How to Record a Contractor Progress Billing Payment During a Construction Project
Accumulating a milestone payment to the main contractor in the Construction in Progress account.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Construction in Progress (CIP) | Asset (+) | 500,000.00 | - |
| Accounts Payable (Contractor) | Liability (+) | - | 500,000.00 |
💡 Accountant's Note
All construction costs accumulate in the CIP account while the building is being built. CIP is not depreciated until construction is complete and the building is placed into service.
Practitioner & Systems Framework
💻 ERP Architecture
The CIP account accumulates all construction-phase costs: progress billings, materials, professional fees, permits, and capitalized borrowing costs. Create a project code in the ERP for each construction project so all CIP costs are tracked at the project level. The CIP balance should reconcile to the contractor's progress billing statements and the project quantity surveyor's cost report. Monitor the CIP balance against the approved project budget — overruns may require additional financing or investor notifications.
⚠️ Audit Flags
Auditors test that CIP costs relate to genuine construction activity — they will review the quantity surveyor's certificate confirming the work stage completed. Contractor invoices without supporting quantity surveyor certification are insufficient for capitalization of large amounts. At year-end, CIP is subject to impairment testing — if the expected selling price (or fair value for investment property) of the completed building is below the accumulated CIP cost, a write-down is required.
📄 Required Documentation
Contractor invoice with reference to the contract milestone, quantity surveyor's payment certificate confirming the work stage, contract agreement and milestone schedule, CIP balance roll-forward, project budget vs. actual analysis, retention calculation, and year-end CIP impairment assessment.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
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.