Unfortunately for the accountant, it is often decided to place lots on the market before all the contemplated improvements have been completed. In such cases the books will show a certain cost price when the sales commence, and this book price will increase continuously until the improvements are completed; in fact, the cost price is subject to monthly, weekly, and even daily changes.

This undesirable situation may be avoided by estimating in advance the cost of all improvements contemplated, and by adding to this a fair margin of safety. This amount should then be credited to an improvement reserve account, and debited to the cost price; charging all proper expenditures, as they occur, against this improvement reserve. The estimate does not involve or determine expenditures, and any excess which may remain can properly be credited to Gain account, for this account would have been proportionately greater had these improvements not been added to the cost.