COST ACCOUNTING

CONTRACT COSTING
Illustration 1: On 31st October, 2003, A undertook a Contract No.786 for Rs.2,00,000. The following information is available in respect of this contract for the accounting year ended 31.12.2003. Rs. Work Certified Wages paid Materials supplied Other expenses Plant supplied on 1-10-2003 Uncertified work Materials unused lying at site Wages due but not paid Provide 10% depreciation on plant. Prepare Contract Account in the books of A. Illustration 2: M/s. Baiju & Co. undertook a contract for Rs.2,80,000 for constructing a building. The following is the information concerning the contract during the year 2003. Rs. Materials sent on site 84,786 Labour engaged on site 74,152 Plant installed at site at cost 15,000 Direct expenditure 3,201 Other charges 4,878 Materials returned to stores 552 Work certified 1,95,000 Value of plant as on 31st December 2003 11,000 Cost of work not yet certified 4,500 Materials at site 31.12.2003 1,880 Wages accrued 31.12.2003 2,400 Direct expenditure accrued 31.12.2003 240 Cash received from contractee 1,80,000 Prepare contract account in the books of m/s. Baiju & Co. for the year ending 31.12.2003. 40,000 15,000 20,000 3,000 20,000 1,000 800 600

Illustration 3 A railway contractor makes up his accounts to 31st march. Contract No.SER/14 for constructing a culvert between Bhilai and Rajpur commenced on 1st July 2003. The costing records yield the following information at 31.03.2004. Materials charged out to site 31,540 Labour 75,300 Sundry expenses 11,700 A machine costing Rs.25,000 has been on the site for 73 days. Its working life is estimated at 5 years & its final scrap value at Rs.1,000.a supervisor, who is paid Rs. 18,000 per annum, has spent approximately charges amount to Rs. 17,000. Materials in stores at site at the end of the year cost Rs. 2,500. The contract price is Rs. 3,00,000. At the end of the year 2/3rd of the contract was completed, for which the Architects Certificate has been issued & Rs. 1,60,000 have so far been received on account. Prepare Contract Account showing profit or loss to included in respect of this contract in the financial accounts to 31.03.2004 Illustration 4: A firm tendered for a contract putting in a tender price of Rs. 25,00,000. After mutual discussions the price tendered was reduced by 20% & the firm started work on the contract on 1st Jan, 2003. The following information is available for the year ending 31.12.2003. Rs. Material purchased for contract 5,00,000 Stores & spares consumed 45,000 Wages 2,64,000 Plant & Machnery 1,20,000 Overhead expenses 51,000 Stock of materials 31.12.2003 25,000 st The machinery was purchased on 1 April 2003. It has a working life of 5 years & its scrap value has been estimated at Rs. 20,000. By 31.12.2003 the contractor had received Rs. 8,00,000 which represented 80% of the value of work certified on 15th Dec,2003. Expenses incurred after 15.12.2003 upto 31.12.2003 were as follows: 1. Materials Rs. 12,000. 2. Wages Rs. 11,000. 3. Overhead expenses Rs. 7,000. Prepare the Contract Accounting showing the calculation of the profit if any to be taken credit for.

Illustration 5: The following is the summary of the entries in a Contract Ledger as on 31.12.2003 in respect of Contract No.51: Rs. Materials ( direct ) 60,000 Materials ( from stores) 13,000 Wages 64,600 Direct expenses 13,400 Establishment charges 16,000 Plant 68,400 Sale of scrap 3,640 Sub-contract cost 14,400 You are given the following information: 1. Accruals on 31.12.2003 are: Wages Rs. 1,600 & Direct Expenses Rs. 2,200. 2. Depr. on plant upto 31.12.2003 is Rs. 17,100 3. Included in the above summary of abstract are wages Rs. 2,000 & other expenses Rs. 3,000 since certification. The value of the material used since certification I Rs. 4,160. 4. Materials on site on 31.12.2003 cost Rs. 20,000. 5. Work certified was Rs 1,25,000. Prepare Contract Account No.51 % show that profit or loss should be taken into account for the year ended on 31.12.2003.