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A contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when the right is dependent on the passage of time.
A contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when the right is dependent on the passage of time.
False
Receivable is an entity's right to consideration that is conditional and requires the good or service to be transferred to the customer before payment is due.
Receivable is an entity's right to consideration that is conditional and requires the good or service to be transferred to the customer before payment is due.
False
Construction in progress is used in traditional construction accounting to accumulate recognized profits, but not recognized losses, to date.
Construction in progress is used in traditional construction accounting to accumulate recognized profits, but not recognized losses, to date.
False
Progress billing in traditional construction accounting records amounts billed for work performed on a contract, even if they have not been paid by the customer.
Progress billing in traditional construction accounting records amounts billed for work performed on a contract, even if they have not been paid by the customer.
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An entity's receivable becomes due for payment only after the entity has transferred the goods or services to the customer, regardless of any future refunds.
An entity's receivable becomes due for payment only after the entity has transferred the goods or services to the customer, regardless of any future refunds.
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An independent contractor is hired in a vertical relationship with subcontractors.
An independent contractor is hired in a vertical relationship with subcontractors.
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The transaction price for construction contracts only includes the contract price, excluding any subsequent variations.
The transaction price for construction contracts only includes the contract price, excluding any subsequent variations.
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Each promise to transfer a distinct good or service is considered a performance obligation to be accounted for separately.
Each promise to transfer a distinct good or service is considered a performance obligation to be accounted for separately.
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Performance obligations are only satisfied over time if the customer simultaneously receives and consumes the benefits.
Performance obligations are only satisfied over time if the customer simultaneously receives and consumes the benefits.
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EPC Accounting-Related focuses on the transaction price and performance obligations in construction contracts.
EPC Accounting-Related focuses on the transaction price and performance obligations in construction contracts.
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Post-construction phase mainly involves auditing specialized industries.
Post-construction phase mainly involves auditing specialized industries.
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During the pre-construction phase, the project team focuses on aligning the budget and securing all necessary building permits.
During the pre-construction phase, the project team focuses on aligning the budget and securing all necessary building permits.
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Entitlements for a project refer to the intended use of the building and its compliance with city planning regulations.
Entitlements for a project refer to the intended use of the building and its compliance with city planning regulations.
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The procurement stage involves obtaining labor, equipment, and materials necessary for the project, regardless of its size or expected commencement date.
The procurement stage involves obtaining labor, equipment, and materials necessary for the project, regardless of its size or expected commencement date.
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Quality control is typically addressed during the post-construction phase of a project.
Quality control is typically addressed during the post-construction phase of a project.
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The strategic plan developed by the project planner helps in dividing the project into smaller units to establish completion timelines.
The strategic plan developed by the project planner helps in dividing the project into smaller units to establish completion timelines.
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Poor foundation and communication structure during the pre-construction phase can lead to potential project delays.
Poor foundation and communication structure during the pre-construction phase can lead to potential project delays.
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Study Notes
Recognition of Revenue
- Revenue is recognized at the earlier of the date when the entity receives consideration before the good or service is transferred to the customer (advance payment) or when the entity has an unconditional right to the consideration before the good or service is transferred to the customer (non-cancelable contract requires payment in advance).
Contract Asset
- A contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when the right is conditioned to something other than passage of time (entity's future performance).
Receivable
- A receivable is an entity's right to consideration that is unconditional, requiring only passage of time before the payment of that consideration is due, even if the amount is subject to refund in the future.
Construction Accounting
- Construction in progress is an account used to accumulate contract costs incurred and recognized profits (less recognized losses) to date.
- Progress billing is an account used to record amounts billed for work performed on a contract, whether or not they have been paid by the customer.
Independent Contractor
- An independent contractor is a contractor who is hired alongside other contractors in a horizontal (equal) relationship to each other, rather than the vertical relationships between contractors and subcontractors.
Accounting-Related Terms
- Transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods and services to a customer, excluding amounts collected on behalf of third parties.
- Transaction price for construction contracts normally consists of the contract price and any subsequent variations in the contract price that are probable to result in revenue and can be measured reliably.
- Performance obligations are each promise to transfer a distinct good or service, or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer.
- A performance obligation is satisfied over time if the customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs.
Construction Project Phases
- The project planning phase involves setting the project scope, developing a strategic plan, and dividing the project into smaller units to establish completion timelines.
- Building permits are necessary before the commencement of the project and are secured throughout the project as different disciplines have different licenses.
- The pre-construction phase involves developing a formal approach to calculate costs, scope, and schedules for project execution, assembling the project team, and aligning the foundation of the project and a communication structure.
- The procurement stage involves obtaining the necessary equipment, labor, and materials, and the complexity of this stage depends on project size, expected commencement date, and availability of resources.
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Description
Test your knowledge on project planning and the process of securing building permits before commencing a project. Learn about dividing projects into manageable units and obtaining necessary licenses for construction.
