pratik upadhyay (AUDIT COMPLIANCE OFFICER) (469 Points)
01 February 2012please help....
Why in AS 7- "Construction Contract" it is stated two times to disclose method when there is only one method i.e. Precentage oF completion method
one time asked for the amount of revenue...and second time for stage of completion ..!!
CMA Ramesh Krishnan
(Cost & Management Accountant)
(71609 Points)
Replied 01 February 2012
Under AS-7 contract Revene Recognition. the calclation of Percentage of Completion and application of the same in to the contract revenue is 2 different steps. Percentage of completion arrived based on the total contract value and work done. but the based on the completion we need to apply the percentage and need to deduct the earlier recognised reveune and need to arrive the revenue for the particular reporting period. so there is 2 calculations and both calculaiton need to be disclosed
Naresh
(Finace Excutive)
(27 Points)
Replied 01 February 2012
What Ramesh said that is correct.
I am going to give one example for Revenue Recognition
Contract Value - 100 Rupees
Planned Cost - 80 Rupees and Planned Revenue - 100 Rupees
Jan Month Cost - 20 Rupees.
Jan Month Revenue - 20 Rupees
POC = Actual Cost / Palnned Cost
POC = 20 / 80
POC = 25%
Actual Revenue is 20 Rupees. But As per the POC Method revenue should be 25 Rupees.
Difference Amount also we need consider as revenue (25 - 20 ) = 05.
So'We need to Recognition the Revenue as per the POC Method (100X25%)=25
CAclubindia
