Contract Assets
Also called: Unbilled Revenue
Work you have done for a customer but cannot invoice yet under the contract terms, on the Balance Sheet.
In detail
Contract Assets records revenue the company has earned by doing the work but has not yet invoiced because the contract says billing comes later, for example a trek package half delivered at month end or a project billed on milestones. NFRS 15 requires the revenue to be recognised as the work is done, so the earned part is debited here and credited to Rendering of Services at period end, and reversed when the Sales Invoice is issued and Debtors takes over. The difference from Debtors is that nothing is yet due from the customer. Leaving unbilled work out understates profit; booking work not yet done overstates it, so the month-end figure should rest on a progress record.
Formula
Contract Assets = Revenue earned to date on the contract - Amounts invoiced to date (when positive).
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Contract Assets | Rs 80,000 | |
| Rendering of Services | Rs 80,000 |
How to record it in BRAccount
- 01At month end, list each contract in progress with the value of work completed but not invoiced.
- 02Go to Invoicing > Journal Entry > New dated the month end; debit Contract Assets, credit Rendering of Services.
- 03Submit. The entry above posts for a half-finished trek package.
- 04When the Sales Invoice is raised next month, post the reverse Journal Entry so revenue is not counted twice.
- 05Open the ledger from the chart; it should return to zero once every contract is billed.
When to use it
Post by Journal Entry at month end for completed work not yet billed. Reverse when the Sales Invoice is raised.
Example from the demo books
Dr Contract Assets Rs 80,000, Cr Rendering of Services Rs 80,000 for a half-finished trek package not yet invoiced at Ashadh end.