Accounting for a job that spans over two years

Treated as a sales provision or WIP?

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Example : 

A contract worth £500k and £250k of the work is done in this financial year and £250k is done next year.

If i invoice £200k for work done and and received a certification for same and post a £50k sales provision for work done but not yet invoiced, how do i handle the other £250k do i treat it as WIP or as if it's a few fresh contract for £250k? If WIP can you please advise the postings for same.

Thanks 

 

Replies (2)

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DougScott
By Dougscott
13th Dec 2023 21:13

The £50k is the work in progress not yet invoiced. That's all you need to take into account for this financial year.

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By paul.benny
14th Dec 2023 13:10

The term sales provision is not one I would ever use. On facts given, the £50k is a credit to revenue in the period and the corresponding debit is to accrued income.

But you need to look at the estimated costs to completion and determine whether the proportion of revenue you are recognising is aligned with the proportion of costs incurred. In your example, you have the revenue split evenly between the years. If costs are weighted towards the beginning, more revenue may belong in the first year.

FRS102 23.17-23.27 gives a fuller explanation.

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