CONTRACT COSTING

CONTRACT COSTING

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Contract   Costing

Easy to understand “ job order costing on larger scale”. For construction of building and other large scale wok which take considerable period of time to complete ,it is not possible to account for by job costing method so contract costing is used.

 

 

CONTRACT A/C   XXX

 

Material issued from stores

 

Direct wages

 

Book value of plant used on site

 

Overheads

 

 

X

 

X

 

X

 

X

 

Sale of materials on site

 

 

 

TOTAL COST(balancing figure)

 

X

 

 

 

X

  XXX   XXX

Cost of Work Uncertified=   Total Cost to date – Cost of work Certified – Material In hand – Plant at site

 

Retention Money =              Value of Work Certified – Progress Payments

 

Work Certified       =Progress Payment + Retention Money

 

Notional Profit      Income till date(i.e Value of WC + Cost of work uncertified) – Expenditure till date (total cost on contract after netting off material at site,WDV of plant at site,Prepaid/Accrued expenses etc)

Percentage of Completion                                  Profits to be Recognised

 

Below 25%                             Nil

25% – 50%                             1/3rd * Notional Profits * Cash Received / Work Certified

50% – 90%                             2/3rd * Notional Profits * Cash Received / Work Certified

90% – 99%                             Profits is estimated on basis of Estimated total Profits

                100%                      Notional Profits * Cash Received / Work Certified                                                                         

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