Page 232 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes Working note: Calculating of depreciation on plant:
(1)
 10 9 
Depreciation = 50 000, × ×  = ` 3,750.

 100 12 
Contractee’s Account

date Particulars ` date Particulars `
st
2009, 31 March To Contract account 3,00,000 2009, 31 March By Cash account 3,00,000
st
3,00,000 3,00,000
Example: Neelam Construction obtained a contract for the govt. building for ` 3,50,000.
Construction work commenced on 1st April, 2008 and at the end of the financial year they
received payment of ` 1,50,000 representing 80% of the amount of work certified. The following
information available from the books of the contractors:
Materials issued ` 80,000
Materials on hand on 31st March, 2009 ` 5,000
Direct wages ` 90,000

plant installed at site ` 80,000
Direct expenses ` 31,000
Overheads allocated to this contract ` 15,500
Work finished but not yet certified at cost ` 10,000

plant to be depreciated at 10%
prepare the Contract Account for the year ended 31st March, 2009 and show your calculation of
the amount adjusted to the credit of profit & loss account.

Solution:
Contract Account of Neelam Construction
For the year ending 31st March, 2009
Particulars ` Particulars `
To Materials 80,000 By Work-in-progress :
To Direct wages 90,000 Work certified 1,87,500
To plant 80,000  150 000× 100 
,
,
To Direct expenses 31,000   80  
To Overheads 15,500 Work uncertified 10,000 1,97,500
By Materials at site 5,000
By plant at site (80,000 – 8,000) 72,000
By Profit and loss account (Loss) 22,000
2,96,500 2,96,500

Example: Rinki Builders Limited spent ` 90,000 upto 31st March, 2009. The value of
work certified to data was ` 1,00,000 and ` 90,000 has been received in cash. The contract is
near completion and it is estimated that additional expenditure of ` 20,000 will be incurred. The
contract price is ` 1,50,000. Ascertain the profit to be credited to profit and loss account.

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