How project revenue and gross profit are being calculated in contracting business?

By using cost to cost method (% of completion), but it need a loads of attention. The linchpin of attention lies in the following

1. Total actual cost incurred to date & total recent estimated cost to date,  from which % of completion is being calculated

2. Contract value and its variations

3. Certified cost and uncertified cost ( as delivery of material  deemed uncertified cost, even though its money is received but that should be taken away from actual cost incurred,) , because the percent  of completion is based on work done cost, not delivery of  materials.

4. time program of project also causes cost turbulences if it hasn't been controlled well.

all parties payments are revenues and after deducted suppliers demand then balance amount of calaculated gp

It depends on your revenue recognition policy.

mainly you have 2 ways 

1, cost recovery 

2, percentage of completion

Note: you should use one method for your all contracts.