COST ACCOUNTING

2. Mrs Smith started work on a contract for 5, 00,000 on 1.1.2006. The following information

relating to

The Contract is available.

Material issued 1, 60,000

Wages paid 1, 01,200

Wages outstanding on 31.3.2006 37,560

New machines purchased and sent to site 1, 49,000

Direct charges paid 7,500

Direct charges outstanding on 31.3.2006 600

Establishment charges apportioned to contract 6,400

On 31.3.2006 materials lying unused at site were valued at Rs.21, 620. Machines are to be

depreciated at 20% p.a. value of work certified was by Rs.3, 50,000. While the cost of work done

but not yet certified As on that date was Rs. 19,000. Mrs.smith had received a total sum of

Rs.2, 90,000 from the contractor till 31.3.2006. Prepare contract account in Mrs Smith ledger.

Working note 1: Percentage of contract completion
Contract Price = 5, 00,000
Work Certified = 3, 50,000
5, 00,000 = 100%
3, 50, 000 =?
3, 50,000 X100 = 70%
5, 00,000

Contract account for the year ending 31-3-2006

Dr Cr

Particulars Amount Particulars Amount

To Material issued 1,60,000 By Work Certified 3,50,000

To Wages 1,01,200 By Work Uncertified 18,000

To Outstanding Wages 37,560 By Material at site 21,620

To Machine purchased 1,48,000 By Machine closing 1,18,400

To Direct charges 7,500 1,48,000 X20

To Outstanding Direct charges 600 100
To Establishment Charges 6,400 (1,48,000—29,600)

To Notional Profit 46,760 By Notional Profit 5,08,020
5,08,020 46,760
To Profit& Loss A/C
Notional profit X2 X Cash Received 17,457 46,760

3 Work Certified 29,303
46,760 X 2 X 2,80,000 46,760

3 5,00,000
To Reserve A/C

TAKKELLA PUNNAIAH CHOWDARY Page 101

3. The following expenditure was incurred on a contract of Rs.12, 00,000 for the year ending

31.12.2007.

Materials 2, 40,000

Wages 3, 29,000

Plant 40,000

Overheads 17,200

Cash received on account of the contract to 31st Dec., 2005 was Rs.4, 90,000. Being 90% of the

Work certified. The value of materials in hand was Rs.20, 000. The plant had under gone 20%

Depreciation. Prepare contract account.

Working note 1: Work Certified

Cash received 4, 80,000 being 80% of work certified

4, 80,000 = 80% work certified

100% =?

4, 80,000 X 100 = 6, 00,000

80

Working note 2: Percentage of contract completion
Contract Price = 12, 00,000
Work Certified = 6, 00,000
12, 00,000 = 100%
6, 00, 000 =?
6, 00,000 X100 = 50%
12, 00,000

Contract account for the year ending 31-12-2007

Dr Cr

Particulars Amount Particulars Amount

To Material 2,40,000 By Work Certified 6,00,000

To Wages 3,28,000 By Material at site 20,000

To Plant 40,000 By Plant closing 32,000

To Overheads 17,200 40,000 X20

100
(40,000—8,000)

To Notional Profit 26,800

6,52,000 6,52,000

To Profit& Loss A/C 14,293 By Notional Profit 26,800
Notional profit X2 X Cash Received

3 Work Certified

26,800 X 2 X 4,80,000
3 6,00,000

To Reserve A/C 12,507

26,800 26,800

TAKKELLA PUNNAIAH CHOWDARY Page 102

4. The following particulars relate to a contract:

Materials issued 95,000

Wages 74,000

Plant at cost 15,000

Direct expenses 13,000

Establishment charges 4,000

Materials returned to store 500

Cost of work certified 2, 00,000

Cost of work un certified 4,500

Materials on hand (31st Dec) 1,900

Wages outstanding 2,500

Value of plant (31st Dec) 10,000

The contract price was agreed at Rs. 2, 60,000. Cash received from the Contractee was Rs.

1, 95,000. Prepare contract account and Contractee account and balance sheet.

