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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.
The journal entries for completed contract method are as follows −
|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|
Consider the following table for understanding how to write journal entries −
|Cumulative cost incurred ($)||2000000||5000000||12000000|
|Total cost (estimated) $||12000000||12000000||12000000|
The journal entries by using the completed contract method for the above-mentioned data are as follows −
|Incurring costs||Dr. 2000000
|Dr. 3000000 |
|Receiving payments||Dr. 1000000 |
|Recording revenue||Dr. 13000000
|Recording expense||Dr. 12000000
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