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One of the most important setup decisions you will make is how to recognize revenue.
Percentage-of-
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Completion
The percentage-of-completion revenue recognition method is commonly used by companies that do not accumulate maintenance costs evenly over the life of a contract (e.g., seasonal maintenance).
The percentage-of-completion method tracks maintenance contract revenue using a cost-to-date/forecast cost ratio. This ratio represents a contract's percentage of revenue or loss for an entire year. For each maintenance contract, estimated and forecast costs can be projected, in addition to tracking the actual costs.
Revenue
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Schedule
The revenue schedule method allocates maintenance contract revenue for each period by dividing the contract amount by the number of months in the contract. For example, when one month of work for a 12-month contract is complete, you can recognize 1/12 of the contract's revenue. The amount of revenue to be recognized each month is maintained in a revenue schedule for each contract.
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