Working note 1: Percentage of contract completion
Contract Price = 2, 60,000
Work Certified = 2, 00,000
2, 60,000 = 100%
2, 00, 000 =?
2, 00,000 X100 = 76.9%
2, 60,000

Contract account for the year

Dr Cr

Particulars Amount Particulars Amount

To Material issued 85,000 By Work Certified 2,00,000

To Wages 74,000 By Work Uncertified 4,500

To Plant 15,000 By Material at site 1,800

To Outstanding Wages 2,500 By Plant closing 10,000

To Direct expenses 13,000

To Establishment Charges 4,000

To Notional Profit 22,800 By Notional Profit 2,16,300
2,16,300 22,800
To Profit& Loss A/C
Notional profit X2 X Cash Received 14,820 22,800

3 Work Certified 7,980
22,800 X 2 X 1,95,000 22,800

3 2,00,000
To Reserve A/C

Particulars Contractee A/C Amount
To Balance c/d 1,95,000
Amount Particulars 1,95,000
1,95,000 By Cash A/C 1,95,000
1,95,000

By Balance c/d

TAKKELLA PUNNAIAH CHOWDARY Page 103

5. Mr Chowdary undertook several contracts on 31st march 2006, contract no.900 showed the

following

Materials purchased 1, 90,000 Direct expenses 24,000

Materials issued from stores 50,000 Plant purchased 1, 60,000

Wages 2, 44,000 Establishment charges 54,000

Depreciation on plant 16,000

The contract was for Rs. 15, 00,000. Rs.6, 00,000 had been received by chowdary up to31st

march 2006. Which represented the amount certified less 20% retention money? UN sends

materials at site Were valued at Rs. 15,000. Prepare contract account.

Working note 1: Work Certified

6, 00,000 cash received = 20% of less than of work certified

6, 00,000 = 80% work certified

100% =?

6, 00,000 X 100 = 7, 50,000

80

Working note 2: Percentage of contract completion

Contract Price = 15, 00,000

Work Certified = 7, 50,000

15, 00,000 = 100%

7, 50, 000 =?

7, 50,000 X100 = 50%

15, 00,000

Contract account for the year ending 31-3-2006

Dr Cr

Particulars Amount Particulars Amount

To Material purchased 1,80,000 By Work Certified 7,50,000

To Material issued from stores 50,000 By Material at site 15,000

To Direct Wages 2,44,000 By Plant 1,44,000
To Direct Expense
24,000 (1,60,000—16,000)

To Plant 1,60,000

To Establishment Charges 54,000

To Notional Profit 1,97,000 By Notional Profit 9,09,000
9,09,000 1,97,000
To Profit& Loss A/C 1,05,067
Notional profit X2 X Cash Received 1,97,000
91,933
3 Work Certified 1,97,000
1,977,000 X 2 X 6,00,000

3 7,50,000
To Reserve A/C

TAKKELLA PUNNAIAH CHOWDARY Page 104

6. The following expenditure was incurred on a contract of Rs.6, 00,000 for the year ending

January 2007.

Materials 1, 30,000

Wages 1, 44,400

Plant 20,000

Business expenses 19,600

Cash received on account was Rs.2, 40,000. Being 90% of the Work certified. The value of

materials in Hand at 31.12.2007 was Rs.10, 000. The plant had under gone 10% Depreciation.

Prepare contract Account.

Working note 1: Work Certified

Cash received 2, 40,000 being 80% of work certified

2, 40,000 = 80% work certified

100% =?

