A contract asset is your right to payment for work already performed, when that right is still conditional on something other than the passage of time (ASC 606-10-45-3). In construction it usually means underbilling: earned revenue on the WIP schedule exceeds billings to date. On the balance sheet it’s often labeled “costs and estimated earnings in excess of billings”.
Why it matters
Sureties and banks watch underbillings closely. Work done but not billed may never be billed (unapproved changes, a too-optimistic cost-to-complete), so a large or growing contract asset is a warning sign.
Worked example
Riverside (sample data): earned $35,778,781.04, billed $33,000,000. The WIP entry posts Dr 1120 Contract Asset $2,778,781.04 / Cr Contract Revenue, and auto-reverses next month.
Common mistakes
- Netting one job’s underbilling against another’s overbilling.
- Treating the asset as safe when it comes from an EAC nobody has updated.
How os.construction handles it
WIP posting is not built in the accounting preview yet, so contract asset entries are made as manual journal entries. See Job cost and WIP.