Revenue recognition

Question 1

How do you record cost incurred on construction?

Answer 1

1. Debit construction in progress
   2.Credit cash

Question 2

How do you record billings on contract?

Answer 2

1. Debit Contract receivable
2. Credit progress billings

Question 3

How do you record payment in a construction revenue contract?

Answer 3

1. Debit cash
2. Credit contract receivable

Question 4

How do you record revenue, cost and gross profit?

Answer 4

1. Debit construction expense (Cost incurred in the year)
2. Debit construction in progress (Difference between revenue - profit of the year)
3. Credit revenue (% of completion * revenue of the year)

Question 5

What is the process to account for construction revenue over time

Answer 5

1. Compute gross profit (at completion)
2. Compute % of completion
3. Compute gross profit earned (Total)
4. Compute gross profit earned current