that the task has been billed in excess of gross (marked up) costs. Using the logic described above, the total accrued revenue will be REDUCED by this amount. If you are using WIP to show costs that haven’t been realized, then you would generally set up a liability account rather than show a negative amount for the WIP asset account. If the asset WIP account is usually a positive amount ( a debit), then crediting a WIP asset account may be all right. If the unbilled amount is always a negative, it’s more appropriate to set up a WIP liability account to credit.
