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Accounting for long term contract which becomes unprofitable, contract price is less than contract cost (costs to date + estimated cost to complete the contact), losses must be recognized as soon as estimable, for the percentage-of-completion method any profit recognized in previous periods must be off set in the period the loss was determined (estimated) because the profit previously recognized is no longer expected to be realized, reverse any previous profit on the contract & also realize the loss estimated for the current period, contract expense = (revenue for the period + estimated loss on the contract), Construction In Progress (inventory account) is reduced by the reversal of previous profits plus estimated loss, for completed contract method only realize the current loss estimated as a reduction to construction-in-progress account & realize loss on long term contracts, detailed accounting by Allen Mursau