Construction WIP Journal Entries: Two-Month Worked Example
A construction WIP adjusting journal entry is a balanced month-end General Ledger entry that aligns billed progress revenue (Account 4000) with cost-to-cost earned revenue by recording gross underbillings in Current Asset Account 1350 (Costs in Excess of Billings) and gross overbillings in Current Liability Account 2450 (Billings in Excess of Costs) without ever netting the two positions. Below is a complete two-month walkthrough showing both the Day-1 Reverse-and-Rebook method (recommended for SMB QuickBooks teams) and the Cumulative Net-Delta method.
Two-Job Portfolio Flipping Across Month 1 (Sept 30) and Month 2 (Oct 31)
Suppose a mechanical contractor runs two active fixed-price commercial jobs. Notice how Job A flips from overbilled in September (mobilization draw) to underbilled in October as crew labor hits, while Job B stays overbilled:
| Close Period & Job | Revised Contract | Revised EAC | Installed Cost | % Comp | Earned Rev | Billed (Excl. Ret.) + Ret. 1210 | Asset 1350 | Liability 2450 |
|---|---|---|---|---|---|---|---|---|
| Sept 30 · Job A (RTU) | $400,000 | $300,000 | $75,000 | 25.0% | $100,000 | $140,000 (incl. $14k 1210) | $0 | $40,000 |
| Sept 30 · Job B (Piping) | $500,000 | $400,000 | $200,000 | 50.0% | $250,000 | $195,000 (incl. $19.5k 1210) | $55,000 | $0 |
| Sept 30 Ending Balance Sheet Target (Never Net $55,000 Against $40,000) | $55,000 | $40,000 | ||||||
| Oct 31 · Job A (RTU) | $400,000 | $300,000 | $210,000 | 70.0% | $280,000 | $250,000 (incl. $25k 1210) | $30,000 | $0 |
| Oct 31 · Job B (Piping) | $500,000 | $400,000 | $320,000 | 80.0% | $400,000 | $425,000 (incl. $42.5k 1210) | $0 | $25,000 |
| Oct 31 Ending Balance Sheet Target | $30,000 | $25,000 | ||||||
Method A (Recommended): Reverse Sept 30 Entry on Oct 1, Rebook Ending Oct 31 WIP
The single most common QuickBooks WIP bug is booking October's ending $30,000 underbilling on top of September's $55,000 balance, inflating Account 1350 to $85,000. Reversing September's entry on October 1 eliminates stacking errors by construction:
| Entry Date | Account | Debit | Credit | Purpose |
|---|---|---|---|---|
| 2026-09-30 | 1350 Costs in Excess of Billings | $55,000.00 | Sept ending gross underbillings | |
| 2026-09-30 | 4020 WIP Revenue - Underbilling Accrual | $55,000.00 | Sept earned revenue above billings | |
| 2026-09-30 | 4010 WIP Revenue - Overbilling Deferral | $40,000.00 | Defer Sept unearned mobilization billings | |
| 2026-09-30 | 2450 Billings in Excess of Costs | $40,000.00 | Sept ending gross overbillings | |
| 2026-10-01 | Auto-Reverse 2026-09-30 Entry (Flip Debits & Credits) | $95,000.00 | $95,000.00 | Resets 1350 and 2450 to $0.00 on Day 1 |
| 2026-10-31 | 1350 Costs in Excess of Billings | $30,000.00 | Oct ending gross underbillings (TB 1350 = $30,000) | |
| 2026-10-31 | 4020 WIP Revenue - Underbilling Accrual | $30,000.00 | Oct ending underbilling accrual | |
| 2026-10-31 | 4010 WIP Revenue - Overbilling Deferral | $25,000.00 | Oct ending overbilling deferral | |
| 2026-10-31 | 2450 Billings in Excess of Costs | $25,000.00 | Oct ending gross overbillings (TB 2450 = $25,000) |