Question

What is the term used to describe a loss in the current period on a contract that is expected to be profitable upon completion?

1) Deferred loss
2) Accrued loss
3) Unrealized loss
4) Temporary loss

Answer 1

The term is 'unrealized loss,' which reflects a temporary loss in the current period on a contract expected to turn profitable by completion.

Step-by-step explanation:

The term used to describe a loss in the current period on a contract that is expected to be profitable upon completion is an unrealized loss. This type of loss is not actualized until the contract is completed, and final profit or loss is determined. It represents a temporary situation where the anticipated expenses exceed the revenues, but expectations are that the overall contract will still be profitable upon its finish. For instance, in the construction industry, a contract might reflect an unrealized loss at a certain reporting period if the costs incurred to date are higher than expected, but the company believes that it can recover these costs and generate profit by the end of the project.