Final answer:
Revenue on long-term contracts is recognized over time using the Percentage-of-Completion method.
Step-by-step explanation:
Recognizing revenue on long-term contracts over time is important in business and accounting. This method is known as the Percentage-of-Completion method. In this method, revenue is recognized over the course of the contract based on the progress or completion percentage.
For example, let's say a construction company has a contract to build a house for $100,000. If the company completes 50% of the project, they would recognize $50,000 in revenue. This ensures that revenue is accurately matched with the progress of the contract.
This method is used to prevent revenue manipulation and provide a more accurate representation of the company's financial performance.