Hello,
At the end of first year:
Total contract revenue: 12 lacs
Total estimated cost: 8 lacs
% of completion certified by surveyor in the report: 95%
At the end of 2nd year
Total contract revenue : 12 lacs
Total estimated costs : 10 lacs
% of completion certified by surveyor in the report: 90%
what are the journal entries to be passed in second year..?
Thanks in advance
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Revenue recognitiin in construction contracts
Replies (1)
for y1:
as % of completion is 95%, revenue of 11.4l will be recognised and 7.6l cost will be booked leading to profit of 3.8l
for y2:
no income will be recognised and provision of 0.6l will be booked and exp of 1.4l will be booked[(10*90%)-7.6]
so overall profit booked will be 1.8l for both yr1 &2
entries for y2:
1.for booking expenditure:
expenditure a/c. dr. 1.4l
to cash/bank/creditor. 1.4l
2. for booking provision
estimated loss/provision for loss a/c. dr. 0.6l
to income a/c. 0.6l
as % of completion is 95%, revenue of 11.4l will be recognised and 7.6l cost will be booked leading to profit of 3.8l
for y2:
no income will be recognised and provision of 0.6l will be booked and exp of 1.4l will be booked[(10*90%)-7.6]
so overall profit booked will be 1.8l for both yr1 &2
entries for y2:
1.for booking expenditure:
expenditure a/c. dr. 1.4l
to cash/bank/creditor. 1.4l
2. for booking provision
estimated loss/provision for loss a/c. dr. 0.6l
to income a/c. 0.6l
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