Which statement best explains the percentage of completion method?
A)An accounting method that recognizes revenue and expenses on a contract only after it is completed.
B)An accounting method that recognizes revenue and expenses on a contract in proportion to the degree of progress.
C)An accounting method that recognizes an amount of revenue equal to the costs that are expected to be recovered on the contract.
D)An accounting method that recognizes revenue and expenses based on the fair value of the contract.

Question

Quizplus · Accepted Answer

The percentage of completion method is an accounting method that recognizes revenue and expenses on a contract in proportion to the degree of progress. This means that revenue is recognized based on the percentage of work completed on the contract, rather than waiting until the contract is fully completed to recognize all revenue. Expenses are also recognized in proportion to the degree of progress. This method is commonly used in the construction industry and other long-term contracts where it is difficult to determine the exact amount of revenue and expenses until the work is completed.

Which Statement Best Explains the Percentage of Completion Method