Page 234 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes Work certified Cashreceived
(d) Fourth Method: Profit = Estimatedprofit× Contractprice × Workkcertified

,
140 000 100 000
,
,
,
= , × 51 200 ×
,
193 600 140 000
,
,
,
= ` 26,446
Example: prepare the Contract Account on 31 March, 2009 from the following particulars:
st
Materials purchased ` 1,90,000
Materials issued from stores ` 40,000
Direct wages ` 2,54,000
Direct expenses ` 20,000
plant purchased ` 1,70,000
proportionate establishment charge ` 50,000
The contract was for ` 15,00,000 and up to 31st March, 2009, ` 6,00,000 had been received in
cash which represented 80% of work certified. The materials at site unconsumed was valued at
` 25,000. The contract plant was to be depreciated by ` 17,000.
Solution:

Contract Account
For the year ending 31st March, 2009

Particulars ` Particulars `
To Materials purchased 1,90,000 By Materials at site 25,000
To Materials issued from stores 40,000 By Work certified 7,50,000
To Direct wages 2,54,000 (6,00,000×100/80)
To Direct expenses 20,000
To Establishment charges 50,000
To Depreciation on plant 17,000
To Notional profit 2,04,000
7,75,000 7,75,000
To Profit & loss account 1,08,800 (1) By Notional profit 2,04,000
To Work-in-progress account 95,200
2,04,000 2,04,000
2 Cashreceived
Working note: Profit = Notionalprofit× ×
(1)
3 Work certified
,
,
2 6 00 000
= , , × 2 04 000 × = ` 1,08,800
,
3 7 50 000
,
Example: Following amounts have been spent on a contract still unfinished on 31st
December, 2007:
Materials ` 90,000
Wages ` 60,000
Direct charges ` 60,000

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