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
|