Construction

inventory method used by construction companies. The inventory account reflects construction costs incurred using the completed contract method and the percentage-of-completion method. Under either method, when construction costs occur, the entry is to debit construction-in-progress and credit progress billings. Additionally, under the percentage of completion method, profit is recognized gradually each period when work is performed, requiring an additional entry to record the profit. The entry is to debit construction-in-progress and credit profit. Under either method, construction-in-progress is eliminated in the final year when the contract is completed. The entry is to debitprogress billings and credit construction-in-progress and profit. Under the percentage method, the profit is for the last year only. Under the completed method, the profit is the cumulative profit for all the years.