Amounts Due to Customers for Contract Work
On long contracts, what you have billed above the costs plus profit recognised so far. On the Balance Sheet.
In detail
This account belongs to long construction or project contracts measured by percentage of completion. When the business has invoiced a customer for more than the work actually performed so far, the excess is not yet revenue; it is owed back to the customer as work still to be done, and it sits here as a liability. The reverse situation, work done but not yet billed, sits in the asset account Amounts Due from Customers for Contract Work. The balance is adjusted at each period end by Journal Entry after a stage-of-completion review. A travel company rarely needs it, but a firm building lodges under milestone contracts does. Ignoring it lets early milestones inflate revenue.
Formula
Amount due to customers = Progress billings to date - (Contract revenue x Percentage complete)
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Rendering of Services | Rs 1,00,000 | |
| Amounts Due to Customers for Contract Work | Rs 1,00,000 |
How to record it in BRAccount
- 01At period end, measure the percentage of the contract completed from cost or survey records.
- 02Compare cumulative billing with revenue earned; the excess billing is the liability.
- 03Go to Invoicing > Journal Entry > New dated the period end.
- 04Debit Rendering of Services and credit Amounts Due to Customers for Contract Work with the excess.
- 05Submit. The entry below posts.
- 06Reverse the entry on the first day of the next period and remeasure at its end.
When to use it
Post by Journal Entry at period end for construction-type contracts. Not needed for simple sales.
Example from the demo books
Dr Rendering of Services Rs 1,00,000, Cr Amounts Due to Customers for Contract Work Rs 1,00,000 when billing runs ahead of work done.