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Contract Account Preparation Guide

The document outlines the preparation of a contract account for a project with various financial entries including materials, wages, plant costs, and business charges. It includes calculations for work certified, profit to be credited to the P&L account, and depreciation of plant assets. Additionally, it provides a template for a contract account with placeholders for further financial details.

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8 views7 pages

Contract Account Preparation Guide

The document outlines the preparation of a contract account for a project with various financial entries including materials, wages, plant costs, and business charges. It includes calculations for work certified, profit to be credited to the P&L account, and depreciation of plant assets. Additionally, it provides a template for a contract account with placeholders for further financial details.

Uploaded by

KrishnaVeni Ambati
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Page 259, ICAI book

Solution
Contract account
Dr Cr.
Particulars Amount Particulars Amount
To materials issued to site 627200 Stock of materials at site 12000
To plant issued at site 60000 WIP: Certified 1650000
To wages paid 734550 Uncertified
(60,000 - 35000
To wages outstanding 7200 15000(Depreciation)) 45000
To Direct charges paid 25150
To direct charges outstanding 2100
To establishment charges 56500
To notional profit c/d 229300 1742000
1742000

To P&L account By notional profit b/d 229300


130701 130701
To WIP reserves 98599
229300 229300
Illustration 13: Following are the information on a contract for Rs 600000 commenced on Feb 2024

Materials = 120000
Wages = 164400
Plant = 20000
Business charges = 8600

Cash received is Rs 240000 being 80% of the work certified;


The value of materials in hand at 31/12/2024 was Rs 10000

Prepare the contract account for 2024 showing profit to be credited to the year's P&L account.
Plant is to be depreciated at 10%
(Page IV/1-25) Jain and Narang
Contract account
Dr Cr.
Particulars Amount Particulars Amount
To materials 120000 WIP: Certified WN(1) 300000
To wages 164400 Material in hand 10000
To plant 20000 Closing value of plant = (20,000 - 18000
To business charges 8600 2000(Depreciation))
To notional profit c/d 15000
328000 328000

By P&L account (WN2) 8000 By notional profit b/d 15000


By WIP reserves 7000
15000 15000

Working notes
1. Work certified 80% = 240000
then, 100% = 240000*100/80
2. work completion percent 0.5
50%
thus, P&L account 8000
Contract account
Dr Cr.
Particulars Amount Particulars
Stock of materials at Amount
To materials issued to site xxxx site(closing value) value net
Plant at site(closing xxxx
To materials
To materials transferred
purchased from other xxxx of depreciation) xxxx
contract xxxx WIP: Certified xxxx
To plant at site xxxx Uncertified
P&L account (loss on sales of xxxx
To wages paid xxxx plant and material) xxxx
To wages outstanding xxxx Plant/material
Plant/material returned
loss (by fire or xxxx
To Direct expenses xxxx theft) xxxx
To direct
P&L charges
account outstanding
(profit on sales of plant xxxx
and material) xxxx
To establishment charges xxxx
To notional profit c/d

By P&L account xxxx By notional profit b/d xxxx

By WIP reserves xxxx


xxxx xxxx

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