How to Record the Sale of a Job in Accounting
Some companies contract with a customer to perform a job for the customer. The customer communicates how he wants the job performed, and the company determines the materials and labor hours necessary to complete the job. Each job contains specific requirements requiring the company to plan each job individually. Once the company completes the job, it records the sale, or the revenue earned for that job. Since each job fits individual requirements, the company needs to record each job based on its characteristics.
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Instructions
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Recording The Sale Of A Job
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1
Negotiate a selling price with customer. After meeting with the customer, determine the specific requirements for accomplishing the job. Calculate a cost for each requirement and a total cost for the job. Determine the minimum profit required for the company to accept the job, and add this to the total cost. This amount reflects the minimum selling price acceptable to the company. Determine a desired profit level for this job and add this to the total cost. This represents the desired selling price for the job. Meet with the customer and agree on a price between the minimum selling price and the desired selling price.
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2
Perform the job. Send employees to the jobsite with the specific job requirements. Monitor the progress of the job until the employees complete the work.
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3
Determine which accounts the sale impacts. Review the specific financial accounts to determine which apply to the job. The company may use several different revenue accounts depending on the various services it provides. Determine which revenue account applies to the work provided. Determine whether the customer paid for the job or if she still owes money. Determine whether the company should record the earnings as cash or as accounts receivable.
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Determine the dollar amount to charge against each account. Review the contract to determine the total selling price. If the earnings apply to multiple revenue accounts, separate the portion applicable to each. If the customer paid some in cash and still owes money, determine how much to apply against cash or accounts receivable.
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Record the sale. Once the accounts and dollar amounts are known, record the entry in the general journal. List each account and the corresponding dollar figure.
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Tips & Warnings
Make sure you verify each customer's credit rating to ensure you only extend credit to paying customers.
