When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable under private entity GAAP?
A)Instalment method
B)Percentage-of-completion method
C)Completed-contract method
D)None of these

Question

Quizplus · Accepted Answer

When work to be done and costs to be incurred on a long-term contract can be estimated dependably, the preferable method of revenue recognition under private entity GAAP is the percentage-of-completion method. This method recognizes revenue as progress is made on the contract, based on the proportion of costs incurred to total estimated costs. This method provides a more accurate reflection of the revenue earned during the contract period.

When Work to Be Done and Costs to Be Incurred