Previously, law firms were not obliged to include their work-in-progress (WIP) in their taxable income. These amounts were only recognized once invoiced.
Since March 22, 2017, this exemption has been phased out. Work in progress must now be included in taxable income, as it is considered “inventory”. They must therefore be entered in the accounts.
In concrete terms, what does this mean in JurisEvolution software?
Simply that at each accounting period (monthly, quarterly or annually, depending on the firm), the accountant must manually make a general ledger (GL) entry representing the change in WIP inventory compared with the previous month, so that the Balance Sheet is up to date on the same dates as the WIP reports.
Here is a visual example from January to May 2024
Month | from | to | Wip start | Wip end | Variation |
jan | 01-01-2024 | 31-01-2024 | 0,00 | 6 000,00 | +6 000 |
feb | 01-02-2024 | 29-02-2024 | 6 000,00 | 20 000,00 | +14 000 |
march | 01-03-2024 | 31-03-2024 | 20 000,00 | 14 000,00 | -6 000 |
april | 01-04-2024 | 30-04-2024 | 14 000,00 | 18 000,00 | +4 000 |
may | 01-05-2024 | 31-05-2024 | 18 000,00 | 4 000,00 | -14 000 |
june | 01-06-2024 | 30-06-2024 | - | - | - |
july | 01-07-2024 | 31-07-2024 | - | - | - |
aug. | 01-08-2024 | 31-08-2024 | - | - | - |
sept. | 01-09-2024 | 30-09-2024 | - | - | - |
oct. | 01-10-2024 | 31-10-2024 | - | - | - |
nov. | 01-11-2024 | 30-11-2024 | - | - | - |
dec. | 01-12-2024 | 31-12-2024 | - | - | - |
Report to use
Variation in WIP - Fees and disbursements are shown separately in the broken-down version.
Normally, only fees are taken into account for the general ledger (GL) entry.
The End WIP column gives the reference value at the report end date.
Each month, the accountant generates the report on the month-end dates (or period dates, depending on their reality) to obtain the end WIP value.
As an example, here's what he would have obtained for each month from January to May.
Here are some examples of the variation entries made each month.
The entry is normally made up of a current asset account for the value of the WIP inventory and a counterpart current liability account for Accrued income.
(this is for information only - users must always validate their accounts with their accountant).
january
febuary
march
april
may
Compare work-in-progress (WIP) reports with the balance sheet at a given date.
It's easy to validate that the variation information has been entered for each month and for the right amount. Simply generate a balance sheet at the period-end date.
january
febuary
march
april
may
