How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract?
A) Progress billings as deferred income, construction in progress as a deferred expense.
B) Progress billings as income, construction in process as inventory.
C) Net balance, as a current asset if debit balance, and current liability if credit balance.
D) Net balance, as income from construction if credit balance, and loss from construction if debit balance.

Question

Quizplus · Accepted Answer

The balances of progress billings and construction in process should be presented as a net balance. If the net balance is a debit (progress billings exceed construction costs incurred), it should be presented as a current asset. If the net balance is a credit (construction costs incurred exceed progress billings), it should be presented as a current liability. This method is in accordance with the guidance of International Accounting Standards.

How Should the Balances of Progress Billings and Construction in Process