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Hi Mr. Little,
May I ask you a question about this question regarding the journal entries of construction cost?
In the balance sheet, only Amount due from customer is regarded as an asset and debit 6000. Why the progress billing (work certified) of 10000 is not journalised as trade receivables?
Thanks.
Is there anything at all in the question that says that this $10,000 is still outstanding?
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No, but how can I be certain? This is something I always find trickier in Exam. I just do not get when some info is implicitly included in the trial balance, some needs the adjustment.
It would have either been shown separately or the examiner would have stated in note (ii) something like “Just before the year end, Moby invoiced $XXXX which amount has been included within the figure for receivables”
OK?
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But it is not shown separately in the trial balance, nor did the examiner state in note (ii) that the amout has been included within the figure for receivables. And yet the progress billing is not showing as an asset in the solution’s balance sheet.
That’s why I am confused how one can decide in such situations.“But it is not shown separately in the trial balance, nor did the examiner state in note (ii) that the amout has been included within the figure for receivables”
Therefore it must have been paid! The examiner has not told you in either of the two available ways that the amount is outstanding and therefore it can’t be outstanding so it’s not an asset!
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