Percentage billing allows the recognition of an estimated portion of a job to be realized regardless of the actual status of material and labor. Using percentage billing follows all the basic rules of job costing with the exception of suspending the cost of goods sold expenses in two standard account codes. These two special accounts are reversed at final billing.
At the time of job costing, this account receives a credit for the estimated material expense. The amount is reversed at the time of final billing of the billing group. Until that time, this amount will appear on the Month End Inventory Balance Report. This account is typically located in the asset section of the balance sheet, although it will typically have a credit balance.
At the time of job costing, this account receives a debit for the estimated material expense. The amount is reversed at the time of final billing for the billing group. This account is typically located in the cost of goods sold section of the income statement.
At the time of job costing, this account receives a credit for the estimated labor expense. The amount is reversed at the time of final billing for the billing group. This account is typically located in the asset section of the balance sheet, although it will typically have a credit balance.
At the time of job costing, this account receives a debit for the estimated labor expense. The amount is reversed at the time of final billing for the billing group. This account is typically located in the cost of goods sold section of the income statement.
When job costing a percentage order in percentage partial billing only these entries are made. The balance of the entries are made when the full order is job costed.
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