Discussion:Percent Complete Accounting Question
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Discussion Forum Index --> Accounting Questions --> Percent Complete Accounting Question
Happy-generally (talk|edits) said: | 8 July 2008 |
| I operate a construction company and work with a cpa for year end accounting, however,I am working on interim financials and really just want to better understand the adjustment process for percent complete accounting.
My question is, I understand the idea of percent complete accounting, and where earnings in excess of billings, and billings in excess of earnings come from. Here is my scenario. 2006 was the first year ending period where we recorded an adjustment to our earnings based on the percentage of completion. This year the adjusting entry was simple a debit to contract revenue, and a credit to billings in excess of earnings. The question comes the following year, what do you do to back out the amount in the asset? Is it directly debited against the billing as it occurs in reality? I really get lost at this point. | |
RoyDaleOne (talk|edits) said: | 8 July 2008 |
| The entry for the next year is to reverse the prior entry, and record the new amounts.
The next year entry is a debit to billings in excess of earnings and a credit to contract revenues, using the same amounts as previously recorded. Next record the new amounts. | |
Happy-generally (talk|edits) said: | 8 July 2008 |
| Thank you for your help, I still have to get my wip to tie, but just the clarity that is the right thing to do makes things better. : ) | |
RoyDaleOne (talk|edits) said: | 8 July 2008 |
| I use a separate revenue account for the over/under billing adjustments. Having a separate account keeps the billing account "clean". | |
| 9 July 2008 | |
| Happy, consider yourself lucky that you have some work to complete!
I am a builder, but I deal in a different market: Bluebirds. I build bluebird houses, and have since the '70s. Owner provides the site, and I put it up. At this point, birds are not allowed to hold title directly, but I'm working with PETA to change this. Anyway, seems my market slumped when the other did, and I have 1,400 squirrel proof front panels I got halfway completed. So, you could say that the bluebird of happiness has gone south. Any advice from construction or accounting pros would be appreciated. Please, no wiseacres: bluebirds have the right to affordable housing also. | |
Bushmaster (talk|edits) said: | 10 July 2008 |
| Crow, you could ask HUD for help. Set up the non profit, get HUD certified, and I will do the audit and 990. That way, we all win. | |
