Mars Construction Ltd. gets a contract of Rs. 500 crore to build an Elevated Road to be completed in 5 years. The director of the company wants to determine profit or loss on the contract only after completion of the contract. Do you think director is justified in his approach
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No, the management is not justified. Although the true profit or loss can be ascertained only after the completion of the contract, it will be divided into time intervals of twelve months for the ascertainment of profit as per Accounting Period Concept.
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