On 1 April 20X3, Bright Solutions plc, a company which provides industrial cleaning services, entered into an 18-month contract with a new customer. The contract price was agreed at £525,000 and total contract costs were estimated to be £400,000.

At 31 December 20X3 amounts relating to the contract were as follows. LO6

£

Certified sales value of work completed 367,500 Contract costs incurred 300,000 Invoices raised to customer 325,000 Progress payments received 287,500 Estimate of additional costs to complete contract 150,000 Required:

Explain, with calculations where appropriate, how the amounts in respect of this contract should be presented in the statement of profit or loss and statement of financial position of Bright Solutions plc for the year to 31 December 20X3 if the stage of completion of the contract is calculated using:
An input method An output method.
Explain briefly why the two accounting policies result in different amounts in the 20X3 financial statements.