- This topic has 4 replies, 4 voices, and was last updated 14 years ago by
.
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Just follow below steps:
Step 1: Determine estimated profit/loss of the total contract
Estimated profit/loss = Contract price – Estimated total cost
– If loss-making: recognise whole loss immediately
Step 2: % of completion: 2 ways:
Way1: Cost basic:
% of completion = Costs to date used in contract (exclude unused)/ Total contract cost
Way2: Sales basic:
% of completion = Value completed to date and certified/ Total contract value
Step 3: I/S extract:
Revenue (Contract price x % completion)
– Contract cost (Estimated total costs x % completion)
Profit
Revenue will be put in Sales, Contract Costs will be put in COS in I/S
Step 4: SFP extract:
Cost to date (including unused cost)
+ Profit recognised (step 2)
– Progress billing received and receivable
– Foreseenable loss if loss-making
Amount due to/from customer
+ If positive result –> AR
+ If negative result –> APOoh okay . i’ll try to do some more exercise . Cause there’s one that has depreciation and rectification costs . that’s the one that’s confusing . and another one where the contract was done half way and we have to find “FOR THE YEAR”
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dep will go to da income statement and rectificaton cost must be recognised in the period in wich it arose……..
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