Long Term Construction Contracts

Zero Profit Method Percentage of Completion Method

Recognize revenue upon completion of contract
There is no estimates as we go through the
projects
Recognize revenue throughout the project
Estimate in the period completion
%= CITD/Total Estimated costs

CIP
Payable
Account Cost of Constructions

AR
Billings

Cash
AR
Cash Collection

CIP
Cost of Construction
Construction Rev

Total Revenue
Contract Price
Multiply % of completion

Contract Revenue
- Initial amount of revenue agreed in the
contract
- Variations

Contract Revenue Contract Revenue

*profit *profit
COC (CIFTY) COC + CIP
*anticipated losses *anticipated losses
During the year During the year
Contract Price Contract Price
Multiply % of completion Multiply % of completion
Value of Contract Earned to Date Value of Contract Earned to Date
Less CR prior recognized Less CR prior recognized
Contract Rev for the year Contract Rev for the year

*COC= CR+GPETD(an wa pa imultiply ha %) *COC= CR+CIP (loss during the year)

(loss during the year) *COC= CR-CIP (gain during the year)
*COC= CR+CIP(GPETD-GPEP) (negative GPETD
and negative in the prior years) *CIP is an asset so debit hiya!
 *COC= CR-CIP (last year and negative prior)

*CIP is an asset so debit hiya!