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What the difference between the Completed Contract Method and the Percentage Of Completion Method in Construction Accountig?

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Question ajoutée par Abdu Elshahir CMA Dipifr , financial manager , Alrasail For communication
Date de publication: 2018/05/03
Ganesh Radhakrishnan
par Ganesh Radhakrishnan , Finance Manager , dormakaba Gulf FZE

Completed Contract method does not recognise revenue untill project completes rather percentage of completion method recongise revenue based on work completion like piecemeal basis.

bilal sheikh
par bilal sheikh , STOCK CONTROLLER / PURCHASER , Al Faisal Group

Completed Contract method considers all income and expenses directly related to a long term contract as recieved when work is completed. So taxes wil be filed at end of project time. This might give a income tax break to the company but if tax rate is increased durig those years, company has to pay extra income tax. so its a riskier method.

Where as Percentast of Completeion method affords similar tax deferral benefits with less risk for fluctuaion and a more frequent reporting of revenues and expenses. In this method, company may arrange milestones throughout the building process or estimate the percentage of project completed. As long as particular amounts of income and expenses can be attributed to each completed part, using percentage calculation or defined milestones, activities are reportable.

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