Project Planning and Building Permits Quiz

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.