1. What is Billings in Excess?

Billings in Excess represents deferred revenue that occurs when billings to customers exceed the costs incurred on a construction project. This is a key concept in construction accounting under the percentage-of-completion method.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( \text{Billings} \) — Total amount billed to the customer (currency)
• \( \text{Costs Incurred} \) — Total costs actually spent on the project (currency)

Explanation: When billings exceed costs, it indicates that the company has collected more from the customer than it has spent, creating a liability on the balance sheet representing future performance obligations.

3. Importance in Construction Accounting

Details: Billings in Excess is crucial for accurate financial reporting in long-term construction contracts. It helps companies track their revenue recognition and ensures compliance with accounting standards like GAAP and IFRS.

4. Using the Calculator

Tips: Enter both billings and costs incurred in the same currency units. Ensure values are positive numbers representing actual contract amounts and project costs.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive Billings in Excess indicate?
A: A positive value indicates the company has billed more than it has spent, creating deferred revenue that will be recognized as income as work progresses.

Q2: What if Costs Incurred exceed Billings?
A: When costs exceed billings, it results in "Costs in Excess of Billings," which represents an asset on the balance sheet for work performed but not yet billed.

Q3: How is this different from revenue recognition?
A: Billings in Excess deals with cash collection timing, while revenue recognition follows the percentage-of-completion method based on costs incurred versus total estimated costs.

Q4: When should this calculation be performed?
A: This calculation should be performed regularly throughout the project lifecycle, typically at each financial reporting period.

Q5: Are there industry standards for this calculation?
A: Yes, this follows construction accounting standards under ASC 606 (Revenue from Contracts with Customers) and similar international standards.