Results Analysis?

RA is actually used to valuate ongoing or else unfinished activities; with assumption these activities
will do addition, once they are finished. Without RA, P&L shall show loss, as without inclusion of
unfinished activities, only Cost will be captured.

There are multiple methods used for R.A, this note is specific to formula used for Method - 3:

Cost-Based POC Method

For RA Method 3, there are pre-requisites, as below:

 Cost (Planned) & Cost (Actual) & Revenue (Planned) & Revenue (Actual)

Parameters Used, as below!!

 REV (P) = Plan Revenue & COST (P) = Plan Cost.

 REV (A) = Actual Revenue & COST (A) = Actual Cost.

 COST (PA) = Cost affecting Net Income.

 REV (PA) = Revenue affecting Net Income.

 POC = Percentage of Completion.

Calculations, as below!!

 First parameter, calculate POC :

POC Formula = COST (A) / COST (P)

 Calculation of Cost effecting Net Income

COST (PA) = {COST (A) / COST (P)} * COST (P) = COST (A)

 Calculation of Revenue effecting Net Income

REV (PA) = {COST (A) / COST (P)} * REV (P)

 What do you have, after all calculation?
1. Cost effecting Net Income = COST (PA)
2. Revenue effecting Net Income = REV (PA)

 If the Actual Revenue > Revenue Affecting Net Income

Outcome = Revenue Surplus.

 If the Actual Revenue < Revenue Affecting Net Income

Outcome = Reserves in excess of Billing.

REV in Excess of Billings can be transferred to FI.

REV Surplus can be transferred to FI.

EXAMPLE WITH FIGURES

Tried showing the flow for 2 consecutive periods.

1st Period

 COST (P) or Planned Cost = 880

 COST (A) or Actual Cost = 220

 REV (P) or Planned Revenue = 1100

 REV (A) Actual Revenue = 0

POC = (220/880) = 0.25

REV (PA) = POC * REV (P) = 0.25 * 1100 = 275.

Now in this case:

Calculated Rev or COST (PA) > Actual Revenue

Output comes as Revenue in excess of Billing

Revenue in excess of Billing = Revenue Affecting Net Income – Actual Revenue

Revenue in excess of Billing = 275 – 0 = 275.

INCOME STATEMENT

EXPENSE REVENUE

Cost (A) or Actual Cost = 220 REV (A) or Actual Revenue = 0

PROFIT = 55 Rev (PA) or Revenue in excess of Billing = 275

OUTPUT / TOTAL = 275 OUTPUT / TOTAL = 275

2nd Period

Now in period 2, progress is seen, invoice of 440, generated for customer.

Increment, in Actual Cost is also seen.

 COST (P) or Planned Cost = 880

 COST (A) or Actual Cost = 540

 REV (P) or Planned Revenue = 1100

 REV (A) or Actual Revenue = 440

POC = (540/880) = 0.613.

REV (PA) = POC * REV (P) = 0.613 * 1100 = 674.3.

Calculated Rev or COST (PA) > Actual Revenue

Output comes as Revenue in excess of Billing

Revenue in excess of Billing = Revenue Affecting Net Income – Actual Revenue

Revenue in excess of Billing = 674.3 – 440 = 234.3.

INCOME STATEMENT

EXPENSE REVENUE

Cost (A) or Actual Cost = 540 REV (A) or Actual Revenue = 440

PROFIT = 134.3 Rev (PA) or Revenue in excess of Billing = 234.3

OUTPUT / TOTAL = 674.3 OUTPUT / TOTAL = 674.3