A construction company receives advance from customer, against the contract of constructing a bridge. But the construction company does not take this to income or sale, due to which of the following concept: 

Solution

Revenue recognition of services depends as the service is performed. This is further divided into two ways: (a) Proportionate Completion Method: This method of accounting recognizes revenue in the statement of profit & loss proportionately with the degree of completion of each service. Here the service completion consists of the execution of more than one act. Revenue is recognized with the completion of each such act. (b) Completed Service Contract Method: This method of accounting recognizes revenue in the statement of profit & loss only when the rendering of services under a contract is completed or substantially completed.