Posting WIP in QuickBooks: How to Record and Reverse Your Work-in-Progress Journal Entry

Introduction: Tracking Work-in-Progress (WIP) is a powerful tool for home builders who want a clear picture of job profitability. In our last post, we explained how to calculate your WIP. In this follow-up, Jon Markee, your Builder CPA, walks through how to record and reverse your WIP entry inside QuickBooks Online—a critical next step if you want your financials to match reality month by month.

Start with the Chart of Accounts

To begin, you’ll need two accounts added to your chart of accounts:

• Costs in Excess of Billings (Underbillings)

• Billings in Excess of Costs (Overbillings)

Jon recommends referencing the National Association of Home Builders (NAHB) chart of accounts when setting these up, though you should only add accounts relevant to your needs.

• Underbillings are recorded as a Current Asset, and

• Overbillings are ideally a Liability, but for sorting purposes, you can also treat them as a current asset using the “Inventory” type.

Create a Simple Journal Entry

Once the accounts are in place, enter a journal entry for the underbilling amount. In Jon’s example, this is $140,000—an amount that represents the cost you've incurred but haven't billed your client for yet.

• Debit: Costs in Excess of Billings (asset)

• Credit: Sales (income)

Yes, it feels counterintuitive—credits increase income, which is exactly what you want reflected here. This adjustment allows your P&L to reflect the job progress as of the end of the month.

Reverse the Entry the Next Day

The WIP entry is only valid on the last day of the month, so it’s crucial to reverse it on the first day of the next month. QuickBooks makes this easy—just hit the “reverse” button inside the journal entry screen.

• QuickBooks will automatically date the reversal correctly.

• The memo line will label it as a reversal.

• The reversal ensures that your financials for the following month aren’t artificially inflated unless you’ve sent the client an invoice or made another WIP entry.

What to Watch Out For

Using WIP entries can make your profit and loss statements unreliable mid-month, especially if you haven’t sent your invoice or updated your WIP schedule again. This is why consistency is so important. If you're going to post WIP journal entries, commit to doing it every month-end.

Conclusion

Posting WIP entries in QuickBooks helps match your income to your job progress—but only if you commit to doing it right. Add the right accounts, enter the journal entry accurately, and always remember to reverse it the next day. For a visual walkthrough, be sure to watch our full video where Jon Markee, your Builder CPA, explains the process in detail.

By understanding how to record and reverse WIP entries, you’ll have more accurate job costing, better financials, and a clearer picture of your business’s performance.