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

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

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

Updated on: 07-Jul-2021

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