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

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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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