Hi I want to check my understanding of these two concepts. Can you tell me if my analysis of this example is correct? Thanks e.g. 10M project, cost is 8M, it takes 3 yrs Cost and billing schedule Year | 1 | 2 | 3 Cost | 2 | 4 | 2 Billing | 3 | 3 | 4 Abbreviations CIP = Construction in Progress (Asset) AB = Advance Billings (Liabilities) RE = Retained Earnings (Equity) My analysis: %-of completion method Income statement Year | 1 | 2 | 3 Revenue | 2.5 | 5 | 2.5 Expense | 2 | 4 | 2 Income | 0.5 | 1 | 0.5 Balance sheet Year | 1 | 2 | 3 Cash | 1 | 0 | 2 CIP | 2.5 | 7.5 | 10 AB | 3 | 6 | 10 RE | 0.5 | 1.5 | 2 Completed contract method Income statement Year | 1 | 2 | 3 Revenue | 0 | 0 | 10 Expense | 0 | 0 | 8 Income | 0 | 0 | 2 Balance sheet Year | 1 | 2 | 3 Cash | 1 | 0 | 2 CIP | 2 | 6 | 10 AB | 3 | 6 | 10 RE | 0 | 0 | 2
% Completion (all figures are cumulative) Income Year********1****2****3 ==================================== Revenue***2.5****7.5****10.0 Cost******2.0****6.0*****8.0 =================================== Income****0.5****1.5****2.0 ======================== Cash Cum.Bill****3****6******10 Cum Cost**2****6*******8 ====================== Cash*****1*****0*******2 ====================== Net CIP/AB ========= Income***0.5****1.5****2.0 Cum Cost**2****6*******8 ===================== CIP******2.5****7.5****10.0 Cum.Bill****3****6******10 ======================= Net CIP****0****1.5*****0
Thanks for your reply. I think I understand now. CIP and AB are not on the balance sheet. Only either Net CIP (if CIP > Cum. AB) or Net AB (if Cum. AB > CIP) appear there.
awesome