Percentage of Completion Method (PCM)
Many construction contractors typically employ one accounting method for projects initiated and completed within the same year and a different method for long-term contracts. Nevertheless, it is permissible to utilize the cash method of accounting for both short-term and long-term contracts, provided your average annual gross receipts do not exceed $5 million, and revenue from merchandise sales remains within the range of 10 percent to 15 percent of your gross income.
In cases where the average gross receipts for the preceding three tax years are $10 million or less, eligibility for the cash method is granted, irrespective of business structure or inventory presence.
Completed Contract Method (CCM)
The Internal Revenue Service designates a business as a "large company" if its average annual gross receipts surpass $26 million, mandating large contractors to employ the percentage of completion method (PCM) in accrual accounting.