The Percentage-Of-Completion Method Is a Generally Accepted Accounting Procedure That

question 23

Essay

The percentage-of-completion method is a generally accepted accounting procedure that allows revenue to be recognized prior to the completion of a project or product.Revenues and gross profit are recognized each period based upon the progress of the construction.Construction costs plus gross profit earned to date are accumulated in an inventory account (Construction in Progress)and progress billings are accumulated in a contra-inventory account (Billings on Construction in Progress).
Required:
Explain the effect on shareholders and managers if an enterprise did not use the percentage-of-completion method to account for long-term contracts and projects.

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Definitions:

Standard Deviation

A measure of the amount of variability or dispersion of a set of values around the mean.

Confidence Interval

A span of numbers, calculated from observed data statistics, that probably encompasses an unknown parameter of a population.

Sample

A group or set collected from a larger population for the purpose of statistical analysis, representing the larger group.