construction contract - lets see how much you know

[Ali Akbar]

<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by insaan</i>
<br />Ohh.. I feel my question was a bit vague
Let me elaborate with an example
A. the contract is fixed price contract
B. according to company’s policy certification of work has prime importance in computing interim profits on a contract in progress

Contract price = Rs.750000
Work certified = Rs. 487500
Cost to date = Rs.470000
Further estimated expenditure = Rs.227000
Solution
Total estimated profit on this contract = 750000-697000=Rs.53000
Profit to be credited to P/L = 53000*(487500/750000) =Rs.34450

Now
W.I.P = 487500 ………… (1)
Or
W.I.P = 470000+34450 =504450 ………. (2)

According 2 javed zuberi W.I.P = Rs.504450 and he would treat the work certified figure as progress billing and the balance i.e. Rs 16950 as due from customer
Whereas according to our teacher W.I.P = Rs 487500

Here, <b>which</b> treatment is correct and <b>why?</b>


<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Ok.

According to para 27 of IAS 11 the two names i.e 'amount due from customer' & 'WIP' may be alternatively used for same purpose by users of IAS.

And the amount due from customers/WIP can be worked out as follows

Cost incurred (Actual cost, and it may include the cost of unconsumed material and uncertified work)
Add/(less) recognized profits/losses
Less progress billings

So in ur example, the value of amount due from customer is

Cost incurred to date (470,000)+profits recognized (34,450)-progress billings, if any.

So the WIP and amount due from customers are not two separate terms.

ICAPians, the unparalleled..