![Trending Articles on Technical and Non Technical topics](/images/trending_categories.jpeg)
Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Physics
Chemistry
Biology
Mathematics
English
Economics
Psychology
Social Studies
Fashion Studies
Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Write the journal entries for the percentage of completion method
In this method, all the revenues are recognized based on the percentage of work completed over a period of time through a cost to cost method.
Journal entries
The journal entries for the percentage of completion method are as follows −
Particulars | Debit | Credit |
---|---|---|
Incurring costs | Construction in progress | Cash or accounts payable |
Billing | Accounts receivable | Construction in progress (Bill) |
Receiving payments | Cash | Accounts receivable |
Period end adjustments for revenue | Construction expense Construction in progress | Construction revenue |
Completing the project | Construction in progress (Bill) | Construction in progress |
Example
Consider the following table for understanding how to write journal entries. Here, all numbers are used for understanding purposes only.
Particulars | 2001 ($ IN MILLION) | 2002 ($ IN MILLION) | 2003 ($ IN MILLION) |
---|---|---|---|
Cumulative cost incurred ($) | 4 | 9 | 15 |
Total cost (estimated) $ | 15 | 15 | 15 |
Billings | 3 | 10 | 5 |
Collected | 2 | 11 | 5 |
Solution
The journal entries by using the percentage of completion method for the data in the above mentioned table are as follows −
Particulars | 2001 | 2002 | 2003 |
---|---|---|---|
Incurring costs | Dr. 4M Cr. 4M | Dr. 3M Cr. 3M | Dr. 8M Cr.8M |
Billing | Dr. 3M Cr. 3M | Dr. 10M Cr. 10M | Dr.5M Cr. 5M |
Receiving payments | Dr.2M Cr. 2M | Dr. 11M Cr.11M | Dr. 5M Cr. 5M |
Period end adjustments for revenue | Dr. construct exp 4M Dr. CIP 0.5M Cr. Rev 3.5M | Dr. construct exp 3M Dr. CIP 0.25M Cr. 3.25M | Dr. construct Exp. 8M Dr. CIP 3.5 M Cr. Rev 11.5M |
Completing the projects | Dr. billing 18M Cr. CIP 18M |
Advertisements