Percent completed

The system calculates percent completed using the following formula:

Costs are divided by estimated costs at completion.

Earned revenue

The system calculates earned revenue using the following formula:

Total contract multiplied by percent completed.

Gross profit

The system calculates gross profit using the following formula:

Earned revenue minus costs.

Income

The system calculates income using the following formula:

Billed minus costs.

Estimated costs at completion

The system calculates estimated costs at completion using the following formula:

Budget plus approved change orders to the budget.

Underbilled

The system calculates underbilling using the following formula:

Billed minus earned revenue.

Overbilling and underbilling definitions

Overbilling and underbilling describe billing status compared to completed work.

Overbilling occurs when you invoice for more than the completed work. This creates a liability on your balance sheet.

Underbilling occurs when you complete work but haven't invoiced it. This creates an asset on your balance sheet.