- Trending Categories
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 completed contract method
In this method, all revenue and expenses will not be recognized, until the completion of the contract. If there is any unpredictability in collecting funds from customers, then this method is used. This method is easy to determine and simple.
Journal entries
The journal entries for completed contract 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 |
| Recording revenue | Construction in progress (Bill) | Construction revenue |
| Recording expense | Construction cost | Construction in progress |
Example
Consider the following table for understanding how to write journal entries −
| Particulars | 1995 | 1996 | 1997 |
|---|---|---|---|
| Cumulative cost incurred ($) | 2000000 | 5000000 | 12000000 |
| Total cost (estimated) $ | 12000000 | 12000000 | 12000000 |
| Billings | 2000000 | 4000000 | 7000000 |
| Collected | 1000000 | 5000000 | 7000000 |
Solution
The journal entries by using the completed contract method for the above-mentioned data are as follows −
| Particulars | 1995 | 1996 | 1997 |
|---|---|---|---|
| Incurring costs | Dr. 2000000
Cr.2000000 | Dr. 3000000 Cr. 3000000 | Dr. 7000000 Cr.7000000 |
| Billing | Dr. 2000000
Cr.2000000 | Dr. 4000000 Cr.4000000 | Dr. 7000000
Dr.7000000 |
| Receiving payments | Dr. 1000000 Cr. 1000000 | Dr. 5000000
Cr. 5000000 | Dr. 7000000
Cr. 7000000 |
| Recording revenue | Dr. 13000000
Cr. 13000000 | ||
| Recording expense | Dr. 12000000
Cr.12000000 |
- Related Articles
- Write the journal entries for the percentage of completion method
- How are the journal entries and legal entries recorded for contingent liabilities?
- How journal entries are made or how to prepare journal entries?
- How journal entries for the imprest petty cash system are recorded?
- What are reversing entries and their journal entries?\n
- Give the journal entry for the sinking fund deprecation method.
- Write the accounting entries for cash flow hedge
- Explain the complete contract method
- Calculate provision expenses and write its journal entry
- Describe the term journal in accounting.
- How to calculate the accounting entries for forward contracts?
- Compare the void contract and the voidable contract
- What is Happiness Planner/Journal? How to use a happiness journal?
- What is the accounting treatment for costs in contract costing?
- Contingent Contract: Section 31 of the Indian Contract Act
Advertisements