Hi I am getting a confused in Construction in Progress and Net advance billing stuff. I would appreciate if anybody can please explain me this thing in detail. How does we take this things in balance sheet and income statement. Thanks for your help.
You might get a better response if you post a specific problem whose answer you don’t understand.
What have you tried to understand it? Doing a whole example is pretty hard to do in this format. The basic gist is that your income statement shows actual costs and accrued revenue. The balance sheet has either an asset or a liability. The partial construction is worth your cost + % net profit. The amount you have billed is, uh, what you have billed. If you have billed for more than the construction is worth, you have a liability because you owe someone soe construction work. If it is worth more than you have billed, you have an asset because it is worth more than someone has paid you. The asset would be called thye net construction in progress but the liability would be called the net advance billings. (BTW - Here is one of those disturbing differences between accounting and most of science. There is this formula that produces a number and in most of science you would call that number something like “Construction value”. In accounting you call it different things depending on whether it’s positive or negative. Very troubling.) Edit: I also agree with DarienHacker
Thanks JoeyDVivre. Actually I was unable to understand the concept that you just explained. Thanks for it.
Glad to help - you should probably be able to go through one of those gory examples where you have payments, % completion, costs over three years and do the income and balance sheets. What a pain. Imagine doing that for a living…
Yea I agree with you on that