Completed - contract method - wikipedia Completed - contract method 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 fulfilled. The contract is considered complete when the costs remaining are insignificant. Contents 1 General description 2 When to use 3 Balance sheet presentation 4 References 5 External links General description Accounting for long term contracts can be done in two ways : through the completed - contract method and the percentage of completion method. The choice between the two depends on the provisions of SOP 81 - 1 from the AICPA. The completed - contract method recognizes income only when the contract is completed or substantially completed. When to use The completed - contract method is used when costs are difficult to estimate, there are many ongoing small jobs ( one time work ), and projects are of short duration. This method can be used only when the job will be completed within two years from inception of a contract. 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. References Jump up ^ Samuel C. Weaver ; J. Fred Weston ( 23 February 2004 ). Finance & Accounting for Non-Financial Managers. McGraw - Hill Professional. p. 30. ISBN 978 - 0 - 07 - 143536 - 9. Retrieved 4 March 2012. Jump up ^ Michael C. Thomsett ( July 2001 ). Builder 's Guide to Accounting. Craftsman Book Company. p. 25. ISBN 978 - 1 - 57218 - 105 - 2. Retrieved 4 March 2012. External links Completed - contract method Retrieved from `` https://en.wikipedia.org/w/index.php?title=Completed-contract_method&oldid=815143392 '' Categories : Accounting systems Methodology Talk Contents About Wikipedia Add links This page was last edited on 13 December 2017, at 00 : 46 ( UTC ). About Wikipedia

Question: when is revenue recognized under the completed-contract method
Answer: only when the contract is completed or substantially completed