What is the difference between billings-in-excess liability and unbilled asset on a contractor balance sheet?
ABL Advisor states: “What is unique for a contractor's balance sheet compared to other industries is cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet). These two items are a result of Percentage of Completion accounting (POC).” Northstar states: “Under ASC 606, overbilling is classified as a contract liability and underbilling as a contract asset.” OCC separately lists “Unbilled accounts receivable” among “receivables commonly designated as ineligible”. Source prints: Gurian CPA states “An overbilling position is a contract liability: the contractor still owes that value in future work. An underbilling position is a contract asset: it represents future receipts for work already performed.”; Pease Bell states overbillings “appear on the balance sheet as a current liability” and underbillings “appear as a current asset, reported under current GAAP as a contract asset”; SEC R21 states costs and estimated earnings in excess of billings “are classified as a current asset” and billings in excess of costs and estimated earnings “are classified as a current liability”.
Last updated: September 12, 2026
The difference at a glance
Gurian CPA states: “Overbilling occurs when a contractor bills a customer more than the revenue actually earned on a project to date. On the balance sheet, this appears as billings in excess of costs and estimated earnings, a contract liability.” And: “Underbilling occurs when revenue has been earned but not yet billed to the customer. That appears as costs and estimated earnings in excess of billings, a contract asset.”
Pease Bell on the WIP schedule states: “Overbillings, formally "billings in excess of costs and estimated earnings on uncompleted contracts," appear on the balance sheet as a current liability. Under current GAAP terminology, this is reported as a contract liability.” And: “Underbillings, formally "costs and estimated earnings in excess of billings on uncompleted contracts," appear as a current asset, reported under current GAAP as a contract asset.”
SEC filing R21 states: “Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset.” And: “Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date and are classified as a current liability.”
IRS Publication 5522 states: “To account for the difference between percentage of completion method and billings, two balance sheet accounts are created:” It lists “Costs and Estimated Earnings in Excess of Billings (Asset)” and “Billings in Excess of Costs and Estimated Earnings (Liability)”.
| Line | Verbatim print | Source |
|---|---|---|
| Billings-in-excess (overbilling) | “Overbilling occurs when a contractor bills a customer more than the revenue actually earned on a project to date. On the balance sheet, this appears as billings in excess of costs and estimated earnings, a contract liability.” | Gurian CPA |
| Unbilled / costs-in-excess (underbilling) | “Underbilling occurs when revenue has been earned but not yet billed to the customer. That appears as costs and estimated earnings in excess of billings, a contract asset.” | Gurian CPA |
| Overbillings (GAAP label) | “Overbillings, formally "billings in excess of costs and estimated earnings on uncompleted contracts," appear on the balance sheet as a current liability. Under current GAAP terminology, this is reported as a contract liability.” | Pease Bell |
| Underbillings (GAAP label) | “Underbillings, formally "costs and estimated earnings in excess of billings on uncompleted contracts," appear as a current asset, reported under current GAAP as a contract asset.” | Pease Bell |
| Costs and estimated earnings in excess of billings | “Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset.” | SEC R21 |
| Billings in excess of costs and estimated earnings | “Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date and are classified as a current liability.” | SEC R21 |
Buyer answer: billings-in-excess liability vs unbilled asset
ABL Advisor states: “What is unique for a contractor's balance sheet compared to other industries is cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet).” IRS Publication 5522 states: “To account for the difference between percentage of completion method and billings, two balance sheet accounts are created:” “Costs and Estimated Earnings in Excess of Billings (Asset)” and “Billings in Excess of Costs and Estimated Earnings (Liability)”. Northstar states: “Overbilling shows up as a current liability on your balance sheet; underbilling shows up as a current asset.”
Percentage-of-completion timing creates both lines
ABL Advisor states that those two items “are a result of Percentage of Completion accounting (POC).” Precision Accounting states: “When cumulative billings exceed earned revenue, you are overbilled. On the balance sheet this shows up as billings in excess of costs and estimated earnings — a liability, not income.” And: “When earned revenue exceeds cumulative billings, you are underbilled. This shows up as costs and estimated earnings in excess of billings — an asset, much like an unbilled receivable.” Construction Cost Accounting states: “Overbilling appears on the balance sheet as a current liability — often labeled Billings in Excess of Costs, or Billings in Excess of Revenue Earned.” And: “In construction accounting, underbilling is an asset — often labeled Costs in Excess of Billings, or Revenue Earned in Excess of Billings.”
