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.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Costs and Estimated Earnings in Excess of Billings (Asset) | Asset (+) | 75,000.00 | - |
| Contract Revenue | Revenue (+) | - | 75,000.00 |
💡 Accountant's Note
Under-billing (or 'unbilled revenue') occurs when work is done but invoicing lags. This is a key balance sheet item in construction — it represents earned but not yet billed revenue and is effectively a receivable.
Practitioner & Systems Framework
💻 ERP Architecture
Generated via the month-end WIP reconciliation. If (Cumulative Earned Revenue) > (Cumulative Billings), the difference is an Under-Billing. Post to 'Contract Asset' (Current Asset). Ensure this reverses at the start of the next period as actual billings catch up.
⚠️ Audit Flags
Highly scrutinized. Chronic under-billings often hide unapproved claims, disputed variations, or cost overruns that the client refuses to pay for. Auditors will ask for subsequent evidence (e.g., did this under-billed amount get certified and invoiced next month?). If not, it may require write-down.
📄 Required Documentation
WIP schedule, subsequent month's certified progress claim, and management explanation for aging unbilled balances.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.