Comments on: Percentage of Completion and Work in Progress

By: Jeetendra

Jeetendra — Tue, 24 Jan 2012 12:23:23 +0000

In one of our project the value got revised as a result of deletion in scope of work. We have booked an excess revenue in the last FY based on the initial value, however the value got revised in the current year. How do I treat the excess revenue booked last year in the current year. Can someone tell me the accounting entries for this?

By: Barry

Barry — Tue, 27 Sep 2011 06:04:55 +0000

What (revenue or expenditure) should be manipulated to recognise a loss making job?

For example, a six month job, with very tight margins incurs cost overruns prior to any progress claims being made (ie. I have no revenue recognised against that job, but I expect to make a loss on the job, and wish to recognise that loss,

Should my entry be to accrue negative revenue, or accrue additional costs to the P&L, not WIP) in order to achieve my loss result?

Thanks

By: Melissa

Melissa — Tue, 10 May 2011 12:29:27 +0000

Michelle,

They should be booked on a monthly basis so your monthly financial statements are more accurate. There can be large ups & downs that make it hard to tell how the company is doing if you do not adjust your revenues.

By: admin

admin — Fri, 18 Feb 2011 23:12:58 +0000

Michelle,

It depends on how often you file your taxes, I suspect the reason your CPA is requiring the over/under booking quarterly is to match your tax filings. In that case I would support your CPA’s decision.

Erin

By: michelle

michelle — Fri, 18 Feb 2011 22:00:39 +0000

When should over unders be booked? We have always done this at year end when we do the CSR and give all of the financials to the CPA. He now wants them done quarterly, at extra expense. Why would he want to change booking these to quarterly instead of yearly after 35 years of doing it yearly with nothing said to the contrary?

By: Kelly R

Kelly R — Fri, 14 Jan 2011 22:56:10 +0000

This is the best explanation for a layperson that I have found for percentage of completion/work in progress accounting. Thank you for your clear language and easily-understood calculations.

By: Evans Komen

Evans Komen — Tue, 05 Oct 2010 05:31:27 +0000

question
1. at what stage can we recognize work in progress as part of the assets of a company and how should it be treated while reporting in line with both IFRS and IAS.

By: admin

admin — Thu, 19 Aug 2010 15:42:00 +0000

James,

The entry against “Sales” is the Income Statement adjustment. People will often choose to use another Revenue account rather than their Sales Account - perhaps “Billing Adjustments” or something like that. But the income statement adjustments are always to Revenue.

Hope that helps,

Erin

By: James

James — Thu, 19 Aug 2010 15:16:16 +0000

Could you also show how it is presented on the financials or is that in another post? What would be the adjustment to the Income Statement?

By: admin

admin — Fri, 18 Jun 2010 15:38:53 +0000

Michael,

It depends. Costs are recognized as they are incurred but as far as revenue, be careful in recognizing it only as it is billed. You’ll need some other way to ensure billings are on target than actual billings.

There should be an upfront agreement with the buyer about total expected costs to them, it may be a set amount and it may be a percentage of costs. If it’s a percentage of costs, use that figure in determining revenue recognition. If it’s a set amount, then you would proceed as outlined in the post.

If there is no buyer in advance, it seems to me that the project is on spec and is then an asset until sold with no cost or revenue recognition until the sales event.