Construction Accounting Q&A Part 2 - Key Components

Confused over construction accounting question and answer Part II

Today we cover Q&A #2 on key component in the construction accounting following our first sharing on the business cycle in last week.

We will run a series of our training note to our clients and new colleagues on contract accounting. Next is the accounting standard on the construction account.

Construction Accounting Key Components

1. What is progress bill?

Invoice billed to customers for a part of the project that has been completed to date.

2. How to calculate the % of Completion?

2.1 Progress bill Method: Actual work done to date (Revenue) ÷ Contract Sum

2.2 Cost Method: Actual cost incurred up to date ÷ Budget Cost

3. How to recognize revenue?

% of Completion x Contract Sum

4. What kind of costs may incur for a construction?

Materials, Direct labour, Sub-contractors’ wages, Petrol and diesel, Depreciation, and

etc. (Depend on situation)

5. How to recognize cost?

% of Completion x Budgeted Cost

6. What is retention sum?

A sum that retained by the customers as a safeguard to ensure the contractor has

carried out the construction completely and properly.

7. What is amount due from/to customer?

7.1 Amount due from customer represents the amount of revenue earned on a contract

but yet billed to the customer.

7.2 Amount due to customer represents the amount earned on a contract in excess of the amount billed to the customer.

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AccountKtp KtpJanuary 11, 2021construction accounting, contract accounting

Construction Accounting Q&A Part 2 - Key Components

Confused over construction accounting question and answer Part II

Construction Accounting Key Components

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