percentage of completion method definition

percentage of completion method

Revenue recognition method for a contract completed over more than one accounting period. In this method, a portion of the total contract revenue and a portion of the estimated contract costs is recorded in each accounting period. It is an appropriate method where the total cost of performing the contract and the realizable profit are, within reason, predictable and determinable. Formula: Cumulative revenue = Cost incurred to date x contract price ÷ Total estimated cost. See also completed contract method.

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