Jump to content

Completed-contract method

Add links
From Wikipedia, the free encyclopedia
This is an old revision of this page, as edited by Markerdryer (talk | contribs) at 16:59, 27 February 2012 (+). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

The Completed-contract method is an accounting method of work-in-progress evaluation, for recording long-term contracts. GAAP allows another method of revenue recognition for long-term construction contracts, the percentage-of-completion method.

With this method revenue is recognized when the contract is fullfilled. The contract is considered complete when the costs remaining are insignificant.

When to use

The completed-contract method is used when:

  • Costs are difficult to estimate
  • There are many ongoing contracts
  • Projects are of short duration.

Balance sheet presentation

  • In current assets is shown excess of costs over billings: the current asset accounts are "due on accounts", a receivable account, and "construction in progress" ("CIP" - or "costs in excess of billings").
  • In current liabilities is shown the excess of billings over costs ("progress billings"): these are progress billings on uncompleted contracts in excess of costs.
Retrieved from "https://en.wikipedia.org/w/index.php?title=Completed-contract_method&oldid=479145050"