Is a firm’s previous year backlog a revenue surplus for the next year? Or the amount of exceeded expenses that need to be covered with the next year’s revenue?


Hey Oana,

I’ll see if I can get you an answer on this. Also, thank you for posting your question!

Hi Oana,

This is a really good question! I took the below screenshot from the BKS flashcards:

So the backlog is not really revenue surplus or an exceeded expense. It is the amount that the architect has not billed for yet. For example, if the contract includes SD, DD, CD, & CA the amount the architect may have billed for the completed SD phase may have been %20 the total contract sum. The remaining 80% will be billed upon completion of other phases or milestones, like DD, CD, & CA. The remaining 80% of the contract amount is your backlog.

These phases haven’t been completed yet, so they aren’t a loss to the firm, simply work is scheduled to be done in the future. In reality, the backlog often becomes an issue for firm if the team is advancing the project without having been paid for work already completed. But the backlog still isn’t considered an expense or surplus itself. The expenses are the cost of the employees’ salaries, the firm overhead, etc. The money paid to the firm is a credit on the firm’s balance sheet (or revenue). Whether portions of it are surpluses or not depends on the firm’s existing expenses verse received total revenue.

Hopefully this helps!


I have a couple more things! The below flashcard is another definition of backlog and I think it does a good job explaining the relationship between the firm’s revenue and backlog. Backlog is not revenue itself, but will be when it is paid. Until it is paid it will effect the firm’s projected revenue.