How to deal with account of advance project payment
Since the construction period of the project is long, generally speaking, both parties will agree on the way of advance payment when signing the construction contract. How to account for the advance project payment?
Accounting entry of project prepayment
Debit: prepayment
Credit: bank deposit
When calculating project funds according to reasonable progress and contract provisions
Debit: construction in progress
Tax payable - VAT payable (input tax)
Credit: prepayments/bank deposits, etc
When paying for the project
Debit: construction in progress
Tax payable - VAT payable (input tax)
Credit: bank deposits/cash on hand, other monetary funds
When the project is completed and reaches the intended use state
Debit: fixed assets
Credit: construction in progress
Prepayment refers to a creditor's right arising from the agreement between the buyer and the seller that the buyer should pay part of the payment in advance to the supplier. Prepayments belong to asset accounts, which are recorded as debit when increased and credit when decreased. Prepayments generally include: prepayments for goods and prepayments for purchase deposits. If it is a construction enterprise, its advance payment mainly includes: advance project payment, advance material preparation payment, etc. Enterprises with few prepayments can debit the prepayments to Accounts Payable. Write off after receiving the goods. However, in this case, at the end of the period, the debit balance of the accounts payable subsidiary ledger should be listed as an asset item in the balance sheet, while the credit balance should be listed as a liability. Enterprises with more prepayments can set up sub ledgers. The enterprise's prepayments do not require provision for bad debts. However, if there is conclusive evidence that the nature of the enterprise's prepayment has changed, or it is determined that goods cannot be received, such as the bankruptcy and cancellation of the supplier, the amount originally included in the prepayment will be transferred to other receivables, and bad debt reserves will be withdrawn or written off as required.