contract revenue recognition

Contract revenue recognition is the accounting process of recognizing income from contracts over time, reflecting the actual progress of work done. Instead of recording all income when a contract is signed, businesses recognize revenue as they fulfill their obligations. This approach ensures financial statements accurately represent a company’s performance. For example, if a construction company builds a building over several months, it records revenue progressively based on milestones reached, rather than waiting until the project is fully completed. This practice helps stakeholders understand a company’s financial health during the contract period.