Question

a constructor signed an agreement to construct a dam that requires a four years to complete for a contract price of birr 100000000.the contractor collected 15% of the contract price in advance.the cost to be incurred yo complete the dam is estimated to birr 80000000.sk if the receipt of payment method of recognizing revenue is used what entry is passed by contractor at the time of contract

Answer 1

When using the receipt of payment method for recognizing revenue, the contractor would pass the following entry at the time of the contract: Cash 15,000,000 and Advance from Customers 15,000,000.

Step-by-step explanation:

When using the receipt of payment method for recognizing revenue, the contractor would pass the following entry at the time of the contract:

Cash 15,000,000

Advance from Customers 15,000,000

Advance from Customers is a liability account that represents the amount collected in advance from customers. By recording this entry, the contractor recognizes the receipt of payment from the customer.