Comments on: Percentage of Completion and Work in Progress http://www.accountingunplugged.com/2008/09/11/percentage-of-completion-work-in-progress/ The System Behind the Software Tue, 07 Sep 2010 13:27:14 +0000 http://wordpress.org/?v=2.6.5 By: admin http://www.accountingunplugged.com/2008/09/11/percentage-of-completion-work-in-progress/#comment-2289 admin Thu, 19 Aug 2010 15:42:00 +0000 http://accountingetc.wordpress.com/?p=585#comment-2289 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 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 http://www.accountingunplugged.com/2008/09/11/percentage-of-completion-work-in-progress/#comment-2288 James Thu, 19 Aug 2010 15:16:16 +0000 http://accountingetc.wordpress.com/?p=585#comment-2288 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? 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 http://www.accountingunplugged.com/2008/09/11/percentage-of-completion-work-in-progress/#comment-2228 admin Fri, 18 Jun 2010 15:38:53 +0000 http://accountingetc.wordpress.com/?p=585#comment-2228 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. 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.

]]> By: michael byakabasa http://www.accountingunplugged.com/2008/09/11/percentage-of-completion-work-in-progress/#comment-2227 michael byakabasa Fri, 18 Jun 2010 14:12:31 +0000 http://accountingetc.wordpress.com/?p=585#comment-2227 There will be scenarios where project costs cannot be reliably estimated.In such cases would it not be best to recognise only revenue that has been billed and the project costs incurred to in the period? I am currently working on valuation of WIP for a client in the service sector and have found that their estimates of project revenue/costs in the past have not been all that accurate. Michael Byakabasa There will be scenarios where project costs cannot be reliably estimated.In such cases would it not be best to recognise only revenue that has been billed and the project costs incurred to in the period?
I am currently working on valuation of WIP for a client in the service sector and have found that their estimates of project revenue/costs in the past have not been all that accurate.
Michael Byakabasa

]]> By: admin http://www.accountingunplugged.com/2008/09/11/percentage-of-completion-work-in-progress/#comment-1711 admin Mon, 28 Dec 2009 21:59:07 +0000 http://accountingetc.wordpress.com/?p=585#comment-1711 Thanks to Jennifer Holten for spotting a calculation error in my "est. cost to complete" column. Thanks to Jennifer Holten for spotting a calculation error in my “est. cost to complete” column.

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