Revenue Recognition — Percentage-of-Completion vs. Completed-Contract
# Revenue Recognition — Percentage-of-Completion vs. Completed-Contract
Long projects span accounting periods, so **when** you record revenue matters.
## Percentage-of-completion (POC)
Recognize revenue **as the job progresses**, usually by **cost-to-cost**: % complete = costs incurred ÷ total estimated costs. Revenue recognized = % complete × contract price. This **matches revenue to the work performed** and is the standard for most larger contractors.
## Completed-contract
Recognize **all** revenue and cost only when the job **finishes**. Simpler, sometimes used by small contractors or for short jobs, but it lumps profit into one period and can distort the picture.
## Why it matters
POC requires **good estimates of total cost** (your job costing) — if the estimate is wrong, your reported profit is wrong. It also drives the **WIP schedule**, covered next. Talk to your CPA about which method fits and what the IRS/lenders expect.
**Takeaway:** Percentage-of-completion only works if your cost estimates are solid.
> *Educational content — not legal, accounting, or licensing advice. Rules vary by state and change; verify with the licensing board and a CPA.*
