Construction Cost !!

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)

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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

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Amount due to/from customer
+ If positive result –> AR
+ If negative result –> AP

dep will go to da income statement and rectificaton cost must be recognised in the period in wich it arose……..