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As revenue is accrued, the cost accrual amount is calculated and the expense account is debited via a Cost Accrual entry. A Cost Accrual Contra account is credited. A Cost Accrual Contra account is used instead of a Cost WIP account to allow you to easily view and reconcile the Cost WIP and Cost Accrual Contra accounts during the life of the project.

When the project is pending close, you must perform appropriate project closing entries. At this time you must ensure that the Cost Accrual (expense) amount equals the Cost WIP amount. You must fully credit the Cost WIP account and debit the Cost Accrual Contra account. When this is done, you have moved all cost WIP amounts to the Cost Accrual (expense) account. The balancing entry that accounts for the difference of the cost accrual amount and the cost amount is an entry to the Cost Accrual account.

If the project status is changed from a closed status to an active status after closing entries, the closing entries are automatically reversed the next time the Generate Draft Revenue process is run for the project. See: Close the Project.