What is Cost Plus Revenue Recognition?

Cost Plus revenue recognition lets you fill the revenue amount on the original transaction with an amount that is different from the billable amount. This is most often done by defining revenue as the actual cost plus an optional markup percent on the account category. For example, when you use time and materials billing, the cost amount is determined by the transaction amount, the billable amount equals the hours multiplied by the table or resource rate, and the revenue amount equals the transaction amount plus a markup percentage on the cost account category. Cost Plus revenue recognition is non-GAAP approved and is generally used by US government contractors.

A variation of cost plus is to have no markup on the account category and to use a revenue burden type to calculate the markup amounts.

Example - Cost Plus Revenue Recognition

  • For one of MOP's US government contracts:

  • They plan to use Time & Materials to determine the billable amounts.

  • They have established a 5% burden and 1% fee to determine cost and revenue rates.

    • To date:

    • $500,000 in direct labor costs have been incurred,

    • $750,000 in direct labor has been billed, and

    • $30,000 in burdens & fees have been accrued (cost and revenue).

    • They are ready to recognize $530,000 in revenue. This amount is based on:

    • $500,000 of direct labor costs and

    • $30,000 in burdens and fees.

    • When BR130 is run:

    • Revenue is credited for $530,000 and

    • Billed/Unearned is debited $530,000.