Home Tribhuvan UniversityTU BBSBBS 2nd yearCost and management accounting work certified and work uncertified, contractee’s account

work certified and work uncertified, contractee’s account

by arjan kc
0 comment 2 minutes read

In contract costing, work certified and work uncertified refer to the stages of completion of a contract and the related accounting entries. These terms are commonly used in situations where the work on a contract is periodically evaluated and certified by an external party, such as an engineer or architect, to determine the percentage of completion. Let’s explore these terms and the associated accounting aspects:
Work Certified:
Work certified refers to the portion of work on a contract that has been officially assessed and verified by an authorized person (usually an engineer or architect) to be completed. This certification often leads to the issuance of a progress certificate, which acknowledges the completion of a certain percentage of the total contract work. The amount certified is typically based on the physical progress of the project.
Accounting Entry for Work Certified:
Debit: Contract Work in Progress (Asset)
Credit: Work Certified (Revenue)
The Contract Work in Progress account represents the value of the work completed but not yet certified. When the work is certified, it is moved from the Contract Work in Progress account to the Work Certified revenue account.
Work Uncertified:
Work uncertified refers to the remaining portion of work on a contract that has not yet been officially assessed or certified. This includes the work that has been performed but has not yet met the criteria for certification. It represents the value of work that is still in progress.
Accounting Entry for Work Uncertified:
Debit: Contract Work in Progress (Asset)
Credit: Work Uncertified (Liability)
The Work Uncertified liability account represents the value of the work that has been performed but is awaiting certification. It serves as a liability on the balance sheet until the work is officially certified.
Contractee’s Account:
The contractee’s account represents the financial record of transactions between the contractor and the client (contractee) related to the contract. It includes details of progress billings, advances received, payments made, and adjustments related to the contract. The contractee’s account helps in maintaining accurate records of the financial interactions and ensuring proper billing and payment processes.
Accounting Entries for Contractee’s Account:
Debit: Contractee’s Account (Receivable)
Credit: Progress Billings (Revenue)
As progress billings are issued to the contractee, the contractee’s account is debited (increased). When payments are received from the contractee, the contractee’s account is credited (reduced). The balance of the contractee’s account represents the amount still due from the contractee.
These concepts and accounting entries help in accurately tracking the progress of a contract, recognizing revenue, and managing financial transactions associated with the contract. They are essential for maintaining proper financial records, assessing the financial health of the project, and making informed management decisions.

You may also like

Leave a Comment

Adblock Detected

Please support us by disabling your AdBlocker extension from your browsers for our website.