2, 40,000 X 100 = 3, 00,000

80

Working note 2: Percentage of contract completion
Contract Price = 6, 00,000
Work Certified = 3, 00,000
6, 00,000 = 100%
3, 00, 000 =?
3, 00,000 X100 = 50%
6, 00,000

Contract account for the year ending 31-12-2007

Dr Cr
Amount
Particulars Amount Particulars 3,00,000

To Material 1,30,000 By Work Certified 10,000
18,000
To Wages 1,44,400 By Material at site
3,28,000
To Plant 20,000 By Plant closing 15,000

To Business expenses 18,600 20,000 X10 15,000

100
(20,000—2,000)

To Notional Profit 15,000

3,28,000

To Profit& Loss A/C 8,000 By Notional Profit

Notional profit X2 X Cash Received

3 Work Certified

15,000 X 2 X 2,40,000

3 3,00,000

To Reserve A/C 7,000

15,000

TAKKELLA PUNNAIAH CHOWDARY Page 105

7. M/s X and co. obtained a contract for building a factory for Rs. 10, 00,000. The building

operation s Started on 1st april.2007 and at the end of the march 2009, they received from party a
sum of Rs 3.9 Lakhs, being 75% of the amount due on the surveyor’s certificate. The following

additional information

Is given from the books of the company:

Stores issued to contract 2, 00,000 Direct expenses 25,000
Stores on hand 31st march, 2009 10,000
Over head allocated to contract 12,000

Wages paid 1, 90,000 Work UN certified at cost 12,000

Plant purchased for the contract 2, 00,000 Plant to be depreciated at 10%

Prepare contract account showing the profit or loss on the contract as on 31 March 2009.

Working note 1: Work Certified

Cash received 3, 90,000 being 75% of work certified

3, 90,000 = 75% work certified

100% =?

3, 90,000 X 100 = 5, 20,000

75

Contract account for the year ending 31-03-2008

Dr Cr
Amount
Particulars Amount Particulars 5,20,000

To Material issued 2,00,000 By Work Certified 12,000
1,80,000
To Wages 1,80,000 By Material at site

To Plant 2,00,000 By Plant closing

To Direct expenses 25,000 2,00,000 X10

To Over head 12,000 100

(2,00,000—20,000)

To Notional Profit 95,000 By Notional Profit 7,12,000
7,12,000 95,000
To Profit& Loss A/C
Notional profit X2 X Cash Received 47,500 95,000

3 Work Certified 47,500
95,000 X 2 X 3,90,000 95,000

3 5,20,000
To Reserve A/C

8. A firm of building contractors began to trade on 1st April, 1996. The following was the

Expenditure on The contract for Rs.3, 00,000.

Material issued to contract 51,000

Plant used for contract 15,000

Wages incurred 91,000

Other expenses incurred 5,000

Cash received on account to 31st march, 1996, amounted to Rs.1, 29,000 being 90% of the work

TAKKELLA PUNNAIAH CHOWDARY Page 106

Certified. Of the plant and materials charged to the contract, plant which cost Rs. 3,000 and
materials Which cost Rs.2, 500 were lost. On 31st march, 1997 plant which cost Rs2, 000 was
returned to stores, The Cost of work done but uncertified was Rs.1, 000 and materials costing

Rs.2, 300 were in hand on Site. Plant Depreciation is 15%.

Working note 1: Work Certified

Cash received 1, 28,000 being 80% of work certified

1, 28,000 = 80% work certified

100% =?

1, 28,000 X 100 = 1, 60,000

80

Working note 2: Percentage of contract completion

Contract Price = 3, 00,000

Work Certified = 1, 60,000

3, 00,000 = 100%

1, 60, 000 =?

1, 60,000 X100 = 53.33%

3, 00,000

Working note3: Plant Depreciation

Plant = 15,000

Less: Plant Loss = 3,000

12,000

Less: Plant Return= 2,000

10,000

Less : Depreciation 1,500

10,000 X 15

100

Closing Plant 8,500

Working note4: Plant Return

Plant Return = 2,000

Less : Depreciation = 300

2,000 X 15 1,700

100

Dr Cr

Particulars Amount Particulars Amount
51,000
To Material Issued 81,000 By Work Certified 1,60,000
5,000
To Direct Wages 15,600 By Work Uncertified 1,000

