How to Recognize the Cost of Sales for an Off-Plan Unit at the Point of Handover
Transferring the accumulated construction cost of a completed unit from CIP or inventory to Cost of Property Sold at handover.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cost of Property Sold | Expense (+) | 450,000.00 | - |
| Property Inventory / CIP | Asset (-) | - | 450,000.00 |
💡 Accountant's Note
Revenue and cost of sales must be matched. The accumulated construction cost of the unit is transferred to Cost of Property Sold at the same time as sale revenue is recognized.
Practitioner & Systems Framework
💻 ERP Architecture
For developments with multiple units, the total CIP cost must be allocated to individual units using a reasonable method: (a) by unit size (floor area), (b) by sales price ratio, or (c) by specific identification if units are distinct. The COGS recognized at handover is the allocated unit cost — not the development average cost. Maintain a unit cost allocation schedule throughout the development. Land cost is also allocated to each unit for the COGS calculation.
⚠️ Audit Flags
Auditors verify the unit cost allocation methodology is reasonable and consistently applied. Using sales price as the allocation basis in a development with premium vs. standard units creates systematic cost mismatches. Auditors also check that the COGS at handover is matched to the same unit and same handover date as the revenue recognized — a unit where revenue is recognized in December but COGS is recognized in January creates a P&L mismatch.
📄 Required Documentation
Unit cost allocation schedule (allocation method, total CIP ÷ units, per-unit cost), CIP roll-forward showing the unit balance before transfer, cost of sales entry dated to the handover date, matching revenue recognition entry for the same unit, land cost allocation to the unit, and post-development cost reconciliation (total costs vs. total revenue for the development).
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.