Question

The percentage-of-completion method is used primarily for short-term contracts. A.recognizes revenue and gross profit each period based upon progress. B.accumulates construction costs in the Billings on Construction in Progress account. C.recognizes revenue and gross profits only when contract is completed.

Answer 1

Answer:

A.recognizes revenue and gross profit each period based upon progress.

Explanation:

The percentage of completion approach is an accounting technique used to recognize revenue in ongoing projects. Revenue from long term contracts is calculated based on the percentage of work completed in a period. This method is applied when payments are assured, and the percentage of work done can be estimated with some degree of accuracy.

The percentage of completion is mostly used in construction industries, but the concept can be used in many projects.  The method compares the revenues and expenses of a project against the percentage of work completed in the financial period. The percentage of completion method contrasts with the completed contract method that recognizes income upon completion of a project.