Construction Knowledge Center
Explore our verified library of Construction transactions. Every entry is reviewed for IFRS compliance and real-world accuracy by our technical accounting team.
How to Record Retention Receivables on Construction Progress Billings
How to account for the percentage of payment withheld by a client until project completion.
How to Apply Manufacturing/Construction Overhead to Work-in-Process
Allocating indirect production costs to Work-in-Process (WIP) based on a predetermined rate.
How to Record the Sale of Manufacturing/Construction Scrap
Recording the miscellaneous income from selling byproduct or waste materials from production.
How to Transfer WIP to Finished Goods (Cost of Goods Manufactured)
Recording the completion of production and moving costs from Work-in-Process to Finished Goods inventory.
How to Record the Sale of Construction Site Scrap Material
Recording revenue from selling excess rebar or copper scrap from a job site.
How to Record a Project Mobilization Advance Payment
Receiving an upfront payment from a client to start a construction project.
How to Capitalize Interest on a Construction Loan (IAS 23)
Adding the interest cost of a project loan to the cost of the building being constructed (IAS 23).
How to Record Purchase Price Variance (PPV) in Standard Costing
Recording the difference between the standard cost of a material and the actual price paid.
How to Record Retention Payable to a Subcontractor
Withholding a percentage of a subcontractor's payment as a guarantee for their work quality.
How to Capitalize Borrowing Costs on Project Loans (IAS 23)
Adding interest costs to the value of a 'qualifying asset' during its construction period (IAS 23).
How to Provision for an Expected Loss on an Onerous Construction Contract
Recording an immediate loss when it becomes clear that the total cost of a construction project will exceed the total revenue.
How to Record Performance Bond and Insurance Premiums
Paying for a bank guarantee or insurance bond that guarantees the client the project will be completed.
How to Record Contract Change Orders (Variation Orders)
Adjusting the contract value and recognizing revenue when a client requests and approves additional work mid-project.
How to Amortize a Mobilization Advance via Progress Billings
Reducing the mobilization advance liability as work progresses and the advance is recovered through deductions on progress billings.
How to Record a Bid Bond / Tender Guarantee Cash Margin
Recording the cash margin paid to the bank to issue a bid bond when submitting a tender.
How to Record a Bid Bond Release Post-Award
Releasing the bid bond margin back to the current account after the tender result.
How to Record Advance Payment Guarantee (APG) Bank Fees
Recording the bank's annual commission for issuing an Advance Payment Guarantee (APG) on behalf of the contractor.
How to Record a Letter of Guarantee (LG) Cash Margin Deposit
Recording cash blocked by the bank as collateral for issuing a performance or advance payment guarantee.
How to Amortize Contractor All-Risk (CAR) Insurance Premiums
Paying the annual Contractor All-Risk insurance premium for a construction project.
How to Capitalize Site Establishment and Mobilization Costs
Capitalizing the initial cost of setting up the construction site — fencing, signage, temporary roads, and site offices.
How to Record a Progress Billing Invoice to the Client
Issuing a monthly progress certificate invoice to the client based on work completed.
How to Recognize Construction Revenue via Percentage of Completion (POC)
Recognizing revenue based on the percentage of the project physically completed at month-end.
How to Record Over-Billings (Billings in Excess of Costs and Estimated Earnings)
Recording the liability when the amount invoiced to the client exceeds the revenue actually earned based on completion.
How to Record Under-Billings (Costs and Estimated Earnings in Excess of Billings)
Recording the asset when revenue earned based on completion exceeds the amount invoiced to date.
How to Record the Release of Retention Receivables
Collecting the withheld retention amount from the client after achieving practical completion and the defects period ending.
How to Accrue Revenue for Construction Claims and Extensions
Accruing revenue for a claim submitted to the client for additional costs caused by employer-risk events (e.g., design changes, delays).
How to Handle Disputed Variation Orders (Contingent Revenue)
Recording a variation order submitted to the client that is under dispute and not yet approved.
How to Record Price Escalation Clause Revenue Adjustments
Increasing the contract value due to a contractual price escalation clause triggered by rising material or fuel costs.
How to Record Milestone Payments Received from Clients
Collecting a payment linked to achieving a specific project milestone (e.g., structural completion).
How to Record the Final Account Settlement on Project Closeout
Recording the agreed final contract value after all variations, claims, and adjustments are settled.
How to Record Cash Purchases for Site Materials
Buying construction materials (steel, cement, blocks) with cash for immediate site use.
