Final answer:
For reporting costs to fulfill a contract, a business must recognize the direct costs associated with it. Collectibility refers to the ability to collect the amount owed by customers.
Step-by-step explanation:
For reporting costs to fulfill a contract, a business must recognize the costs that are directly related to fulfilling the obligations of a contract. These costs include direct materials, direct labor, and other directly attributable costs. They are usually recorded as an expense when the revenue associated with the contract is recognized.
On the other hand, collectibility refers to the ability of a company to collect the amount owed to them by their customers. When reporting collectibility, a business needs to assess the likelihood of collecting the amount owed based on factors such as the customer's credit history, financial stability, and any past collection issues. If the collectibility is uncertain, the amount owed may be recorded as a provision or a bad debt expense.