What is the difference between journal entries to recognize gross profits when revenue is recognized over time and when revenue is recognized upon completion of a long-term project.

Timing

Explanation:

On a long-term construction project, the amount in the construction in progress account represents the costs of construction plus the gross profit recognized to date, and the billings on construction represents the amounts billed to the customer.

The amount billed to customers on long-term construction project is recorded in the billings on construction account.

The construction in progress account represents the total construction costs (labor, material, overhead) and gross profit recognized to date.

TIMING

Explanation:

Critically considering along-term construction project, the total amount in the construction in progress account is represented by the costs of construction and the addition of the gross profit that is recognized to date. However the billings on construction signifies the amounts billed to the customer.

This particular amount that is billed to customers on long-term construction project can be documented in the billings on construction account.

This construction in progress account signifies the total construction costs which can include the followings: gross profit,labor, overhead and material

that can be recognized to date.

When the revenue from a construction type long term contract over time is recognized, in the CIP account balance which contains the following but not limited to the gross profit and losses ,material used. costs of labor.

Therefore, when revenue occur upon completion of a long-term contract, the gross profit is recognized upon completion in the account.

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