To Other Expenses By Material at site 2,300

To Plant By Material Loss 2,500

By Plant Closing 8,500

By Plant Return 1,700

By Plant Loss 3,000

To Notional Profit 27,000 1,79,000
To Profit& Loss A/C 1,79,000 27,000

14,400 By Notional Profit Page 107

TAKKELLA PUNNAIAH CHOWDARY

Notional profit X2 X Cash Received 12,600
3 Work Certified 27,000

27,000 X 2 X 1,28,000
3 1,60,000

To Reserve A/C

27,000

9. The following is the summary of the entries in the contract ledger account as on 31st December,

1992 in Respect of contract no.679:

Materials bought directly 70,000

Materials from stores 14,000

Wages 36,000

Direct expenses 14,000

Establishment charges 16,000

Plant 69,400

Scrap sold 3,640

The further information is as follows:

(i) Accruals on 31st December, 1992 were wages Rs.1, 900; and direct expenses Rs.2, 400.

(ii) The cost of work un certified includes materials Rs.5, 200; wages Rs.2, 000 and expenses

Rs.3, 000.

(iii) Rs.4, 000 worth of plant and Rs.6, 000 worth of materials were destroyed by fire.

(iv) Rs. 9,000 worth of plant sold for Rs.6, 000 and materials costing Rs.10, 000 sold for

Rs.12, 000.

(v) Depreciation till 31st December, 1992 on plant Rs.20, 000.

(vi) Materials at site Rs.10, 000

(vii) Cash Received from contractors Rs.1, 20,000 being 90 per cent of work certified.

(viii) Contract price Rs.2, 00,000

Showing the contract account and balance sheet.

10. The Rao construction company under took construction of building at a contract price of

12, 00,000. The date of commencement of contract was April 1.2004. The following cost

information is given for The year ending 31.3.2005.

Materials sent to the site 3, 00,000

Wages 4, 40,000

Office& administration expenses 1, 51,000

Architect fees 55,500

Un certified work 55,000

Materials at the site at the end of the year 10,000

Cash received (being 90% of work certified) 9, 45,000

Material lost by fire 5,000

Plant & machinery cost 2, 00,000

(Date of purchase 1.7.2004 the estimated working life of the plant 10years and estimated scarp

value at The end 20,000)

Supervisor salary 60,000

You are required to prepare contract account for the ending 31.3.2004.

TAKKELLA PUNNAIAH CHOWDARY Page 108

Working note 1: Work Certified

Cash received 9, 45,000 being 90% of work certified

9, 45,000 = 90% work certified

100% =?

9, 45,000 X 100 = 10, 50,000

90

Working note 2: Percentage of contract completion
Contract Price = 12, 00,000
Work Certified = 10, 50,000
12, 00,000 = 100%
10, 50, 000 =?
10, 50,000 X100 = 87.5%
12, 00,000

Working Note 3: Depreciation of Plant & Machinery

Depreciation = Asset Value – Scrap Value= 2, 00,000 – 20,000 = 1, 80,000= 18,000

Life of the Asset 10 10

Depreciation for 9 months = 18,000 X 9 =13,500

12
Closing Plant& Machinery = 2, 00,000 –13,500= 1, 86,500.

Dr Cr

Particulars Amount Particulars Amount

To Material sent to the site 3,00,000 By Work Certified 10,50,000

To Wages 4,40,000 By Work Uncertified 55,000

To Office & Administration Expenses 1,51,000 By Material at site 10,000

To Architect Fees 55,500 By Material Loss 5,000

To Plant& Machinery cost 2,00,000 By Plant Closing 1,86,500
To Supervisor salary 60,000 (2,00,000—13,500)

To Notional Profit 1,00,000 13,06,500
13,06,500 1,00,000
To Profit& Loss A/C
Notional profit X2 X Cash Received 60,000 By Notional Profit 1,00,000

3 Work Certified 40,000
1,00,000 X 2 X 9,45,000 1,00,000

3 10,50,000
To Reserve A/C

11. The following information relates to two contracts of K.P contractors in 2007.

Contract A(Rs) Contract B(Rs)

Materials sent to site 1, 70,699 1, 46,534

Labour 1, 49,750 1, 37,046

Plant 30,000 25,000

Direct expenses 6,334 5,719

Establishment charges 9,252 7,704

TAKKELLA PUNNAIAH CHOWDARY Page 109

Materials returned to stores 1,099 1,269
2, 90,000
Work certified 3, 90,000
6,000
Work un certified 9,000 3,472
4,200
Materials at site (31.12.2007) 3,766
360
Wages accrued 4,900 19,000
4, 00,000
Direct expenses accrued (31.12.2007) 490

Value of plant (31.12.2007) 22,000

Contract price 5, 00,000

Cash received is 90% of work certified.
Prepare contract account and contractee’s accounts.

