THE CONSTRUCTION CONTRACT COSTS RECOGNITION AND ACCOUNTING ALGORITHM

Abstract

The issues of costs and revenues from construction contracts are among the most important ones in adoption financial statements, tax declarations or definition of production output of any economic entity. They acquire particular significance with a view of construction companies being complicated by sectoral specifics and current accounting rules. The article describes the construction contract costs recognition and accounting algorithm including a series of successive steps. The first one (carried out at the preliminary stage) implies the analysis of work submission terms, revenue registration and recognition determined by the contract conditions based on possible tax consequences and accounting regulations. The next steps are related to the construction process itself and include monitoring, verification of primary documents and recognized facts of executed work, evaluation of created assets and work in progress, analysis and comparison with certain legislative enactments, creating reserves and adopting financial statements.  The consistent implementation of the actions defined in the algorithm will provide an opportunity to reflect properly the information on construction contracts in the information system of an economic entity and to provide objective data that meet the requirements of the users interested in reporting.