How to Record CPFF Cost Overruns
Transferring costs incurred in excess of the Cost Plus Fixed Fee (CPFF) contract funding or ceiling to a non-billable account.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Unbillable Work-in-Process (Cost Overrun) | Debit | 15,000.00 | - |
| Billable Work-in-Process - Direct Costs | Credit | - | 15,000.00 |
💡 Accountant's Note
Costs exceeding the Limitation of Funds (LOF) or Limitation of Cost (LOC) clauses are generally not reimbursable and must be reclassified.
Practitioner & Systems Framework
💻 ERP Architecture
Set hard limits in the project accounting module to prevent automated billing of costs exceeding the ceiling.
⚠️ Audit Flags
Charging costs to a contract after the 'Limitation of Funds' notification date without an amendment.
📄 Required Documentation
Contract funding status reports; LOF/LOC notification letters; latest contract modification.
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Expert Analysis by Qusai Ahmad
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Related Journal Entries
Defense, Aerospace & Government Contracting
Cost-Plus-Fixed-Fee (CPFF) Contract — Revenue Recognition as Costs Are Incurred
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Firm Fixed-Price (FFP) Contract — Cost-to-Cost Percentage of Completion Revenue
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Time & Materials (T&M) Contract — Revenue at Contractual Labor Rates Plus Material Cost
Discussion & Community Questions
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