Contract Costing

Contract Costing

Contents -

1 It is a method of costing

2 Used in construction industry

3 Relating to capital asset

4 Construction industry means- Road, Building, Dam, Bridge, Tunnels, Port etc.

Introduction to Contract Costing

Contract Costing Method

Accounts In the books of Contractor

1. Contract Account

2. Contractee’s Account

3. Work-in Progress Account

Meaning of Contract Account

Types of contract price

(i) Fixed contract price

(ii) Cost plus contract price

Types of contract

(i) Completed contract

(ii) Incomplete contract

Plant In Contract Costing

Presentation of Plant

Complete Contract :

Format of Complete Contract Account

Contractee’s Account (Complete Contract)

Entries of Contractee’s Account (Complete contract)

Complete Contract Questions

INCOMPLETE CONTRACT

1. Work Certified

2. Uncertified Work

Methods of computation of profit or loss on incomplete contract

In case of loss

Contract Account – Incompleted

Incomplete Contract Question

BALANCE SHEET

Entries of Contractee’s Account (Incomplete contract)

W O R K - I N - P R O G R E S S  A C C O U N T

Reserve for Contingencies

Contract Account (Reserve for Contingencies)

Meaning of Contract : Account Contract account is principal account which is maintained by contactor. The main object of this account is to find out profit or loss on contract executed. Thus, contactor is to know the total cost and profit or loss from the contract account at the end of accounting period. Generally, each contactor has the number of contracts undertaken at a time because contract work is completed at site. Each contract is allotted a distinct number in order to identify and distinguish it from other contracts, e.g., contract no. 101, contract no. 102, etc.