Contract Accounting

Question 1

When is the Completed Contract Method used and when is revenue recognized under it?

Answer 1

• When degree of completion can’t be estimated at interim points
• At completion of contract

Question 2

How do you recognize profit under the Percentage of Completion method?

Answer 2

-In proportion to the degree of completion

Question 3

What is Billings?

Answer 3

-A contra to Construction in Progress (an Inventory account)

Question 4

What’s the accounting for an overall loss for a contract under Percentage of Completion method and Completed Contract method?

Answer 4

-When overall loss anticipated recognize in full