construction contract - lets see how much you know

[Ali Akbar]

Yes you are right.

Cost taken to P&L shall be the balancing figure of revenue and profits taken to P&L under the work certified method.

In the balance sheet usually the terminology of WIP is not used rather 'amount due from customer' is more appropriate and the amount shall be calculated in the same way as earlier stated.

And if the examiner require WIP A/C, then you will have to prepare T account of WIP in which on the debit side the following heads usually appear
Material, labour, other over heads chargeable to contract, recognized profit (i.e GP) etc
and on the credit side following heads usually appear
progress billings(the debit of it goes 1st to progress billing A/C and then to Accounts Receivable A/C, so there is a difference b/w accounts receivable and amount due from customers a/c, the latter may be sometimes called unbilled revenue, whereas the former is the billed revenue) and the carried forward balance of WIP which shall be made up of unconsumed machinery/material(i.e cost of uncertified work).

Hope this will help you out.

ICAPians, the unparalleled..