PPT - Contract Costing B Com Notes | EduRev

Cost Accounting

B Com : PPT - Contract Costing B Com Notes | EduRev

 Page 2


COSTING
“The technique and 
process of 
ascertaining costs.”
Contract 
Costing 
Batch 
Costing
Single 
Costing
Process 
Costing
Job Costing
Operating 
Costing 
Multiple 
Costing
Page 3


COSTING
“The technique and 
process of 
ascertaining costs.”
Contract 
Costing 
Batch 
Costing
Single 
Costing
Process 
Costing
Job Costing
Operating 
Costing 
Multiple 
Costing
? Contract Costing is defined by the ICMA 
Terminology as
Page 4


COSTING
“The technique and 
process of 
ascertaining costs.”
Contract 
Costing 
Batch 
Costing
Single 
Costing
Process 
Costing
Job Costing
Operating 
Costing 
Multiple 
Costing
? Contract Costing is defined by the ICMA 
Terminology as
? Each contract is treated as a cost unit.
? A separate account for each contract.
? Work is done at site, away from contractor’s own 
premises.
? The contract has a long duration usually extending more 
than one accounting year.
? All items of cost which are directly related to the contract 
are chargeable to respective contract accounts.
? Payment is made by contractee on the basis of work 
certified by surveyor or architect.
? Penalties or extra money may be imposed.
? Though contract costing is a part of Cost Accounting, but 
it is purely based on the principles of Financial
Accounting. Such as Dual Aspect, Prudence and 
Conservatism. And AS9 (Revenue Recognition)
Page 5


COSTING
“The technique and 
process of 
ascertaining costs.”
Contract 
Costing 
Batch 
Costing
Single 
Costing
Process 
Costing
Job Costing
Operating 
Costing 
Multiple 
Costing
? Contract Costing is defined by the ICMA 
Terminology as
? Each contract is treated as a cost unit.
? A separate account for each contract.
? Work is done at site, away from contractor’s own 
premises.
? The contract has a long duration usually extending more 
than one accounting year.
? All items of cost which are directly related to the contract 
are chargeable to respective contract accounts.
? Payment is made by contractee on the basis of work 
certified by surveyor or architect.
? Penalties or extra money may be imposed.
? Though contract costing is a part of Cost Accounting, but 
it is purely based on the principles of Financial
Accounting. Such as Dual Aspect, Prudence and 
Conservatism. And AS9 (Revenue Recognition)
• Fixed Price is agreed
• Deductions are made for Defectives and Penalties
• Extra money for additional work
Fixed Price Contract
• compensates for costs actually incurred by contractor.
• a percentage of cost or any lump sum amount.
Cost Plus Contract
• Mixture of both of the above.
• A fixed price will increase with increase in cost of material, 
labour.
Contract with Escalation Cost
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