Balance Sheet Results Labor

Compare the effect on Balance Sheet labor results if you use an employee-centered approach to intercompany billing versus a project-centered approach.

Approach 1: Emphasis on Employees

Project Company’s Balance Sheet
A Unbilled Services (from Revenue Generation) 900.00 debit
B Intercompany Accounts Payable (from Intercompany Billing) 900.00 credit
Change in Equity 0.00
Employee's Home Company’s Balance Sheet
B Intercompany Accounts Receivable (from Intercompany Billing) 900.00 debit
D Payables for Actual Overhead Costs 538.00 credit
E Employee's Salary Payable 300.00 credit
Change in Equity 62.00

Approach 2: Emphasis on Projects

Project Company’s Balance Sheet
F Unbilled Revenue (from Revenue Generation) 900.00 debit
H Intercompany Accounts Payable (from Intercompany Billing) 840.00 debit
Change in Equity 60.00
Employee's Home Company’s Balance Sheet
H Intercompany Accounts Receivable (from Intercompany Billing) 840.00 debit
I Payables for Actual Overhead Costs 538.00 debit
J Employee's Salary Payable 300.00 debit
Change in Equity 2.00