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To WIP or not to WIP

We are a very small firm. Personally, I have worked in a mfg environment where contracts were long-term and have done WIP accounting before. However, I am new to C&P and the advertising industry. The majority of our jobs turn around anywhere from 48 HRS to 45-60 days. A few may last 3-6 months (tops). We are setting up C&P for the first time. WIP accounting is the last major hurdle. Because our jobs turn around quickly, I thought it would be more cost effective for us to do a WIP adjustment at year-end instead of every month--at least until such time that the length of our contracts increases and mgmt feels the need to track WIP more accurately. Suggestions? Comments? Instructions on how to set this up?

Thanks,

MARGUERITE COLLAZO

I would. Otherwise you are doing all kinds of accrual adjustments monthly (eg: what if you get a vendor invoice for a big deliverable job, but you don't close the job until next month. You'll never match your revenue with your costs unless you do accrual adjustments).

We code all time & materials to WIP as they get entered and do a cost-of sales journal entry at the end of the month. Really helps us stay on top of our gross margin.

Roxanne Cowan

Roxanne, Would you give me some examples of how you record WIP for time and materials. How do you reconcile your WIP account? What is your source for your cost of sales entry at month end?

Sandy Husk