Construction
Provision for Onerous Contract (Expected Loss)
Recording an immediate loss when it becomes clear that the cost of a construction project will exceed the revenue.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Loss on Construction Contract | Expense (+) | 20,000.00 | - |
| Provision for Onerous Contract | Liability (+) | - | 20,000.00 |
💡 Accountant's Note
According to the Principle of Conservatism, if you know a project will lose money, you must record the entire expected loss immediately, even if the project is not finished.
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