CONTRUCTION BY CONTRACT

I. Entered a construction contract of Building, P800,000

II. Receipt of cash from the contractor paid as PB, P75,000
III. Payment of 15% of contract amount as advances to contractor
IV. Receipt of first progress billing on the 40% completion on the construction of
building
V. Payment of payable based on the first progress billing above
VI. Receipt of the final billing on the construction of building
VII. Recognize collection of LD, P8,000
VIII. Payment of final billing
IX. Reclassification of construction in progress to PPE account
X. Return of performance bond
CONTRUCTION BY CONTRACT
I. Prepared ORS and RAOD-CO
II. Cash Collecting Officer P75,000
Guaranty/Security Deposits Payable P75,000
Cash Treasury/Agency Deposit, Trust P75,000
Cash Collecting Officer P75,000
III. Advances to Contractors P120,000
Cash-MDS,Regular P120,000
IV. Contruction in Progress P320,000
Accounts Payable P272,000
Advances to Contractor 48,000
V. Accounts Payable P272,000
Cash-MDS, Regular P220,000
Guarantee/Security Deposit 32,000
Due to BIR 20,000
VI. C/P-Buildings P480,000
Accounts Payable P408,000
Advances to Contractors 72,000
VII. Cash-Collecting Officers P8,000
Miscellaneous Income P8,000
Cash-Treasury/Agency Deposit, Regular P8,000
Cash-Collecting Officers P8,000
VIII. Accounts Payable P408,000
Cash-MDS, Regular P378,000
Due to BIR 30,000
IX. Buildings P800,000
C/P-Buildings and Other Structures P800,000
X. Guaranty/Security Deposits Payable P107,000
Cash-MDS, Trust P107,000
• Expanded Withholding Tax for Goods and Services as per BIR RR-11-2018 Section 2.j
(j) Income Payments made by a government office, national or local, including barangays, or
their attached agencies or bodies, and government-owned or controlled corporations to its
local/resident supplier of goods/services other than those covered by other rates of
withholding tax.
-Income payments, excepts any single purchase which is P10,000 and below, which are
made by a government office, national or local, including barangays or their attached agencies
or bodies, and government owned or controlled corporations on their purchases of service
from local/resident suppliers;
Suppliers of goods - One percent 1%
Supplier of services - Two percent 2%
A government-owned or controlled corporation shall withhold the tax in its capacity as
government owned or controlled corporation rather than as a corporation stated in Subsection
(I) hereof.
© Income payment to certain contractors. On gross payments to the following contractors
whether individual or corporate – Two 2%
(B) RENTALS
(1) Real Properties – On gross rental for the continued use or
possession of real property used in business which the payor or obligor
has not taken or is not taking title or in which he has not equity – 5%

(2) Personal Properties – On gross rental or lease in excess of Ten

Thousand Pesos (P10,000) annually for a continued use or possession of
personal property used in business which the payor or obligor has not
taken or is taking title, or in which he has no equity, except those under
financial lease arrangements with leasing and finance companies
authorized to operate under RA 8556 – 5%
WITHHOLDING TAX ON GOVERNMENT MONEY PAYMENTS-%AGE TAX
APPLICABLE TO GOVERNMENT WITHHOLDING AGENT ONLY
VAT WITHHOLDING ON PURCHASE OF GOODS 5%
VAT WITHHOLDING OF PURCHASE OF SERVICES 5%

Concepts to be applied uniformly in understanding government

transactions
Purchase Price are inclusive of Taxes
If the ACU purchased was P100,000. Due to BIR will be computed
as P100,000/1.12*6%=5,357.14 (5% for WVAT and 1% EWT)
Take note if problem will specifically state the given amounts are VAT
inclusive or exclusive. If silent, follow the rules above.
• Suppliers and contractors are VAT registered.
• The computed Due to BIR withheld on government payment will be
recorded upon payment of Liability or Expenses.
• In withholding of taxes for installment contracts, Taxes are based on
progress billing
• The installment contract, Recoupment of Advances to contractors will
be based on Percentage of Completion.