Speculative-Project-or-WIP

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Speculative Project or WIP (Work In Process or Progress) Accounting Lesson:
Item List
Map items to WIP Asset accounts for the Expense/COGS, and Unrecognized Income for the
Sales side (see WIP item list)
Include Items for
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Land/Lot Purchase
Closing Costs
Real Estate Commissions
Property Taxes and Insurance
Make sure Job-Related Payroll Items are also mapped to WIP Costs account
What if you do BOTH contract jobs and Speculative or WIP projects?
Option 1: 2 item lists – 1 for WIP and 1 for Contract Jobs
Option 2: Monthly adjustments to WIP OR From WIP
To WIP specific jobs– use standard item list mapped to COGS and Income accounts:
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Run a Profit and Loss by Job Report – Monthly
Do an Adjusting Entry using the Adjustment Register:
o Costs: Negative to Job Related Costs – be sure to include the job name,
Positive to WIP Construction Costs Account – you can even have a WIP account
for each project, be sure to include the job name
o Deferred Revenue: Positive to Construction Income – include Job, Negative to
Unrecognized revenue, you can have one for each job– include job
To Pull Non-WIP Jobs out of WIP – use WIP item list:
Run a custom transaction detail report, filter by WIP accounts and job – total by account list
(good to include all dates just to make sure nothing changed)
Adjusting Entry:
Costs: Positive to Job-Related Costs, Negative to WIP, be sure to include job name
Revenue: Positive to Construction Income, Negative to Unrecognized Revenue – include job
name
Consider using Classes so you can run a separate P&L for Speculative Projects vs. Regular jobs
so you can analyze the margins.
Special Reports:
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Job Profitability Detail is automatically filtered to show income and expense accounts
ONLY, change filter to show All accounts, eliminate “actual income” column and
memorize for each job.
Create 2 custom transaction detail reports:
o Filter for WIP Construction Costs account, Total by Customer, filter by “not
cleared”
o Filter for Unrecognized Income account, Total by Customer, filter by “not
cleared”
Deposits/Draws/Loans:
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Post Loans as deposits on deposit form to individual Loan accounts – note job in Memo
or on “from” line of the deposit
To get Estimated Revenue vs. Actual Revenue: Create invoices for WIP Jobs using WIP
items to post to Unrecognized Revenue, or Post deposits to Unrecognized revenue with
customer as “from” on line item.
Owner Investment – Post to Owner Contribution or Shareholder Loan account as
deposit or transfer
Closing Speculative Development Jobs:
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Run Custom Transaction Detail on both WIP Costs and Unrecognized Revenue (if
applicable)
Identify and reconcile loans (add accrued interest if applicable) associated with the
project, or Unrecognized Revenue
Obtain final closing statement for Sale of property and create adjusting entry to clear:
Liabilities: Loan Balances or Unrecognized Revenue
Assets:
o Lot Purchase
o Land Development
o WIP Construction Costs
o Any other assets/liabilities
Record final closing statement as an adjustment entry (customer job on each line):
o Use items to record costs as a positive for: closing costs, real estate commissions,
insurance and taxes as stated on closing statement, Use a negative to record Sale
of property, and other credits (property taxes), Use a positive to clear out the
loan and deposit proceeds into checking account (or a negative if a loss)
o To clear current asset values, use items as a positive to record Lot/land Purchase,
Land Development costs, WIP Construction Costs, accrued interest on loans if
not accrued as cost already, any other assets associated with the project
o Use Expenses side to clear the Loan Balance as a negative amount
o Use expenses side to assign proceeds to the bank account – either positive or
negative
o Net amount of adjusting entry should be 0, all Balance Sheet Accounts
associated with the project should be 0
Closing WIP, non-speculative jobs:
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Run Custom Transaction Detail on both WIP Costs and Unrecognized Revenue accounts
Create an adjusting entry: Post on expenses side: Unrecognized Revenue as a Positive
amount, same amount to Construction Income as a negative amount, WIP Construction
Costs as a negative amount, offset by Job Related Costs as a Positive, use job name on
all line items
If you want to post more detailed Cost of Goods Sold to the P&L:
Consider using classes on all cost transactions as: Subcontractor, Materials, and Labor, then
filter Custom transaction detail by Customer and total by class, create separate entries on
adjusting entry for the type of cost
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