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Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depreciation 10%on plant Material lying at site 40000 Work certified was to the extent of 1600000and 80% same was received in cash 5%of the value of material issued and 6%of wages may be taken to have been incurred for the portion of work complete but not yet certified Overhead are charged as a percentage of direct wages Ignore depreciation on plant for use on uncertified portion of work Create contract account?
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Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depr...
Contract Account
A contract account is a financial statement that records all the transactions and expenses related to a specific contract or project. It helps in tracking the costs, revenues, and profits associated with the contract.
Components of a Contract Account
1. Wages: The wages incurred in the project are recorded in the contract account. In this case, the wages amount to 600,000.
2. Special Plant: The cost of any special plant or equipment used exclusively for the contract is included in the contract account. Here, the cost of the special plant is 200,000.
3. Material: The cost of materials used in the project is recorded in the contract account. In this case, the material cost is 300,000.
4. Overhead: Overhead costs, such as rent, utilities, and administrative expenses, are allocated to the contract based on a percentage of direct wages. Here, the overhead cost is 120,000.
5. Depreciation: Depreciation on the plant is usually charged as a percentage of the plant's cost. However, in this case, the depreciation is ignored for the portion of work that is not yet certified.
6. Material Lying at Site: The value of materials lying at the site but not yet used in the project is included in the contract account. Here, the value is 40,000.
7. Work Certified: The value of work certified by the client is recorded in the contract account. In this case, the work certified is 1,600,000.
8. Cash Received: The amount of cash received from the client is also recorded in the contract account. Here, 80% of the work certified, i.e., 1,280,000, is received in cash.
9. Cost of Work Complete but not Certified: A portion of the material and wages is considered to have been incurred for the work that is complete but not yet certified. Here, 5% of the value of material issued and 6% of wages are allocated to this portion.
Calculation of Contract Account
To calculate the contract account, we need to consider the following points:
1. Total Cost: The total cost of the contract is calculated by adding the wages, special plant cost, material cost, overhead, and material lying at the site. In this case, the total cost is 1,260,000 (600,000 + 200,000 + 300,000 + 120,000 + 40,000).
2. Cost of Work Complete: The cost of work that is complete is calculated by deducting the cost of work complete but not certified from the total cost. In this case, the cost of work complete is 1,197,000 (1,260,000 - (0.05 * 300,000) - (0.06 * 600,000)).
3. Profit: The profit on the contract is calculated by subtracting the cost of work complete from the work certified. In this case, the profit is 403,000 (1,600,000 - 1
A contract account is a financial statement that records all the transactions and expenses related to a specific contract or project. It helps in tracking the costs, revenues, and profits associated with the contract.
Components of a Contract Account
1. Wages: The wages incurred in the project are recorded in the contract account. In this case, the wages amount to 600,000.
2. Special Plant: The cost of any special plant or equipment used exclusively for the contract is included in the contract account. Here, the cost of the special plant is 200,000.
3. Material: The cost of materials used in the project is recorded in the contract account. In this case, the material cost is 300,000.
4. Overhead: Overhead costs, such as rent, utilities, and administrative expenses, are allocated to the contract based on a percentage of direct wages. Here, the overhead cost is 120,000.
5. Depreciation: Depreciation on the plant is usually charged as a percentage of the plant's cost. However, in this case, the depreciation is ignored for the portion of work that is not yet certified.
6. Material Lying at Site: The value of materials lying at the site but not yet used in the project is included in the contract account. Here, the value is 40,000.
7. Work Certified: The value of work certified by the client is recorded in the contract account. In this case, the work certified is 1,600,000.
8. Cash Received: The amount of cash received from the client is also recorded in the contract account. Here, 80% of the work certified, i.e., 1,280,000, is received in cash.
9. Cost of Work Complete but not Certified: A portion of the material and wages is considered to have been incurred for the work that is complete but not yet certified. Here, 5% of the value of material issued and 6% of wages are allocated to this portion.
Calculation of Contract Account
To calculate the contract account, we need to consider the following points:
1. Total Cost: The total cost of the contract is calculated by adding the wages, special plant cost, material cost, overhead, and material lying at the site. In this case, the total cost is 1,260,000 (600,000 + 200,000 + 300,000 + 120,000 + 40,000).
2. Cost of Work Complete: The cost of work that is complete is calculated by deducting the cost of work complete but not certified from the total cost. In this case, the cost of work complete is 1,197,000 (1,260,000 - (0.05 * 300,000) - (0.06 * 600,000)).
3. Profit: The profit on the contract is calculated by subtracting the cost of work complete from the work certified. In this case, the profit is 403,000 (1,600,000 - 1
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Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depr...
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Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depreciation 10%on plant Material lying at site 40000 Work certified was to the extent of 1600000and 80% same was received in cash 5%of the value of material issued and 6%of wages may be taken to have been incurred for the portion of work complete but not yet certified Overhead are charged as a percentage of direct wages Ignore depreciation on plant for use on uncertified portion of work Create contract account?
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Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depreciation 10%on plant Material lying at site 40000 Work certified was to the extent of 1600000and 80% same was received in cash 5%of the value of material issued and 6%of wages may be taken to have been incurred for the portion of work complete but not yet certified Overhead are charged as a percentage of direct wages Ignore depreciation on plant for use on uncertified portion of work Create contract account? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depreciation 10%on plant Material lying at site 40000 Work certified was to the extent of 1600000and 80% same was received in cash 5%of the value of material issued and 6%of wages may be taken to have been incurred for the portion of work complete but not yet certified Overhead are charged as a percentage of direct wages Ignore depreciation on plant for use on uncertified portion of work Create contract account? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Wages 600000 Special plant 200000 Material 300000 Overhead 120000 Depreciation 10%on plant Material lying at site 40000 Work certified was to the extent of 1600000and 80% same was received in cash 5%of the value of material issued and 6%of wages may be taken to have been incurred for the portion of work complete but not yet certified Overhead are charged as a percentage of direct wages Ignore depreciation on plant for use on uncertified portion of work Create contract account?.
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