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Let me explain it based on my understanding
Formula
Cost to date—————x
profit recognised or loss recognised—x/(x)
less receivable(billed amount or invoiced amount or unpaid amount)-(x)
equal contract asset(amount due from customer) x/(x)When Prepared trial Balance of Moby in Bpp and calculated as above and my balance became equal in both side meaning total asset=equity +liability
In this case, I followed the formula because always ”estimated cost to completion date +cost to date” have to be recognized under p/l in order to find cost of sales by multiplying complete percent.
The publisher only recognised cost to date(14000) and performance obligation satisfied over time of 10000 under P/l and the mistake here is that forgot to take into consideration of multiplying complete percent and ANOTHER reason COST TO DATE was the FIGURE of 1 OCTOBER 2015.And another reason from 1 october 2015 to 31 september 2016 extra 6000 and should be added over cost to date.-THIS IS MY UNDERSTANDING.”estimated cost to completion date +cost to date”-we have to be careful about this formula why? Downing example in 2016 which was tricky because in the question says that 15 million cost to date and total expected cost 24 and lots of student probably took did like that 15000+24000=39000 but it was wrong because 24 million includes both cost to date and estimated cost to completion and the key word was there TOTAL! I always cautious about trial balance preparation.
When I paid attention to answer I really became angry, how am gonna to get already just one way of understanding REVENUE. Decided to follow the formula and I WAS CORRECT whether or not what has been written behind the book!
THIS FORMULA IS MY WEAPON and If i follow this rule i will never get incorrect outcome.
Formula
Cost to date—————x
profit recognised or loss recognised—x/(x)
less receivable(billed amount or invoiced amount or unpaid amount)-(x)
equal contract asset(amount due from customer) x/(x)the formula that i showed is acceptable to find contract liability/asset under current asset/current liability
Under p/l formula always i follow
(Revenue*complete percent)———————————–x
cost of sales(cost to date +estimated cost to comletion date)*complete percent)x
profit or loss recognisedAnother way to find only recognized profit under P/L
Contact price-x
cost to date-(x)
estimated cost to completion date-(x)
estimated profit *complete percent =the answer will give the result only ”profit recognised” under P/L
In this case contract price should be higher than cost to date+estimated cost to completion to date calculation
I always find firstly estimated profit in order to see it is not estimated lossBut question arising here what about loss?coming to loss it is not the same as when you
get estimated loss you can’t find it by multiplying complete percent.
If contract price-x
cost to date–(x)
estimated cost to completion date-(x)
estimated loss-automatically recognise it under P/l i think complete percent should be ignored in this case and add it over revenue recognised under P/L in order to find cost of sales so like that.“less receivable(billed amount or invoiced amount or unpaid amount)-(x)”
No, just the amount invoiced. Then in working 3 we have “Amount invoiced – amount received” to find receivables
“estimated loss-automatically recognise it under P/l i think complete percent should be ignored in this case and add it over revenue recognised under P/L in order to find cost of sales so like that”
Agreed
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