How to Transfer Material from Central Store to Site WIP
Moving materials from the central warehouse to a specific project site.
How to Record Surplus Material Returned to Central Stores
Returning unused materials from a project site back to the central warehouse.
How to Write Off Abnormal Material Wastage on Site
Writing off materials damaged or wasted beyond acceptable norms on the construction site.
How to Capitalize Import Duties on Construction Materials
Capitalizing customs duties paid on imported structural steel or specialist equipment into the material cost.
How to Record Fuel and Consumables for Plant Machinery
Recording diesel and lubricants used by excavators, cranes, and generators on site.
How to Record Advance Payments to Material Suppliers
Paying a cement or rebar supplier in advance to secure materials at an agreed price.
How to Offset Supplier Advances Against Material Deliveries
Clearing the advance when the supplier delivers materials and invoices the project.
How to Allocate Gross Wages for Site Workers to WIP
Recording the gross wages for all site-based staff — foremen, masons, carpenters, and laborers.
How to Record Employer Social Security Contributions for Site Workers
Recording the employer's SSC obligation for site workers as a direct project cost.
How to Accrue Overtime Wages for Site Construction Workers
Accruing overtime wages for site workers during an accelerated construction phase.
How to Provision for End-of-Service Benefits (EOSB) for Site Staff
Accruing the end-of-service benefit for long-term site employees as required by local labor law.
How to Record Worker Accommodation and Camp Costs
Recording the cost of housing, meals, and transportation provided to workers at a remote construction site.
How to Capitalize Safety Gear and PPE for Site Workers
Purchasing hard hats, safety boots, harnesses, and hi-vis vests for all site personnel.
How to Capitalize Foreign Worker Visa and Mobilization Costs
Recording the visa fees, medical exams, and flight costs to mobilize foreign laborers to the site.
How to Record Labour-Only Subcontractor Invoices
Recording the cost of a gang of workers supplied by a labour-only subcontractor (materials are provided by the main contractor).
How to Allocate Staff Transport Costs to Project WIP
Recording the cost of daily bus transport for workers between accommodation and the construction site.
How to Record Indirect Labor for Site Engineers and Supervisors
Recording the salary costs of site managers, quantity surveyors, and engineers who supervise multiple activities.
How to Accrue Subcontractor Costs Before Invoice Receipt
Accruing the cost of work completed by a specialist subcontractor before their official tax invoice is received.
How to Record an Advance Payment to a Subcontractor
Paying a specialist subcontractor an advance to mobilize and procure materials.
How to Amortize/Recover a Subcontractor Advance
Deducting the subcontractor advance from a progress payment certificate as work is completed.
How to Release Retention Payable to a Subcontractor
Releasing the retained amount to a subcontractor after their portion of works is complete and the defects period passes.
How to Record a Back-Charge Against a Subcontractor
Deducting costs from a subcontractor's payment for remedial work or damage they caused.
How to Record Subcontractor Termination and Demobilization Costs
Recording costs associated with terminating a non-performing subcontractor mid-contract.
How to Deduct Withholding Tax from Subcontractor Payments
Deducting withholding tax from a domestic subcontractor's payment as required by local tax law.
How to Settle a Subcontractor Final Account
Recording the agreed final payment to a subcontractor after all work, variations, and disputes are resolved.
How to Record Specialist Consultant Fees (Structural/MEP)
Paying a structural engineer or MEP consultant for specialist design and supervision services.
How to Capitalize the Purchase of Owned Plant and Equipment
Buying a construction excavator or concrete mixer for use across multiple projects.
How to Allocate Plant Depreciation to Project WIP
Charging a project with its share of plant depreciation based on machine hours used.
How to Record Plant Hire and Equipment Rental
Recording the weekly rental of an excavator or tower crane from a plant hire company.
How to Record Tower Crane Monthly Hire Costs
Recording the monthly hire charge for a tower crane on a multi-storey building project.
How to Record Scaffolding Hire Expenses
Recording the monthly rental of scaffolding system for the building façade works.
How to Expense Small Tools and Site Consumables
Purchasing hand tools, drill bits, saw blades, and other consumables for site use.
How to Capitalize Site Office and Temporary Building Costs
Recording the cost of portable site offices, cabins, and site-specific facilities.
How to Record Site Utilities (Electricity and Water)
Paying for temporary electricity supply and water connection to the construction site.
How to Record Site Security and Guard Services
Monthly cost of a contracted security company protecting the construction site from theft and unauthorized access.
