- This topic has 11 replies, 3 voices, and was last updated 9 years ago by
.
- Posts
How do you know what technique to use? Whether to work through the computation using the percent calculated or the balancing figure approach???
The two methods were shown in the mini exercises 9 Sundry 7 & 8.Regards
ShamelaAnd how did those mini exercises decide? Wasn’t there something within the question that pushed you one way or the other? In the exam, the examiner will spell it out for you, so no worries
The difference I noted was that one question (#8) gave you the percent completion and the contract price was fixed. This question used the balancing figure approach.
The other question (#7) you were required to calculate the percent completion. The company recognizes profits on uncompleted contracts on the percent of completion basis as determined by the agreed work to date compared to the total contract price.So there you have it – sometimes the examiner will give you the percentage complete and other times she won’t – but she WILL give you the basis upon which you have to calculate that percentage completeness
Ok?
That’s what I am not t sure of – is it that when she gives the percent then you use the balancing figure approach??? Or is there additional information I should be looking for???
When you’re given the percentage, apply the percentage to revenue and the the TOTAL costs of the contract
If you have to calculate the percentage, apply the percentage to the TOTAL costs of the contract!
What do you mean “the balancing figure approach”
The only time I imagine you using a balancing figure is for the costs figure when an overall loss is forecast!
Question 8 had given the percent completion – it took the full contract price less the contract cost. The profit figure was then prorated based on the percent completion. Working one where we calculate the attributable profit, the prorated profit was deducted from the revenue recognized for the period. That figure was the balancing figure which was the total cost for the period.
If I take the percent of total cost that figure does not agree to that above.Was I clear? Please do let me know.
Ah, now I understand. But didn’t the question specify that profit recognition was to be the percentage completed multiplied by e overall profit? And, if I’m right with that, surely that’s the examiner specifying how you should determine the revenue, costs and profit figures!
She’s actually making it easier for you. Trust me, the question WILL give you instructions as to how to calculate the missing figures. Just get used to the idea that the instructions / information / detail may be given to you in a number of different ways
A structural engineer or architect or quantity surveyor – whatever has been agreed between the two parties – will regularly visit the construction site and certify that $XXXXXX worth of work has been completed.
Think about it! Where is the examiner getting these percentages from (or, where do companies get these percentages from)? Some independent appropriately qualified person is calculating the stage reached and certifying that value as being correct
Ok?
Yes thank you that make sense.
I was just worried that it might be some other ‘technical’ word for ‘invoiced’.
- You must be logged in to reply to this topic.