How do I adjust for billings which are charged to income before the costs are invoiced? What's the difference between tracking WIP by task and WIP by cost? Why is it necessary to record work in progress? The Work In Progress FAQ has all the answers:

Q. Why is it necessary to record work in progress?

Good accounting practice requires that job costs be matched with billings on your financial statements. In Clients & Profits ASAP, this would automatically happen if all job costs were billed through Accounts Receivable the same month they are incurred. In practice, agencies sometimes bill all possible charges at the end of every month. This results in costs on the financial statements with no revenue yet recorded. The Work in Progress (i.e., WIP) report shows the unbilled amount which can be used to accrue the revenue.

Q. What's the difference between tracking WIP by task and WIP by cost?

When a client invoice is added, billing amounts are copied from the job task to the invoice. The billing amount is based on the task's unbilled total. You can bill any amount, whether it's for more or less than the job's costs. This gives you the flexibility to freely adjust your client's invoice, without worrying about the costs on the job itself. How the job task tracks WIP is simple: it is the difference between the task's gross costs minus the task's billings. When you print the WIP by Task report, you're seeing the leftover unbilled tasks -- whatever still hasn't been billed.

Cost-based WIP reports literally show you which costs are unbilled. This option gives you the most detailed look at unbilled costs, which then become the basis for your WIP accrual entries. However, it's more complicated to track WIP by cost than it is by task. To keep it accurate, you'll need to check how billings were allocated to job costs each time you add (or change) a job invoice.

Q. How do I adjust for billings which are charged to income before the costs are invoiced?

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.