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Hi,
What is difference between amounts due from customer and trade receivables and why we distinguish it. Question is related to chapter Construction contracts.Thank you!
There are two figures that are called “Amounts due from customers”
The first is in working W2 and is the equivalent of an accountancy firm’s unbilled work in progress
The second in working W3 is the equivalent of receivables
They are in nature different assets (inventory and receivables) and really should be shown separately (if you get one of them wrong and you show just a combined figure in your answer, then you risk losing the mark for the one that you got correct)
Having said that, the examiner very rarely asks for the receivable element so working W3 is rarely applicable in the F7 exam
Ok?
Thank you. But why you comparing to inventories and receivables. Or you just tried to say that they are different in nature like inventory and receivables
Unbilled work in progress is inventory – its work in progress. It’s not inventory in a classical sense of goods in stock available for resale, but it’s EFFECTIVELY the same as work in progress
Receivables is receivables! The working W2 “Amounts due from customers” is not a receivable because it hasn’t been invoiced. It’s nevertheless an asset. What do you want to call it?
Ok
🙂
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