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Revenues and gross profit are recognized each period based on the construction progress, in other words, the percentage of completion. Construction costs plus gross profit earned to date are accumulated in an asset account (construction in process, also called construction in progress), and progress billings are accumulated in a liability account (billing on construction in process).
A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials that are feedstock for future finished products. As feedstock, the term connotes these materials are bottleneck assets and are required to produce other products.
These are all cost related to the construction process, right from materials, labor costs, consultancy and all management expenses. Construction accounting involves charging construction costs to the applicable contract. Costs fall into three categories. Direct costs are labor, material, and subcontracting costs, land. [2]
Cost accounting is defined by the Institute of Management Accountants as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail.
Material flow accounts provide information on the material inputs into, the changes in material stock within, and the material outputs in the form of exports to other economies or discharges to the environment of an economy. Material flow accounting can be used in national planning, especially for scarce resources, and also allows for forecasting.
The partially completed work (or work in process) is a measure of inventory built during the work execution of a capital project, [9] [10] [11] such as encountered in civilian infrastructure construction or oil and gas. Inventory may not only reflect physical items (such as materials, parts, partially-finished sub-assemblies) but also knowledge ...
Raw material; Work in process; Finished goods; A good purchased as a "raw material" goes into the manufacture of a product. A good only partially completed during the manufacturing process is called "work in process". When the good is completed as to manufacturing but not yet sold or distributed to the end-user, it is called a "finished good". [1]
This involves reviewing the project's plans and specifications to produce a take-off or quantity survey, which is a listing of all the materials and items of work required for a construction project by the construction documents. Together with prices for these components, the measured quantities are the basis for calculation of the direct cost.