When work to be done and costs to be incurred on a long-term contract can be estimated reliably, which of the following methods of revenue recognition is preferable?

Question

Quizplus · Accepted Answer

When work to be done and costs to be incurred on a long-term contract can be estimated reliably, the percentage-of-completion method is preferable. This method recognizes revenue based on the percentage of work completed, which is determined by comparing the actual costs incurred to the total estimated costs for the contract. This method provides a more accurate reflection of the revenue earned during the reporting period, and it is also more frequently used in practice.

When Work to Be Done and Costs to Be Incurred