The Principal Disadvantage of Using the Percentage-Of-Completion Method of Recognizing

question 93

Multiple Choice

The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it

• A) is unacceptable for income tax purposes.
• B) gives results based upon estimates which may be subject to considerable uncertainty.
• C) is likely to assign a small amount of revenue to a period during which much revenue was actually earned.
• D) None of these answers are correct.

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Definitions:

Duty of Trust

An obligation that requires a party, typically in a fiduciary role, to act in the best interest of another party.

Confidentiality

The obligation to keep information shared in a privileged relationship secret, preventing unauthorized disclosure of private information.

Professional

An individual who has specialized skills, knowledge, and expertise in a particular field or occupation, typically acquired through education and training.

Generally Accepted Auditing Standards (GAAS)

The principles auditors must adhere to while conducting audits on companies' financial statements.