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You're on completed contracts method and don't even know it!



According to the completed contract method of revenue recognition, an entity recognizes revenue on a project when it's completed. So any time you have revenue and costs on your books, it's from completed projects.


However, it's likely that you're recording all of your billings and costs directly to the income statement without consideration of WIP.


Many construction companies recognize revenue based on progress billings alone and wait for the year end adjustment from their CPA to convert to percentage of completion. There's nothing wrong with that practice, but you may be in for a surprise at year end. If you're looking to maintain or increase your bonding capacity, you should consider maintaining your books on a percentage of completion basis.


If you have any questions, please leave a comment below!

Thanks!

Ara

ara@thewipreport.com

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