Accounting Entries Using The Percentage Of Completion Method

November 9th, 2009 Comments off
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Under the percentage of completion method, revenue and expenses are recognized in income as the contract activities progress by reference to the stage of completion of a contract.

The costs incurred in reaching the stage of completion are matched with this revenue, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed.

Append below are the normal accounting journal entries pertaining to the taking up of revenue and expenses in construction contract accounting using the percentage of completion method:-

Accounting Entries Using The Percentage of Completion Method

Debit

Credit

Contract costs

100,000

Cash/payroll/accumulated depreciation

100,000

Being costs assigned to a contract

Construction materials, supplies,etc

20,000

Contract costs

20,000

Being contract costs relating to future activities being carried forward as an asset at the end of reporting period

Contract Costs

80,000

Income Statement

80,000

Being net contract costs representing amount incurred and is closed off to the Income Statement for the period

Due from customer/accounts receivables

Xxx

Progress billings account

Xxx

Being customers billed

Cash Account

Xxx

Due from customer/accounts receivables

Xxx

Being cash received from customers

Progress billings account

Xxx

Contract revenue in Income Statement

Xxx

Being contract revenue recognized based on stage of completion at end of each period

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Financial Accounting

 
 

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