Opening balance for Work in Progress

Hi Michelle - There are a couple of ways of dealing with this.

1. In your business, where you are accumulating unsold cost "Inventory" is actually the account type you should use, it's what the word means and so, as Latha describes, create your "WIP" account and allocate it to the Inventory type.

This "parks" the cost on the balance sheet and then, as properties are sold, you transfer their cost into profits by taking the cost out of WIP to a Cost of Sales account, using a journal entry.

2. Many businesses that buy stock to sell, do the reverse of the above. So they put the costs directly to the cost of sales account in the P&L, rather than to a Stock account (again an Inventory type).

What they then do, every accounting period, whether that be monthly, quarterly or annually, is to transfer out the cost of stock, at the period end, from the cost of sales account, to the Stock account.

So both methods end up doing the same thing.

If you have several developments on the go at a time with lots of costs split between them then, to make sure the relevant properties are noted on each cost, so that you can see which to transfer, you have to remember to put details in the summary box of the suppliers' bills as this will show up when you look in the account holding all the costs using Report>Transactions. If there are loads of costs then you can download the report as a CSV spreadsheet to sort them.

The problem with this is if you get a bill that covers more than one property and so, in this case, or if you don't want to have to faff about with spreadsheets, you are better off using method 2 and setting up "Projects" and "Project invoice items" (In Settings/Toggle features) this enables you to allocate a property project to each cost, per line of a bill if necessary, as well as to the sales, with the added benefit that you can then do a Project P&L account under the Project tool to see all the property costs (and sales) split out per property.

Unfortunately, using projects is of no use if you accumulate costs in the WIP account (under 1.) as you can't do a project report on balance sheet accounts.

Hope that long winded response helps

Hi Michelle - There are a couple of ways of dealing with this.

1. In your business, where you are accumulating unsold cost "Inventory" is actually the account type you should use, it's what the word means and so, as Latha describes, create your "WIP" account and allocate it to the Inventory type.

This "parks" the cost on the balance sheet and then, as properties are sold, you transfer their cost into profits by taking the cost out of WIP to a Cost of Sales account, using a journal entry.

2. Many businesses that buy stock to sell, do the reverse of the above. So they put the costs directly to the cost of sales account in the P&L, rather than to a Stock account (again an Inventory type).

What they then do, every accounting period, whether that be monthly, quarterly or annually, is to transfer out the cost of stock, at the period end, from the cost of sales account, to the Stock account.

So both methods end up doing the same thing.

If you have several developments on the go at a time with lots of costs split between them then, to make sure the relevant properties are noted on each cost, so that you can see which to transfer, you have to remember to put details in the summary box of the suppliers' bills as this will show up when you look in the account holding all the costs using Report>Transactions. If there are loads of costs then you can download the report as a CSV spreadsheet to sort them.

The problem with this is if you get a bill that covers more than one property and so, in this case, or if you don't want to have to faff about with spreadsheets, you are better off using method 2 and setting up "Projects" and "Project invoice items" (In Settings/Toggle features) this enables you to allocate a property project to each cost, per line of a bill if necessary, as well as to the sales, with the added benefit that you can then do a Project P&L account under the Project tool to see all the property costs (and sales) split out per property.

Unfortunately, using projects is of no use if you accumulate costs in the WIP account (under 1.) as you can't do a project report on balance sheet accounts.

Hope that long winded response helps