Working note 1: Percentage of contract completion
Contract Price = 5, 00,000
Work Certified = 3, 90,000
5, 00,000 = 100%
3, 90, 000 =?
3 90,000 X100 = 78%
5, 00,000

Working Note2: Cash Received

Cash Received is 80% of work certified
3, 90,000 X 80 =3, 12,000
100

Dr Contract accounts of KP Contractors for the year ending 2007 Cr
Contract B
Particulars Contract Contract Particulars Contract
A 2,90,000
AB 6,000
3,90,000 3,472
To Material sent to site 1,70,698 1,46,534 By Work Certified 9,000 1,268
3,766 19,00
To Labour 1,48,750 1,37,046 By Work 1,098

To Plant 30,000 25,000 Uncertified 22,000

To Direct expenses 6,334 5,718 By Material at site

To Establishment Charges 8,252 7,704 By Material

To Outstanding Wages 4,800 4,200 Return

To O/S Direct Expenses 480 360 By Plant Closing -------
4,25,864
To Notional profit 56,550 ------------ By Notional Loss 6,822
3,26,562
4,25,864 3,26,562

To Profit& Loss A/C 23,525 By Notional profit 56,550
Notional profit X2 X CashReceived 33,025

3 WorkCertified
56,550 X 2 X 3,12,000

3 5,00,000
To Reserve A/C

56,550 56,550

TAKKELLA PUNNAIAH CHOWDARY Page 110

12. Madhu constructions limited have taken two contracts on 1st oct2004. The positions of the

contracts on 30th September 2005 is as follows:

Contract I(Rs) Contract II(Rs)

Contract price 27, 00,000 60, 00,000

Materials 5, 90,000 10, 90,000

Wages paid 11, 24,000 16, 50,000

Other expenses 29,000 60,000

Plant at site 1, 60,000 3, 00,000

Un used materials at site 40,000 60,000

Wages payable 36,000 4,000

Other expenses due 4,000 9,000

Work certified 16, 00,000 30, 00,000

Cash received 12, 00,000 22, 60,000

Work un certified 90,000 90,000

The plant at site to be depreciated at 10%. Prepare the contract account in respect of each work

Showing the notional profit to be transferred to profit and loss account.

Dr Contract accounts of KP Contractors for the year ending 2007 Cr
Contract I Contract II
Particulars Contract I Contract II Particulars

To Materials 5,80,000 10,80,000 By Work Certified 16,00,000 30,00,000
To Wages 11,24,000 16,50,000 By Work 80,000 90,000
To Other Expenses Uncertified
To Plant at site 28,000 60,000 By Material at site 40,000 60,000
To Outstanding Wages 1,60,000 3,00,000 By Plant Closing 1,44,000 2,70,000
To Outstanding other expenses
36,000 4,000
4,000 9,000

To Notional profit 3,17,000 By Notional Loss 68,000
34,20,000 19,32,000
19,32,000 34,20,000
By Notional profit 3,17,000

To Profit& Loss A/C 15,920
Notional profit X2 X CashReceived
3,01,080
3 WorkCertified 3,17,000
3,17,000 X 2 X 22,60,000

3 30,00,000
To Reserve A/C

3,17,000

13. The following information relates to a building contract Rs.10, 00,000.

2006 2007

Materials issued 3, 00,000 94,000

Direct wages 2, 30,000 1, 05,000

Direct expenses 22,000 10,000

In direct expenses 6,000 1,400

Work certified 7, 50,000 10, 00,000

Work un certified 9,000 ----

Materials at site 5,000 7,000

Plant issued 14,000 2,000

TAKKELLA PUNNAIAH CHOWDARY Page 111

Cash received from Contractee 6, 00,000 10, 00,000

The value of plant at the end of 2006 and 2007was 7,000and 5,000 respectively. Prepare

contract Account and Contractee account.

