Amounts Due from Customers for Contract Work
On long construction or project contracts, the costs plus profit recognised so far that exceed what you have billed. On the Balance Sheet.
In detail
Amounts Due from Customers for Contract Work is the construction-contract version of a contract asset. On a long project billed in stages, the costs incurred plus the profit recognised so far can exceed what has been invoiced to the customer; that excess is an asset, because the customer will eventually be billed for it. It is measured by the stage of completion, often cost to date over total expected cost, and recomputed at each period end with the other side in Rendering of Services. When billing runs ahead of the work, the balance flips to the liability account Amounts Due to Customers for Contract Work. A simple sale of goods or a short trip never needs it.
Formula
Due from customers = (Costs to date + Profit recognised to date) - Progress billings to date, when positive.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Amounts Due from Customers for Contract Work | Rs 2,50,000 | |
| Rendering of Services | Rs 2,50,000 |
How to record it in BRAccount
- 01At period end, work out the stage of completion of each contract from cost to date over total cost.
- 02Compute revenue earned to date and subtract the Sales Invoices already raised on the contract.
- 03Go to Invoicing > Journal Entry > New dated the period end; debit this account, credit Rendering of Services.
- 04Submit. The entry above posts for a resort fit-out 60 percent complete.
- 05Reverse and recompute at the next period end so the balance always reflects the current stage.
When to use it
Post by Journal Entry at period end for construction-type contracts. Not needed for simple sales of goods or trips.
Example from the demo books
Dr Amounts Due from Customers for Contract Work Rs 2,50,000, Cr Rendering of Services Rs 2,50,000 for a resort fit-out 60 percent complete.