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:

Problem Solving

The process of identifying a problem and finding an intelligent solution to it.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how much the values deviate, on average, from the mean.

Data Distribution

Describes how the values in a data set are spread or distributed.

Proportion of Measurements

The fraction or percentage of measurements falling within a specified range in a dataset.