Hi,
I am working on finalising the income statement for a consultancy firm. We do consultancy projects that usually run across 2 or 3 months to complete. So if I use the accrual method, my understanding is that I need to split the associated costs and income for the contracts over the 2 or 3 months in which the contract actually took place. Sometimes the costs are not captured with enough granularity to determine which costs were incurred in which months (something Im working on changing).
To over come this, I calculate the total costs for a specific project and then split it into the individual months according to how many of the total days of the project were worked on in each month. The total income for the project is then split in the same manner.
As example:
Total costs: 14323.566
Total Days: 37
APR 12 days = 4645.48
MAY 19 days = 7355.34
JUN 6 days = 2322.74
I am quite new to accounting so I would appreciate some input as to if this is a valid approach or if there are other methods or rules that I need to consider.
Thank you,
Pieter
I am working on finalising the income statement for a consultancy firm. We do consultancy projects that usually run across 2 or 3 months to complete. So if I use the accrual method, my understanding is that I need to split the associated costs and income for the contracts over the 2 or 3 months in which the contract actually took place. Sometimes the costs are not captured with enough granularity to determine which costs were incurred in which months (something Im working on changing).
To over come this, I calculate the total costs for a specific project and then split it into the individual months according to how many of the total days of the project were worked on in each month. The total income for the project is then split in the same manner.
As example:
Total costs: 14323.566
Total Days: 37
APR 12 days = 4645.48
MAY 19 days = 7355.34
JUN 6 days = 2322.74
I am quite new to accounting so I would appreciate some input as to if this is a valid approach or if there are other methods or rules that I need to consider.
Thank you,
Pieter