## Gross Amount Due From / Due To Customer

### What Is It?

At the balance sheet date, the contractor must compute whether they are owed money by the customer (asset) or owe excess billing back to the customer (liability).

### Calculation Format

```

Costs incurred to date xxx

Add: Recognised profits (till date) xxx

Less: Recognised losses (till date) (xxx)

-----

xxx

Less: Progress billings (xxx)

[= Amounts billed by contractor,

whether received or not]

-----

Net Amount xxx

```

If Net > 0 (Positive): → Asset = Gross Amount Due FROM Customer

If Net < 0 (Negative): → Liability = Gross Amount Due TO Customer

### Key Definition: Progress Billings

Progress billings = Total amounts billed by the contractor (regardless of whether the customer has paid yet).

```

Progress Billings = Amounts already received + Amounts billed but not yet received

```

Do NOT use only cash received — use total billed.

### Intuition

Due FROM customer (asset): You have done more work than you have billed → customer owes you.
Due TO customer (liability): You have billed more than the work you have completed → you owe the excess back.

### Changes in Estimates — Prospective Treatment

Revisions to contract revenue or costs are treated as changes in accounting estimates (AS 5) and applied prospectively. No restatement of prior periods.

Worked example

### Example 1

Example 1: Gross Amount Due (Page 9 Illustration)

Data:

Contract Revenue: ₹100 cr; Contract Cost (incurred): ₹25 cr; Future cost: ₹45 cr
Progress payments received: ₹47 cr; Billing done but not yet received: ₹5 cr

Step 1 – Loss check: Total cost = 25 + 45 = 70 < 100 → Not loss-making

Step 2 – % Completion = 25 / 70 × 100 = 35.71%

Step 3 – Revenue = 100 × 35.71% = ₹35.71 cr; Profit = 35.71 − 25 = ₹10.71 cr

Step 4 – Gross Amount Due Calculation:

	₹ cr
Costs incurred to date	25.00
Add: Recognised profit	10.71
Less: Progress billings (47 + 5)	(52.00)
Net = Gross Amount Due TO Customer (Liability)	(16.29)

Billing of ₹52 cr > Work value of ₹35.71 cr → Contractor has over-billed → Liability

### Example 2

Example 2: Two-Year Contract (Illus 3)

Year 1 (X1):

Profit = ₹9,000; Customer paid: ₹79,000; Total billed: ₹79,000 + unbilled ₹11,000 = ₹90,000

	₹
Costs incurred + Profit	81,000 + 9,000 = 90,000
Less: Progress billings	(79,000)
Due FROM customer	11,000 (Asset)

Year 2 (X2):

Revenue ₹1,10,000; Cost ₹89,000; Profit ₹21,000
Total billed: ₹90,000 (prev) + ₹1,10,000 (new) = ₹2,00,000
Total received (assumed): ₹2,00,000

	₹
Costs + Profits cumulative	1,70,000 + 30,000 = 2,00,000
Less: Progress billings	(2,00,000)
Due FROM/(TO) customer	Nil

⚠️ Common exam mistakes

Using only cash RECEIVED as progress billings — must include all amounts BILLED by the contractor (received + receivable).
Forgetting to add recognised cumulative profits (or subtract recognised cumulative losses) before netting against progress billings.
Misclassifying the sign — positive net = asset (due FROM customer); negative net = liability (due TO customer).
Netting assets and liabilities across different contracts — each contract must be presented separately; only net within the same contract.
Using year-only profit figures instead of cumulative profits when computing the balance sheet amount.

Bare-Act text Paras 40–43 (Presentation and Disclosure) · AS 7 – Construction Contracts · click to expand

An enterprise should present: (a) the gross amount due from customers for contract work as an asset; and (b) the gross amount due to customers for contract work as a liability. The gross amount due from customers is the net amount of costs incurred plus recognised profits, less the sum of recognised losses and progress billings.

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