The Open Job Cost Status Report identifies a project’s actual costs of construction, amounts borrowed or financed, and any customer payments made to date. The net result is the contractor’s net investment into the respective project.
Work in Process
Work in process is a term used to represent those goods in production system or in an incomplete state. Work in process is usually a term assigned to large projects or complex goods (auto, RV, marine goods manufacturing). It is one line item of the inventory account in the current assets section of the balance sheet.
In project accounting there are two different methods of accounting used. The first is the completed contract method which is explained in more detail in Lesson 75. The second and the focus of this lesson is the percentage of completion method of accounting. This method is an advanced skill for accountants and requires knowledge of its proper application along with a new type of control account called work in process or work in progress.
This article will illustrate the opposite effect using the same business information. A buyer of a business should be leery of financial information and look for improper accounting processes. The goal is to reduce the operational income and ultimately the value of the business. The goal is to get the business valuation to a realistic number.