Definition
A work in progress schedule lists every open job with its contract price including approved change orders, estimated total cost, cost incurred to date, percent complete, revenue earned to date, gross profit, and amounts billed. The difference between revenue earned and billings produces a contract asset (underbilling) or a contract liability (overbilling). The schedule supports the contractor's revenue, contract balances, and loss provisions.
Why it matters in an audit or review
For most contractors the WIP schedule is the core audit document, because it feeds revenue, cost of revenue, and the balance sheet contract accounts at once. Auditors tie job costs to the general ledger, test estimates to complete against subsequent cost reports and project manager support, and compare prior-year estimates with final results to assess bias. Where a job is expected to lose money, ASC 605-35 calls for recognizing the entire anticipated loss when it becomes known.
Example
Illustrative: contract price $1,000,000, estimated cost $800,000, cost to date $480,000, so percent complete is 60% ($480,000 / $800,000). Revenue earned is $600,000, billings are $650,000, and the job shows an overbilling of $50,000 reported as a contract liability.
Common mistakes
- Using stale estimates to complete that ignore known cost overruns.
- Leaving unapproved change orders in contract price.
- Letting the schedule drift from the general ledger.
Sources
- FASB ASC 606-10-25-27 through 25-37 and 606-10-55-16 through 55-21, measuring progress over time
- FASB ASC 605-35, Revenue Recognition, Construction-Type and Production-Type Contracts (provisions for anticipated losses)
- AICPA Audit and Accounting Guide, Construction Contractors (paid publication)
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error