ABC, Inc. works on a P5,250,000 contract in 2022 to construct an office building. During 2022, ABC, Inc. uses the cost to cost method. At December 31, 2022, the balances in certain accounts were: Construction in progress – P1,890,000; accounts receivable – P180,000; and billings on construction in process – P900,000; contract retention – P90,000; mobilization fee – P70,000. At December 31,2022, the estimated costs to completion are P2,352,000.   How much is the realized gross profit in 2022?

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.