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In the Percent of Completion Method of accounting a WIP Schedule is
generated each month. If a specific revenue account is set up for
the over/under billing, would the exact number from the WIP Schedule
be reflected in this account on the income statement or would it be
a number reflective of the change in over/under billings from last
month to this month?
Comment by Amy 47 — May 10, 2010 @ 4:10 pm
Hi, Amy.
Thank you for your excellent question on the substance of an article that I wrote, Percentage-of-Completion Method of Construction Accounting (please click link to be directed to the article). I also wrote an article on how to calculate over/under billings on a WIP Schedule: “How to Prepare a Work-in-Process (WIP) Schedule“.
The amounts calculated for over/under billings on a WIP schedule refer to the amount(s) that should be reflected on the balance sheet. Consequently, the total amount included on the income statement would be the net adjustments required to reflect those over and under billings on the balance sheet.
Comment by William Brighenti — May 10, 2010 @ 4:52 pm