In this lesson, navigate through the intricacies of the percentage-of-completion method for recognizing revenue in long-term contracts, typically used in the construction industry. Nick begins with the fundamentals, including initial steps to identify total costs and revenues, and quickly moves on to practical examples that demonstrate how to calculate and recognize revenue based on the progress of the project. He clarifies how to differentiate between recognizing revenue and gross profit, depending on what a question might ask, and elaborates on adjusting estimated costs when they inevitably change throughout the course of a project. Additionally, he breaks down critical journal entries that reflect the construction in progress, progress billings, and the recognition of revenue and gross profit, enabling a clear understanding of each accounting step in real-world scenarios.
Lesson: Percentage-of-Completion Method
In this lesson, navigate through the intricacies of the percentage-of-completion method for recognizing revenue in long-term contracts, typically used in the construction industry. Nick begins with the fundamentals, including initial steps to identify total costs and revenues, and quickly moves on to practical examples that demonstrate how to calculate and recognize revenue based on the progress of the project. He clarifies how to differentiate between recognizing revenue and gross profit, depending on what a question might ask, and elaborates on adjusting estimated costs when they inevitably change throughout the course of a project. Additionally, he breaks down critical journal entries that reflect the construction in progress, progress billings, and the recognition of revenue and gross profit, enabling a clear understanding of each accounting step in real-world scenarios.
Updated: Oct. 20, 2021 Create an account