Working note 1: Percentage of contract completion (2006)

Contract Price = 10, 00,000

Work Certified =7, 50,000

10, 00,000 = 100%

7, 50, 000 =?

7, 50,000 X100 = 75%

10, 00,000

Dr Contract account for the year ending 2007 Cr

Particulars Amount Particulars Amount
2006 By Work Certified 7,50,000
To Material issued 3,00,000 By Work Uncertified 8,000
To Direct Wages 2,30,000 By Material at site 5,000
To Direct expenses By Plant closing 7,000
To In Direct expenses 22,000
To Plant 6,000

14,000

To Notional Profit 1,98,000 7,70,000
7,70,000 1,98,000
By Notional Profit
1,05,600 1,98,000
To Profit& Loss A/C 10,00,000
Notional profit X2 X Cash Received 92,400
1,98,000 7,000
3 Work Certified 5,000
1,98,000 X 2 X 6,00,000
10,12,000
3 7,50,000
To Reserve A/c

2007 By Work Certified
Work –In-Progress By Material at site
By Plant closing
Work Certified 7,50,000

(+) Work Uncertified 8,000

7,58,000

(-) Reserve 92,400 6,65,600
5,000
To Material( last year)
84,000
To Material issued 1,05,000

To Direct Wages 10,000
1,400
To Direct expenses 5,000
2,000
To In Direct expenses
1,32,000
To Plant (old) 10,12,000

To Plant(new)

To Notional profit

TAKKELLA PUNNAIAH CHOWDARY Page 112

14. The following information relates to a building contract Rs.10, 00,000 and which 90%of the

value work In progress as certified by architect is being paid by the contractee.

I year IIyear IIIyear

Materials issued 1, 20,000 1, 45,000 94,000

Direct wages 1, 10,000 1, 55,000 1, 10,000

Direct expenses 5,000 17,000 6,000

In direct expenses 2,000 2, 600 500

Work certified 2, 35,000 7, 50,000 10, 00,000

Work un certified 3,000 9,000 ----

Materials at site 2,000 5,000 9,000

Plant issued 14,000 ------ ----

The value of plant at the end of I, II, III was Rs 11,200&7,000and 3,000 respectively. Prepare

contract Account and Contractee account.

Working note 1: Percentage of contract completion (I Year)

Contract Price = 10, 00,000

Work Certified =2, 35,000

10, 00,000 = 100%

2, 35, 000 =?

2, 35,000 X100 = 23.5%

10, 00,000

Working note 2: Percentage of contract completion (II Year)

Contract Price = 10, 00,000

Work Certified =7, 50,000

10, 00,000 = 100%

7, 50, 000 =?

7, 50,000 X100 = 75%

10, 00,000

Contract account for the year

Dr Cr
Amount
Particulars Amount Particulars 2,35,000

IYEAR By Work Certified 3,000
2,000
To Material issued 1,20,000 By Work Uncertified 11,200

To Direct Wages 1,10,000 By Material at site

To Direct expenses 5,000 By Plant closing

To In Direct expenses 2,000

To Plant 14,000

To Notional Profit 200 2,51,200
To Reserve A/c 2,51,200 200

200 By Notional Profit

IIYEAR By Work Certified 7,50,000
Work –In-Progress By Work Uncertified 8,000
By Material at site 5,000
Work Certified 2,35,000 By Plant closing 7,000

(+) Work Uncertified 3,000 2,37,800 Page 113
2,000
2,38,000

(-) Reserve 200

To Material( last year)

TAKKELLA PUNNAIAH CHOWDARY

To Material issued 1,45,000
To Direct Wages 1,55,000
To Direct expenses
To In Direct expenses 17,000
To Plant 2,600
11,200

