Long Term Construction Contracts

OVERALL PROFIT/LOSS = Contract Price - (Cost incurred to date + Total Estimated Cost to Complete)
Zero Profit Method / Cost Recovery Method

Contract Revenue = Construction Cost Incurred - Overall Loss

Contract Revenue for the final year = Balance of Unearned Revenue (Contract Price - Cost incurred to date in previous year)

Alternative Method

Use this method only if there is no overall loss on the contract

Construction in Progress = Contract Revenue

This consists of Construction Cost Incurred to date and Gross Profit Earned to date
When computing for CIP net of Progress Billings, always make sure that you add up all the Progress Billings TO DATE and deduct
them to CIP
o CIP>Billings = Current Asset
o CIP<Billings = Current Liability