How to Record Plant Maintenance and Repair Costs
Recording the cost of repairing a breakdown of company-owned plant machinery on site.
How to Process Plant Cost Transfers Between Projects
Moving an owned excavator from Project A to Project B mid-contract.
How to Recharge Head Office Overheads to Projects
Allocating a portion of head office running costs (salaries, rent, IT) to each active project.
How to Close Over-Applied Project Overhead at Year-End
Adjusting at year-end when the overhead absorbed into projects exceeds actual overhead incurred.
How to Close Under-Applied Project Overhead at Year-End
Adjusting at year-end when actual overhead exceeded the amount absorbed into project costs.
How to Write Down WIP for an Onerous Construction Contract
Reducing the WIP balance when a project is confirmed as loss-making and the WIP value exceeds recoverable amount.
How to Transfer WIP to Cost of Sales on Project Close-Out
Transferring all remaining WIP costs to Cost of Sales upon project completion and final revenue recognition.
How to Accrue a Provision for Defects Liability
Accruing the estimated cost of remedying defects during the defects liability period.
How to Settle Defect and Warranty Claims Against Provision
Using the defects provision to pay for remedial work on a completed project during the warranty period.
How to Record a Project Finance Loan Drawdown
Drawing down a tranche of a project finance loan to fund construction activities.
How to Record Construction Loan Repayments (Principal and Interest)
Making a monthly repayment on the project finance loan after the construction phase.
How to Open a Documentary Letter of Credit for Imported Materials
Opening a documentary letter of credit with the bank to import specialist materials from abroad.
How to Settle an L/C Upon Material Delivery
Releasing the L/C and recording the materials when the supplier's shipping documents are presented.
How to Record a Retention Bond in Lieu of Cash Deductions
Recording a bank guarantee provided to the client instead of withholding cash retention.
How to Record the Factoring of a Progress Invoice
Selling a certified progress invoice to a factoring company to receive immediate cash.
How to Record Output VAT on Construction Progress Billings
Charging VAT on a progress certificate raised to a client.
How to Record Input VAT on Material Purchases
Recording recoverable VAT on material purchases from VAT-registered suppliers.
How to Remit Withholding Tax to the Tax Authority
Paying accumulated withholding taxes deducted from subcontractors to the tax authority.
How to Accrue a Corporate Income Tax Provision at Year-End
Accruing the estimated income tax on the construction company's annual taxable profit.
How to Accrue Zakat on WIP and Contract Assets (Saudi Arabia)
Accruing Zakat on the construction company's Zakatable base including WIP and net working capital.
How to Capitalize Import Duties on Heavy Plant and Machinery
Capitalizing customs duties on imported construction equipment (e.g., excavator, tower crane).
How to Capitalize Municipality Building Levies and Permits
Paying a government levy or permit fee charged on the construction of new buildings.
How to Record the Sale of Surplus Project Materials
Selling leftover materials (sand, aggregate, blocks) at project close-out to another contractor.
How to Record the Disposal of Plant at Project End
Selling or writing off site plant (generators, site huts) at the end of a construction project.
How to Record Liquidated Damages Paid to a Client
Recording the penalty paid to the client for failing to achieve practical completion by the contractual date.
How to Record Repair Costs During the Defects Liability Period
Recording the actual cost of remedying a structural crack or defect identified during the defects liability period.
How to Record an Initial Investment in a Construction Joint Venture
Recording the cash contribution to a construction joint venture (JV) formed to bid and execute a large project.
How to Recognize Profit Share from a Construction Joint Venture
Recording the proportional share of a joint venture project's net income.
How to Record an Intercompany Loan to a Project SPV
The parent construction company lending funds to a Special Purpose Vehicle set up for a specific project.
How to Accrue Revenue for Extension of Time (EOT) Prolongation Claims
Accruing the additional prolongation costs associated with an extension of time granted by the client.
How to Record Monthly Preliminary & General (P&G) Costs
Recording the time-related preliminary costs that run monthly throughout the project (management, security, utilities).
How to Record Payments to Nominated Suppliers
Paying a supplier nominated by the client directly, in accordance with the main contract.
How to Reclassify a Contract Asset to Trade Receivables
Moving an unbilled contract asset to a trade receivable once the progress certificate is formally issued.
How to Record an Expected Credit Loss (ECL) on Construction Receivables
Provisioning for potential non-collection of certified progress invoices from a financially stressed client.
How to Record an Approved Variation Order (Cost and Revenue)
Recording both the additional revenue and the direct cost for a formally approved variation order.
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