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Use of actual vs. billed costs in a construction WIP schedule

When determining total costs accumulated to date for WIP reporting purposes on a construction project, are actual cost or billed cost amounts used for the total costs-to-date value in the calculation? My understanding is that using actual costs is appropriate since the use of billed costs erode profit which has already been captured by the mark-up in the billings-to-date value. Correct?

2 replies

Mar 16, 2020

Generally, the costs-to-date in a work-in-process (WIP) schedule will call for the actual costs incurred for the work. And, after that's identified, it will be compared to the estimated costs, actual billings, etc. For a little more background on WIP, here's an article from Levelset: What Is a Work in Progress Schedule? | Construction Accounting. Further, I'll note that I don't have a ton of personal experience with WIP schedules - so, for more information, it'd be helpful to contact a construction finance professional, like Scott Peper or Elizabeth Boals.

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Apr 22, 2020

I started working for a company that has been without a controller/accountant for a year. I have to back track now entries for the Completed construction project. The A/P person just debited all payables in a WIP account that pertain to the jobs. (There is a job cost with each job separated with their costs). However, the other company I need to bill to has already paid before they have been billed, and just put in a progress payment account. The AP person zeroed out the job cost report because her boss told her to because the jobs are complete. I must know make entries to AR to invoice one company from the building company for the costs of each job. My question is, what entries do I do after the fact. There is no completion method at this point, and I can't even tell if anything is over or under billed. Any help would help!

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