To Notional profit 1,99,400 By Notional profit 7,70,000
7,70,000 1,99,400
To Profit& Loss A/C 1,06,347
Notional profit X2 X Cash Received 1,99,400
93,053 10,00,000
3 Work Certified 1,99,400
1,99,400 X 2 X 6,00,000 8,000
3,000
3 7,50,000
To Reserve A/C 10,11,000

IIIYEAR By Work Certified
Work –In-Progress By Material at site
By Plant closing
Work Certified 7,50,000
6,64,947
(+) Work Uncertified 8,000 5,000
84,000
7,58,000
1,10,000
(-) Reserve 93,053 6,000
500
To Material at site (Last year) 7,000
To Material
To Direct Wages
To Direct expenses
To In Direct expenses
To Plant

To Profit& Loss A/C 1,33,553
10,11,000

15. X, Y Company under took a contract for Rs 15, 00,000 on an arrangement that 90% of the value
of work Done as certified by the architects of the contractee should be paid immediately and
remaining 20% be retained until the contract is completed.

In 2004, the amounts expended were: materials 1, 90,000; wages 1, 70,000; carriage 6,000;
cartage 1,000; sundry expenses 3,000; the work certified for 3, 75,000; and 90% of this was paid
as agreed
In 2005, the amounts expended were: materials 2, 20,000; wages 2, 30,000; carriage 23,000;
cartage 2,000; sundry expenses 4,000. Three fourth of the contract was certified as done by 31st
December, 2005 and 90% of this received accordingly. The value of un used and work-in-
progress was ascertained at Rs.20, 000.
In 2006, the amounts expended were: materials 1, 26,000; wages 1, 70,000; carriage 23,000;
cartage 6,000; sundry expenses 3,000. And on 30th June the whole contract was completed.

TAKKELLA PUNNAIAH CHOWDARY Page 114

Show how the contract as also the contractee’s account would appear for each of these years in

the Books of the contractor, assuming the balance due to him was received on completion of the

contract.

Contract account for the year

Dr Cr

Particulars Amount Particulars Amount

2004 By Work Certified 3,75,000

To Material 1,80,000

To Wages 1,70,000

To Carriage 6,000

To Cartage 1,000

To Sundry Expense 3,000

To Notional Profit 15,000 3,75,000
3,75,000 15,000
To Profit& Loss A/C
Notional profit X2 X Cash Received 4,000 By Notional Profit 15,000

3 Work Certified 11,000
15,000 X 1 X 3,00,000 15,000

3 3,75,000
To Reserve A/C

2005 By Work Certified 11,25,000
Work –In-Progress By Work Uncertified 20,000

Work Certified 3,75,000 3,66,000
2,20,000
(-) Reserve 11,000 2,30,000

To Material 23,000
2,000
To Wages 4,000

To Carriage

To Cartage

To Sundry Expenses

To Notional profit 3,23,000 By Notional profit 11,45,000
11,45,000 3,23,000
To Profit& Loss A/C
Notional profit X2 X Cash Received 1,72,266 3,23,000
15,00,000
3 Work Certified 1,50,734
3,23,000 X 2 X 9,00,000 3,23,000 Page 115

3 11,25,000
To Reserve A/C

2006 By Contractee A/C
Work –In-Progress 9,94,266

Work Certified 11,25,000

(+) Work Uncertified 20,000

11,45,000

(-) Reserve 1,50,734

To Material 1,26,000

TAKKELLA PUNNAIAH CHOWDARY

To Wages 1,70,000
To Carriage 23,000
To Cartage 2,000
To Sundry Expenses 3,000

To Profit& Loss A/C 1,81,734
15,00,000
15,00,000

16. The following figures are extracted from the book of a contractor for the year ending 31.12.2007

Work in progress on 31.12.2006 17, 00,000

(-) Advances from cotractees 11, 00,000

6, 00,000

Material supplied to contract direct 2, 10,000
Material supplied from store 1, 20,000’

