How to Record DCAA Form 1 Disallowances
Adjusts the books after receiving DCAA Form 1 (Notice of Contract Costs Suspended and/or Disapproved) which reduces billable revenue.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Revenue - Federal Contracts (Contra-Revenue) | Revenue | 15,000.00 | - |
| Allowance for Disallowed Costs | Contra-Asset | - | 15,000.00 |
💡 Accountant's Note
When the DCAA issues a Form 1, the contractor must remove the questioned amount from their billable balance until the matter is resolved or the CO issues a final decision.
Practitioner & Systems Framework
💻 ERP Architecture
Establish a reserve account (contra-asset) to track suspended costs without deleting the original cost entries in the ledger.
⚠️ Audit Flags
Failing to adjust the unbilled receivable balance after receiving a formal notice of cost disallowance.
📄 Required Documentation
DCAA Form 1, written response from the contractor, and internal analysis of the questioned costs.
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Expert Analysis by Qusai Ahmad
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Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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Discussion & Community Questions
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