Example 6 - Revenue Recognition Only

A company recognizes revenue for 1,200.00. The original cost per unit is 10.00 for 100 units. The cost of each unit is recorded in the Work in Process account. After the revenue for the units is recognized, the cost is moved from the Work in Process account to the Cost of Goods sold account. The revenue for each unit is recognized as 12.00 per unit. Markup is 200.00.

The journal entries are:

G/L Date	Account	Debit	Credit
June 30, 2005	Work in Process	1,000.00
June 30, 2005	Accounts Payable		(1,000.00)
July 31, 2005	Accrued Receivable	1,200.00
July 31, 2005	Revenue		(1,200.00)
July 31, 2005	Cost of Goods Sold	1,000.00
July 31, 2005	Work in Process		(1,000.00)

Billing AAI table number 4811 first directs the 1,2000.00 invoice amount to the Revenue account. Billing AAI table number 4832, Accrued Receivable, directs the 1,200.00 to the accrued receivable account. Then, billing AAI table number 4841 reduces the Work in Process account by the cost amount and billing AAI table number 4842 increases the Cost of Goods Sold accounts by the cost amount.

The Work in Process account postings and balances for June in the general ledger are:

Date	Debit	Credit	Balance
June 30, 2005	1,000.00		1,000.00

The Accounts Payable account postings and balances for June in the general ledger are:

Date	Debit	Credit	Balance
June 30, 2005		1,000.00	(1,000.00)

The Accrued Accounts Receivable account postings and balances for July in the general ledger are:

Date	Debit	Credit	Balance
July 31, 2005	1,200.00		1,200.00

The Revenue account postings and balances for July in the general ledger are:

Date	Debit	Credit	Balance
July 31, 2005		1,200.00	(1,200.00)

The Work in Process account postings and balances for July in the general ledger are:

Date	Debit	Credit	Balance
June 30, 2005	1,000.00		1,000.00
July 31, 2005		1,000.00	0

The Cost of Goods Sold account postings and balances for July in the general ledger are:

Date	Debit	Credit	Balance
July 31, 2005	1,000.00		1,000.00