Treating the "billings on construction in progress" account as an off-set (contra)to the construction inventory account avoids including certain costs and profits twice on the balance sheet.

Question

Quizplus · Accepted Answer

Treating the "billings on construction in progress" account as a contra account to the construction inventory account helps to avoid including the same costs and profits twice on the balance sheet. This is because the billings account represents billing for work in progress, while the construction inventory account represents the costs of that work in progress. By offsetting the two accounts, only the net amount is shown on the balance sheet, which gives a more accurate picture of the company's financial position.

Treating the "Billings on Construction in Progress" Account as an Off-Set