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Notional profit on a contract is RS 90000 . And 60 % of the contract is completed . The customer pays 80% of work certified . The amount of profit to be reserved for contingencies is 1) nil 2) 36000 3) 18000 4) 42000?
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Notional profit on a contract is RS 90000 . And 60 % of the contract i...
Calculation of Profit on Contract:

  • Notional profit on contract = RS 90000

  • 60% of the contract is completed


Therefore, profit earned on the completed work is:

Profit on completed work = Notional profit x % of work completed

Profit on completed work = 90000 x 60/100 = RS 54000


Payment Received from Customer:

  • Customer pays 80% of work certified


Therefore, payment received from the customer on the completed work is:

Payment received = 80% of work certified x profit on completed work

Payment received = 80/100 x 54000 = RS 43200


Contingency Reserve:
Contingency reserve is the amount of profit that is kept aside to cover any unforeseen expenses or losses that may arise during the project.

The formula to calculate contingency reserve is:

Contingency reserve = (Notional profit - Profit on completed work) x % of work completed

Contingency reserve = (90000 - 54000) x 60/100 = RS 18000


Therefore, the amount of profit to be reserved for contingencies is RS 18000. Answer option 3 is correct.
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Notional profit on a contract is RS 90000 . And 60 % of the contract i...
42000/‐
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Notional profit on a contract is RS 90000 . And 60 % of the contract is completed . The customer pays 80% of work certified . The amount of profit to be reserved for contingencies is 1) nil 2) 36000 3) 18000 4) 42000?
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Notional profit on a contract is RS 90000 . And 60 % of the contract is completed . The customer pays 80% of work certified . The amount of profit to be reserved for contingencies is 1) nil 2) 36000 3) 18000 4) 42000? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Notional profit on a contract is RS 90000 . And 60 % of the contract is completed . The customer pays 80% of work certified . The amount of profit to be reserved for contingencies is 1) nil 2) 36000 3) 18000 4) 42000? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Notional profit on a contract is RS 90000 . And 60 % of the contract is completed . The customer pays 80% of work certified . The amount of profit to be reserved for contingencies is 1) nil 2) 36000 3) 18000 4) 42000?.
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