For profitable long-term contracts, income is recognized over time according to the percentage of completion method, allowing for the gradual recognition of revenue as the project progresses, even before contract completion. The correct answer is d. No/ Yes.
In profitable long-term contracts, revenue recognition occurs over time using the percentage of completion method. This means that income is recognized gradually as the project advances, reflecting the proportionate completion of the contract.
This method allows for a more accurate representation of financial performance, acknowledging revenue as work is accomplished rather than solely upon contract completion.
It facilitates a more nuanced recognition of income throughout the contract period, providing a better reflection of the economic benefits derived from the ongoing project and aligning with the principles of accrual accounting for long-term contractual arrangements.
Option D is correct.