ROHIT GHAI

S.Y.B.B.I
ROLL NO. 1011306
SUB: COSTING
CONTRACT COSTING
SEMESTER 4TH 2011-12
Illustration 1:
M/S Rajesh construction ltd. commenced a contract on April 1, 2003. The total contract was for
Rs. 50,00,000.

Actual expenditure in 2003-04 and estimated expenditure in 2004-2005, are given below:

PARTICULERS 01-04-03 TO 31-03-04 01-04-04 TO 31-12-04

(ACTUAL) (ESTIMATED)
RS. RS.
Materials issued 13,50,000 8,20,000
Labour 7,30,000 5,60,000
Plant purchased 2,00,000 -
Expenses 2,50,000 2,00,000
Plant returned to store 50,000 1,50,000
(historical cost)
(On 31st Dec., 2004)
Material at site 80,000 20,000
Work certified 30,00,000 Full
Work uncertified 2,00,000 -
Cash received 24,00,000 full

The plant is subject to annual depreciation @ 25% of written down value basis. The contract is likely to
be completed on December, 31, 2001.

You are required to prepare contract account for 2003-04 on prudent basis, which has to be credited to
profit & loss a/c.

SOLUTION:

M/S Rajesh Construction Ltd.

Contract a/c
01/04/2003 to 31/03/2004 (12 months) (contract price 50, 00,000)

Dr. Cr.
PARTICULAR RS. PARTICULAR RS.
To Material issued 13,50,000 By Material at site 80,000
To Labour 7,30,000 By Work certified 30,00,000
To Expenses 2,50,000
To Plant returned 50,000

To notional profit c/d 23,80,000

32,80,000 32,80,000
To profit p/l a/c 6,23,343.75 By notional profit b/d 23,80,000
To balance c/d 17,56,656.25
(reserves)

23,80,000 23,80,000

Estimated contract A/c

01/04/2003 to 31/12/2004 (21 months)
Dr. Cr.
PARTICULAR RS. RS. PARTICULAR RS.
To materials By contractees a/c 50,00,000
Actual 13,50,000
(+) estimated 8,20,000
(-) closing site 20,000 21,50,000

To labour
Actual 7,30,000
(+) estimated 5,60,000 12,90,000

To expences
Actual 2,50,000
(+) estimated 2,00,000 4,50,000

To plant dep.
Actual 50,000
(+) estimated 21,093.75 71,093.75

To profit 10,38,906.25
50,00,000 50,00,000

Working note:
1. Plant dep. @ 25% on WDV basis
01/04/2003 2,00,000
Dep.0 1/04/2003-31/03/2004 - 50,000
01/04/2004-31/12/2004 - 1,50,000
Dep. 37,500
WDV - 1,12,500

Therefore, 1,12,500 x 25/100 x 9/12 = 21,093.75

2. For profit
30,00,000 x 10,38,906.25 / 50,00,000 = 6.23.343.75