Tagging Billings in Excess of Costs and Costs in Excess of Billings

This is our general recommendation of the tagging treatment of these accounts.

Costs in Excess of Billings (Asset)

Generally on the Asset side it is tagged as Other – it is viewed as operational because if the project or work (that the costs relate to) were not to go ahead, the goods would not be returned and a refund would not be given – i.e. you would ‘wear’ those costs.

Billings in Excess of Costs (Liability)

On the Liability side, if a client has prepaid and the project or work does not go ahead, you would normally have to refund that money. It is normally tagged as Deferred Revenue (but Related Party Loans is treated the same) which is a non-operational liability for that reason.