ASC 606: contract liability vs contract asset
Northstar states: “Under the older accounting guidance, overbilling and underbilling were presented on the balance sheet as "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings." Under ASC 606, these have been reclassified as contract liabilities and contract assets, respectively.” MBAWPA BreakingGround states: “An underbilling is an example of a contract asset.” and “An overbilling is an example of a contract liability.” It names “"costs and estimated earnings in excess of billings on uncompleted contracts" and "billings in excess of costs and estimated earnings on uncompleted contracts" (the traditional terms for underbillings and overbillings)”. CFMA states: “Under legacy generally accepted accounting principles (GAAP), unbilled revenue — or the near equivalent of Topic 606's contract asset — was commonly referred to in financial statements as costs and estimated earnings in excess of billings on uncompleted contracts, and deferred revenue — or the near equivalent of Topic 606's contract liability — was commonly referred to as billings in excess of costs and estimated earnings on uncompleted contracts.” EisnerAmper lists among contract assets “Costs and estimated earnings in excess of billings on uncompleted contracts (i.e., unbilled receivables)” and among contract liabilities “Billings in excess of costs and earnings (i.e., deferred or unearned revenue)”.
OCC unbilled AR ineligible is a separate ABL rail
The OCC Comptroller's Handbook on Asset-Based Lending lists “Unbilled accounts receivable” among “receivables commonly designated as ineligible”.
| Claim | Listed | URL |
|---|---|---|
| A1 ABL: Under Billings=asset / Over Billings=liability | cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet) | ABL Advisor |
| A2 ABL: POC origin of the two lines | These two items are a result of Percentage of Completion accounting (POC). | ABL Advisor |
| A3 IRS Pub 5522: Asset / Liability balance-sheet accounts | Costs and Estimated Earnings in Excess of Billings (Asset) / Billings in Excess of Costs and Estimated Earnings (Liability) — two balance sheet accounts are created | IRS Pub 5522 PDF |
| A4 MBAWPA: underbilling = contract asset | An underbilling is an example of a contract asset. | MBAWPA BreakingGround PDF |
| A5 MBAWPA: overbilling = contract liability | An overbilling is an example of a contract liability. | MBAWPA BreakingGround PDF |
| A6 MBAWPA: traditional under/over captions | costs and estimated earnings in excess of billings on uncompleted contracts / billings in excess of costs and estimated earnings on uncompleted contracts (traditional terms for underbillings and overbillings) | MBAWPA BreakingGround PDF |
| A7 Northstar: overbilling=liability / underbilling=asset | Overbilling shows up as a current liability on your balance sheet; underbilling shows up as a current asset. | Northstar Financial Advisory |
| A8 Northstar: ASC 606 reclassification bridge | Under the older accounting guidance, overbilling and underbilling were presented on the balance sheet as "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings." Under ASC 606, these have been reclassified as contract liabilities and contract assets, respectively. | Northstar Financial Advisory |
| A9 EisnerAmper: costs in excess = unbilled receivables | Costs and estimated earnings in excess of billings on uncompleted contracts (i.e., unbilled receivables) | EisnerAmper |
| A10 EisnerAmper: billings in excess = deferred/unearned | Billings in excess of costs and earnings (i.e., deferred or unearned revenue), net of conditional retainage receivable | EisnerAmper |
| A11 Precision: overbilling → liability | When cumulative billings exceed earned revenue, you are overbilled. On the balance sheet this shows up as billings in excess of costs and estimated earnings — a liability, not income. | Precision Accounting |
| A12 Precision: underbilling → asset / unbilled receivable | When earned revenue exceeds cumulative billings, you are underbilled. This shows up as costs and estimated earnings in excess of billings — an asset, much like an unbilled receivable. | Precision Accounting |
| A15 CCA: overbilling liability labels | Overbilling appears on the balance sheet as a current liability — often labeled Billings in Excess of Costs, or Billings in Excess of Revenue Earned. | Construction Cost Accounting |
| A16 CCA: underbilling asset labels | In construction accounting, underbilling is an asset — often labeled Costs in Excess of Billings, or Revenue Earned in Excess of Billings. | Construction Cost Accounting |
| A17 CFMA: legacy captions ↔ Topic 606 contract asset/liability | unbilled revenue – or the near equivalent of Topic 606’s contract asset – was commonly referred to in financial statements as costs and estimated earnings in excess of billings on uncompleted contracts, and deferred revenue – or the near equivalent of Topic 606’s contract liability – was commonly referred to as billings in excess of costs and estimated earnings on uncompleted contracts. | CFMA Topic 606 article |
| A18 OCC: Unbilled AR commonly ineligible (FAQ/rail only) | The following are characteristics of receivables commonly designated as ineligible: … Unbilled accounts receivable. | OCC ABL handbook PDF |
| Gurian: overbilling = billings in excess = contract liability | Overbilling occurs when a contractor bills a customer more than the revenue actually earned on a project to date. On the balance sheet, this appears as billings in excess of costs and estimated earnings, a contract liability. | Gurian CPA — Overbilling vs Underbilling |
| Gurian: underbilling = costs in excess = contract asset | Underbilling occurs when revenue has been earned but not yet billed to the customer. That appears as costs and estimated earnings in excess of billings, a contract asset. | Gurian CPA — Overbilling vs Underbilling |
