ACCT 110 Lecture Notes - Lecture 7: Santa Barbara City College, Financial Statement
Document Summary
Percentage-of-completion is one method for measuring the progress towards satisfying an obligation. Application of the percentage-of-completion method requires a basis for measuring the progress at particular interim dates. Disruptions in the input unit and productivity relationship can lead to measurement anomalies. Front-end loading might lead to higher estimates of completion. Inaccurate results if units are not uniform. The most popular input measure when using the percentage-of-completion method is the cost-to-cost basis. Percentage-of-completion: cost-to-cost basis journal entries: as they occur, construction costs are accumulated as debits in a contract asset/liability account (cr. Accounts payable: as they occur, billings are credited to the contract asset/liability account (dr. accounts. Receivable: at the end of the period, the cost of construction for that period is taken out of the. Contract asset account and debited as construction expenses: at the end of the period, when revenue is recognized, it is taken out of the contract.
