Construction
Approved Variation Order — Cost and Revenue
Recording both the additional revenue and the direct cost for a formally approved variation order.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable (VO Billing) | Asset (+) | 58,000.00 | - |
| Work-in-Progress (VO Direct Cost) | Asset (+) | 40,000.00 | - |
| Contract Revenue (Variation) | Revenue (+) | - | 50,000.00 |
| VAT Output (16%) | Liability (+) | - | 8,000.00 |
| Cash / Payables (VO Costs) | Asset/Liability (-) | - | 40,000.00 |
💡 Accountant's Note
An approved variation order is treated as an extension of the existing contract. Revenue and costs are recognized together, ensuring the gross margin on the variation is correctly reported.
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