How to Record T&M Ceiling Overruns
Records the reclassification of costs incurred on a Time & Materials (T&M) contract that exceed the negotiated ceiling price.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Contract Loss - Non-Reimbursable Costs | Debit | 8,500.00 | - |
| Work in Process - T&M Direct Costs | Credit | - | 8,500.00 |
💡 Accountant's Note
When a T&M contract hits its ceiling, additional costs cannot be billed. These costs must be recognized as a loss rather than an asset (WIP/Unbilled Revenue).
Practitioner & Systems Framework
💻 ERP Architecture
Most GovCon ERPs have 'Ceiling' fields in the project setup that automatically stop revenue recognition, requiring a manual write-off entry.
⚠️ Audit Flags
Billing the government above the Not-to-Exceed (NTE) amount without a formal contract modification.
📄 Required Documentation
Contract Modification (SF30) showing the ceiling, and project cost reports showing the overrun.
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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.
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Discussion & Community Questions
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