| Gurian: overbilling position vs underbilling position | An overbilling position is a contract liability: the contractor still owes that value in future work. An underbilling position is a contract asset: it represents future receipts for work already performed. | Gurian CPA — Overbilling vs Underbilling |
| Pease Bell: overbillings are a current liability / contract liability | Overbillings, formally "billings in excess of costs and estimated earnings on uncompleted contracts," appear on the balance sheet as a current liability. Under current GAAP terminology, this is reported as a contract liability. | Pease Bell — Reading a WIP Schedule |
| Pease Bell: underbillings are a current asset / contract asset | Underbillings, formally "costs and estimated earnings in excess of billings on uncompleted contracts," appear as a current asset, reported under current GAAP as a contract asset. | Pease Bell — Reading a WIP Schedule |
| SEC R21: costs in excess classified as current asset | Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. | SEC EDGAR R21 — accounting policy |
| SEC R21: billings in excess classified as current liability | Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date and are classified as a current liability. | SEC EDGAR R21 — accounting policy |
| IRS Pub 5522: two balance-sheet accounts created | To account for the difference between percentage of completion method and billings, two balance sheet accounts are created: | IRS Publication 5522 |
| IRS Pub 5522: costs in excess account (Asset) | Costs and Estimated Earnings in Excess of Billings (Asset) | IRS Publication 5522 |
| IRS Pub 5522: billings in excess account (Liability) | Billings in Excess of Costs and Estimated Earnings (Liability) | IRS Publication 5522 |
| Precision: overbilling vs underbilling quick answer | Overbilling means you have invoiced a job for more than you have earned so far (billings in excess of costs). Underbilling means you have earned more than you have invoiced (costs in excess of billings). | Precision Accounting — Overbilling & Underbilling |
| AccountingTools: monitor overbillings and underbillings | Contract assets and liabilities, including overbillings and underbillings, must be closely monitored to ensure accurate financial reporting. | AccountingTools — Construction Accounting Explained |
Frequently asked questions
What is the difference between billings-in-excess liability and unbilled asset on a contractor balance sheet?
ABL Advisor states: “What is unique for a contractor's balance sheet compared to other industries is cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet). These two items are a result of Percentage of Completion accounting (POC).” Northstar states: “Under ASC 606, overbilling is classified as a contract liability and underbilling as a contract asset.”
Are Under Billings and Over Billings a result of percentage-of-completion accounting?
Yes. ABL Advisor states that those two items "are a result of Percentage of Completion accounting (POC)."
Are Under Billings and Over Billings the same as contract assets and contract liabilities under ASC 606?
Northstar states: “Under the older accounting guidance, overbilling and underbilling were presented on the balance sheet as "billings in excess of costs and estimated earnings" and "costs and estimated earnings in excess of billings." Under ASC 606, these have been reclassified as contract liabilities and contract assets, respectively.” CFMA states unbilled revenue is “the near equivalent of Topic 606's contract asset” and deferred revenue “the near equivalent of Topic 606's contract liability”.
Is unbilled AR the same as costs in excess of billings on the contractor balance sheet?
EisnerAmper lists among contract assets “Costs and estimated earnings in excess of billings on uncompleted contracts (i.e., unbilled receivables)”. Precision Accounting states underbilling “shows up as costs and estimated earnings in excess of billings — an asset, much like an unbilled receivable.” The OCC Comptroller's Handbook on Asset-Based Lending separately lists “Unbilled accounts receivable” among “receivables commonly designated as ineligible”.
Does OCC treat unbilled accounts receivable as commonly ineligible for ABL?
Yes. The OCC Comptroller's Handbook on Asset-Based Lending lists “Unbilled accounts receivable” among “receivables commonly designated as ineligible”.
What is the difference at a glance between billings-in-excess liability and an unbilled asset?
Gurian CPA states: “An overbilling position is a contract liability: the contractor still owes that value in future work. An underbilling position is a contract asset: it represents future receipts for work already performed.” SEC R21 states: “Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date and are classified as a current liability.” And: “Costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset.” IRS Pub 5522 lists “Billings in Excess of Costs and Estimated Earnings (Liability)” and “Costs and Estimated Earnings in Excess of Billings (Asset)”.
Related
- Before binding an ABL revolver, which AR lines are ineligible and which get carved back at term sheet?
- Does unbilled cost-in-excess count toward the borrowing base at term sheet?
- Why is construction AR harder to finance than manufacturing AR at term sheet?
- What is a work-in-process schedule in an ABL borrowing-base certificate for construction contractors?
- Do progress billings count toward the borrowing base before an ABL revolver binds?
- Does cost-plus contract AR advance differently than fixed-price contract AR at term sheet?
- What AR aging buckets are ineligible in the Eligible Receivable definition?