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Revenue is calculated as a percent of the total contract revenue according to the percent of completion. The percent of completion as calculated as the incurred costs up to the end of the reporting period to the total estimated cost for the contract. Simply it is :
Incurred costs up to date
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Total Estimated cost
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Issues in Percentage-Of-Completion Method?
Revenue can be misstated by manipulating the Total Estimated Cost (or Estimate At Completion)
How revenue is treated under long-term contract?
Revenue is calculated as per percentage of completion method in long term contracts like construction contracts as first of all total cost and revenue is determined and after that it is allocated to specific fiscal year according to the percentage of completion of contract or project
Difference between Percentage of Completion method and Completed Contract method?
Difference between Percentage of Completion method and Completed Contract method?
When work to be done and costs to be incurred on a long-term contract can be estimated dependably what methods of revenue recognition is preferable?
percentage-of-completion method
Advantages of percentage of completion method?
Advantage of percentage of completion is that it allocates cost and revenues based of percentage of completion and don't wait till finish of work, Second advantage is that all costs and expenses allocated to the financial statements in which work has done and not allocate the full cost and expenses to the financial statement of the year in which work finish.
Issues in Percentage-Of-Completion Method?
Revenue can be misstated by manipulating the Total Estimated Cost (or Estimate At Completion)
How revenue is treated under long-term contract?
Revenue is calculated as per percentage of completion method in long term contracts like construction contracts as first of all total cost and revenue is determined and after that it is allocated to specific fiscal year according to the percentage of completion of contract or project
Difference between Percentage of Completion method and Completed Contract method?
Difference between Percentage of Completion method and Completed Contract method?
When work to be done and costs to be incurred on a long-term contract can be estimated dependably what methods of revenue recognition is preferable?
percentage-of-completion method
Is the Percentage-Of-Completion Method GAAP?
yes it is
What are the proforma journal entries used under the percentage of completion method?
Pro forma journal entries are used in a certain percentage of the completion method. They are generally used for construction projects.
Long-term contractors are permitted to use the percentage of completion method for the purpose of revenue recognition and income determination. Consider why this method is not used by other companies?
This method is used for long-term projects when there is a contract, and reliable estimates of production completed, revenues and costs are possible.
What is the treatment under percentage of completion method if the cost to date is greater than the estimated cost?
First you will have to reestimate the new total cost of the project. Divide the cost to date by the new, restimated total cost. Multiply the ratio just computed by the contract price to get the new revenue recognition (inception to date). Subtract the previous period inception to date revenue from the the revenue you just calculated. The remainder is the current period revenue recognition. If the number is negative ad material, there may be some accounting treatments (restatements of prior periods) and possibly some tax look back treatments.
If the contract is silent what method to be used percentage of completion or completed contract method?
As the percentage of completion method requires definite receipts but estimated costs so this method is not advisable when receipts of contract are not given. In this scenario there generally appears no contract so it must be the case of a builder who intends to sell the constructed completed project after incurring self costs. In such situations the completion method suits the best.In case the project has been finalised with fixedcontract price and the contractor has his own estimated costs or else the contractor/ builder has entered into contract with various parties ( the prospective buyers) , in advance( before commencing the project/ billing etc.,), with sure receipts then the percentage of completion method is better to be adopted.
Advantages of percentage of completion method?
Advantage of percentage of completion is that it allocates cost and revenues based of percentage of completion and don't wait till finish of work, Second advantage is that all costs and expenses allocated to the financial statements in which work has done and not allocate the full cost and expenses to the financial statement of the year in which work finish.
Methods of calculating price elasticity of demand?
(1) Total outlay or Expenditure Method (2) Proportionate or Percentage Method (3) Point Elastic Method (4) Arc Elasticity of Method (5) Revenue Method
When comparing the percentage of completion and completed contract method of accounting for long term construction contract both methods will report the same?
yes they will