Wages 1, 70,000

Working expenses 30,000

Material returns to store 11,000

Contract finished 4, 50,000

Work certified 3, 00,000

Profit taken in to p&loss account up on contracts completed 2, 30,000

Administrative expenses (out of which 5,000 is chargeable to p&loss a/c) 25,000

Plant issued 50,000

Materials returned from contract to suppliers 9,000

Advances from contractees 9, 00,000

Plant at site 40,000

Dr Amount Cr Amount
Particulars 17,00,000 Particulars 3,00,000
To Work certified 2,10,000 By Work Certified
To Material supplied 1,20,000 By Material Return 11,000
To Material from store 1,70,000 By Material Return From Suppliers 9,000
To Wages By Plant Closing
To Working Expenses 30,000 By Contractee A/C 40,000
To Administration Expenses 20,000 4,50,000
To Plant 50,000

To Profit& Loss A/C 2,30,000 By Work Uncertified (Balance) 17,20,000
25,30,000 25,30,000

17. The following information relating to A company for the year ending 31-3-2017. (2018 oct exam
problem)
Chargeable plant Rs3,000 and materials Rs 2,400 were lost 31-3-2017 the value of plant
Rs 3,000 will be return to stores. Material at site 2,400. Uncertified work 1,200. Contract price is
Rs3, 00,000. Depreciation calculated 10% on plant. Prepare contract account and balance sheet.

TAKKELLA PUNNAIAH CHOWDARY Page 116

Particulars Debit Credit
Share capital 72,000
Sundry creditors 6,000
Cash Received 1,20,000
( Being 80 % of Work certified)
Land & Buildings 25,800
Cash At Bank 15,000
Expense Charged to contract
Materials 54,000
Plant 15,000
Wages 84,000
Expense
4,200

Total 1,98,000 1,98,000

Working note 1: Work Certified

Cash received 1, 20,000 being 80% of work certified

1, 20,000 = 80% work certified

100% =?

1, 20,000 X 100 = 1, 50,000

80

Working note 2: Percentage of contract completion

Contract Price = 3, 00,000

Work Certified = 1, 50,000

3, 00,000 = 100%

1, 50, 000 =?

1, 50,000 X100 = 50%

3, 00,000

Working note3: Plant Depreciation

Plant = 15,000

Less: Plant Loss = 3,000

12,000

Less: Plant Return= 3,000

9,000

Less : Depreciation 900

9,000 X 10

100

Closing Plant 8,100

Working note4: Plant Return

Plant Return = 3,000

Less : Depreciation = 300

3,000 X 10 1,700

100

TAKKELLA PUNNAIAH CHOWDARY Page 117

Contract account for the year ending31-03-2017

Particulars Amount Particulars Amount
1,50,000
To Material Issued 54,000 By Work Certified
1,200
To Direct Wages 84,000 By Work Uncertified 2,400
2,400
To Other Expenses 4,200 By Material at site 8,100
2,700
To Plant 15,000 By Material Loss 3,000

By Plant Closing

By Plant Return

By Plant Loss

To Notional Profit 12,600 By Notional Profit 1,69,800
1,69,800 12,600
To Profit& Loss A/C
Notional profit X2 X Cash Received 6,720 12,600

3 Work Certified 5,880
12,600 X 2 X 1,20,000 12,600

3 1,50,000
To Reserve A/C

Balance sheet

Liabilities Amount Assets Amount
Share capital 72,000 25,800
Sundry creditors 6,000 Land & Buildings 15,000
Profit & loss a/c 6,720 10,800
(-) Material Loss 2,400 1,320 Cash At Bank 2,400

4,320 79,320 Plant 8,100 25,320
(-) Plant Loss 3,000 79,320
(+) Returns 2,700

Materials
Work –In-Progress

Work Certified 1,50,000

(+) Work Uncertified 1,200

1,51,200

(-) Reserve 5,880

1,45,320

(-) Cash Received 1,20,000

ALL THE BEST
TAKKELLA PUNNAIAH CHOWDARY

TAKKELLA PUNNAIAH CHOWDARY Page 118