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Unit-III Chep-II Real Estate Developers Part-II
Unit-III Chep-II Real Estate Developers Part-II
SEMESTER VI (2016-17)
FACULTY OF COMMERCE
THE M.S.UNIVERSITY OF BARODA
SUBJECT : SERVICE MANAGEMENT AND ACCOUNTING
UNIT-III: 2. ACCOUNTING FOR REAL ESTATE DEVELOPERS Part- II
Note : The study material is not exhaustive. The questions are given to save time in
dictation. Students are required to refer reference books.
Contract Costing
Contract: Contract refers to a large job/assignment/work order, where the execution of work
is spread over two or more financial years. Generally, a contract commences in one financial
year, but end in a different year.
2 Job costing is applied in printing press; Contract costing is applied in activities like
furniture works, interior decoration and civil construction, ship Building, etc.
other similar work.
2. Notional profit is the excess of income till date over expenditure till date on a
contract.
1
3. Notional profit can be ascertained as under-
Notional Profit = Income till date (Value of work certified + cost of work uncertified)
Less Expenditure till date (Total costs on contract, after adjusting materials at site,
WDV of plant at site, prepaid/accrued expenses, etc.)
% of Completion = WC/CP
Contract Account
2
Example 1: Profit on completed contract basics
The following details relate to a contract that took exactly one year for completion
Materials issued Rs. 58,000
The contract price was Rs. 175000 and was fully received at end of the year. Prepare the
contract account.
You are required to prepare the contract account for the year ended 31 March.
3
Contract costing
Solution 1
Solution 2
Notes: