ACC E113 Lecture Notes - Lecture 22: Special Circumstances, Accounts Payable, Bank Reconciliation
Document Summary
Applying the revenue recognition principle in special circumstances: Revenue recognition before the earnings process is complete: long- term. Completed contract method (method of accounting): records revenue when the completed product is delivered to the customer and may be used by canadian private enterprises under specific circumstances. Percentage of completion method (used for long-term construction projects): records revenue based on a reliable measure of the percentage of work completed during the accounting period. Ex of percentage of total cost: lets say the total contract price for building a bridge was 50 million and the total cost for construction was 40 million. In 2016, the construction company spent 10 million which was 25% of the contract cost (10mill/40mill). The percentage of completion is then multiplied by the total contract revenue to determine the amount of revenue to be reported in 2016 (25% x 50million = 12. 5mill).