attribution of CONTRACT COSTING cs cost mcq

Posted on 10-05-2016        By ADMIN

attribution of CONTRACT COSTING cs cost mcq cs executive cost and management mcq formula notes "Contract Costing such jobs take a long time to complete & may spread over two or more of the contractor's accounting years”. Features of a Contract • The end product • The period of the contract • The specification • The location of the work • The price • Completion by a stipulated date • The performance of the product Collection of Costs : Desirable to open up one or more internal job accounts for the collection of costs. If the contract not obtained, preliminary costs be written off as abortive contract costs in P&L In some cases a series of job accounts for the contract will be necessary: • to collect the cost of different aspects • to identify different stages in the contract Special features • Materials delivered direct to site. • Direct expenses • Stores transactions. • Use of plant on site Two possible accounting methods: Where a plant is purchased for a particular contract & has little further value to the business at the end of the contract Where a plant is bought for or used on a contract, but on completion of the contract it has further useful life to the business Alternatively the plant may be capitalised with Maintenance and running costs charged to the contract." Profit of Incomplete contract :- 1) When % of completion is less than or equal to 25% then full Notional profit is transferred to reserve. 2) When % of completion is above 25% but less than 50% following amount should be credited to profit & loss a/c = 1/3 * Notional Profit * {Cash received / Work certified} 3) When % of completion is more than or equal to 50% then the amount transferred to profit is = 2/3 * Notional Profit * {Cash received / Work certified} [Balance is transferred to reserve a/c] ? % of completion = {Work certified/Contract price} * 100

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