l.4iQ4SSm (a5O\A<:m5 m /3gP3TTm(a5O83^CUT\m ( m"^: m ,3L<\m m$3YI<^CT?m m m&=em*VB_4Jm*V4; m&=em =KBD m m S;D4m (AUT< m m 1<6\E`<m m f _4iQ4SS 9VQm R3EMm m ]4K=] _4hQ4SS 9VQ +<?: m '>8<m m m2=]_m)bSH47Dm 4@B m&=em =KBD m m S;D4m <c<LUW<:m5km .4Sm)ZDS_]m S;D4 m)d_ m#_; m m!Q m%DK=m-_VS= m&4_FVS4Km D@Be4j m*VB_4Jm*V4;m 0DNK4@=m*VB4; m D]__ m B4HH4[m 4[j4S4 m S;D4m R3Gm m ]4K=] _4SXZDS_] 9VQ C\8L3CP<Ym : 2AC 27C" 6C ,C+ C70C :0# C 22026C02C0+#66#0,6C#,C7"#6C19 (# 7#0, C ,C61#7 C0 C7"#6 C 22026C+ AC 2 1C#, C -AC+#67 & C 2202C02C 6 2 1 , AC,07 C+ AC C 209 "7C70C092C,07# C <"# "C6" )(C C7 & ,C 2 C0 C#,C7" C, @7C #7#0, C 7C#6C,07# C7" 7C, #7" 2C7" C19 )#6" 2C,02C7" C 97"02C02C6 )( 2C?((C C2 610,6# ( C 2C ,AC + C02C(066C0 C 7#0,C70C ,AC0, C0 C ,AC'#, C#,C ,AC+ ,, 2 C7" 2 0+ C 7C#6C69 67 C7" 7C70C :0# C ,AC 09 7C7" C2 2C6"09* C 2066 " &C )(C 7" C 76 C ( =C , C 0,7 ,76C 0 C7" C 19 )# 7#0,C ?7"C 03#!. (C 0: 5+ ,7C 19 )# 7#0,C 02C ,07# 7#0,6 C 0C1 27C0 C7"#6C 00&C+ AC C2 120 9 C02C 01# C#,C ,AC 2+C02C AC ,AC + ,6C 2 1"# C ( 720,# C02C+ " ,# ( C$. (9 #, C1"070 01B, C2 02 #, C7 1#, C02C#, 2+ 7#0,C2 74 : (C 6A67 +6 C 02C 2 120 9 C 0,C ,AC #6 C 7 1 C 1 2 2 7 C + # C 02C 07" 2C #, 2+ 7#0,C 6702 C ;# C 7 C>#7"097C8 C=2#77 ,C1 2+#66#0,C0 C7" C19 )#6" 26 C 2 "C0 C7"#6C 0, #7#0,C#6C(# ( C 2C( (C 7#0, C ((C #6197 6C 2 C69 % 7C70C ("#C%92#6 # 7#0,C0/A C
CHAPTER-WISE MARKS DISTRIBUTION 2018
2019
J
D
J
D
J
D
D
D
J
D
1.
Introduction to Cost 20 Accounting
17
17
20
16
16
5
23
10
13 15.70
2.
Material Costs
11
12
7
14
4
15
8
15
10
9
10.50
3.
Employee Costs
10
3
10
2
13
3
9
10
12
9
8.10
4.
Direct Expenses
6
-
-
-
-
-
-
1
2
-
0.9
5.
Overheads
8
13
8
9
16
6
10
1
8
2
8.10
6.
Cost Accounting Standards
-
10
9
9
9
8
6
10
10
21
9.20
7.
Cost Book Keeping
1
14
11
12
10
12
14
9
10
11 10.40
8.
Job Costing
1
-
1
1
1
1
1
1
1
2
1.00
9.
Batch Costing
9
9
1
1
-
-
2
-
7
-
2.90
10. Contract Costing
8
7
8
8
8
16
11
8
7
7
8.80
11. Process Costing
10
9
8
10
8
10
14
7
9
11
9.60
12. Operating Costing
9
7
8
8
8
7
11
8
8
7
8.10
13. Marginal Costing
23
17
18
17
18
17
11
19
16
18 17.40
14. Standard Costing & Variance Analysis
10
9
10
9
10
10
15
9
8
9
9.90
15. Budget & Budgetary Control
9
8
14
15
14
14
13
14
12
9
12.20
Chapter Name
J: June; D: December
I-5
2021 2022 2023
Average
TAXMANN®
2017
S. No.
PREVIOUS EXAMS TREND ANALYSIS
Year Dec. 2023
QuesComtion No. pulsory 1
[Syllabus 2022]
Yes
Chapter Name
Marks
Category
Introduction to Cost Accounting
2
Theory
Material Costs
4
Theory & Practical
2
Practical
Overheads
2
Practical
Cost Accounting Standards
2
Theory
Cost Book Keeping
4
Theory
Job Costing
2
Theory
Process Costing
4
Theory & Practical
Marginal Costing
4
Practical
Standard Costing & Variance Analysis
2
Practical
Budget & Budgetary Control
2
Theory
2(a)
Introduction to Cost Accounting
7
Practical
2(b)
Employee Costs
7
Practical
3(a)
Cost Accounting Standards
7
Practical
3(b)
Cost Book Keeping
7
Practical
4(a)
Operating Costing
7
Practical
4(b)
Contract Costing
7
Practical
5(a)
Process Costing
7
Practical
5(b)
Standard Costing & Variance Analysis
7
Practical
6
Marginal Costing
14
Practical
7(a)
Budget & Budgetary Control
7
Practical
I-7
TAXMANN®
Employee Costs
I-8 Year
July 2023
PREVIOUS EXAMS TREND ANALYSIS
QuesComtion No. pulsory
Marks
Category
7(b)
Cost Accounting Standards
7
Theory
8(a)
Introduction to Cost Accounting
4
Theory
8(b)
Material Costs
5
Theory
8(c)
Cost Accounting Standards
5
Theory
Direct Expenses
1
Theory
1(a)
Yes
[Syllabus 2022]
TAXMANN®
Chapter Name
1(b)
1(c)
Yes
Yes
Introduction to Cost Accounting
2
Theory
Employee Costs
2
Theory
Cost Accounting Standards
1
Theory
Cost Book Keeping
1
Theory
Job Costing
1
Theory
Process Costing
1
Theory
Standard Costing & Variance Analysis
1
Practical
Marginal Costing
1
Theory
Budget & Budgetary Control
1
Theory
Introduction to Cost Accounting
1
Theory
Material Costs
2
Theory
Direct Expenses
1
Theory
Employee Costs
1
Theory
Budget & Budgetary Control
1
Theory
Process Costing
1
Theory
Operating Costing
1
Theory
Employee Costs
1
Theory
Overheads
1
Theory
Cost Accounting Standards
1
Theory
Introduction to Cost Accounting
1
Theory
Cost Book Keeping
1
Theory
2(a)
Introduction to Cost Accounting
7
Practical
2(b)
Cost Accounting Standards
8
Theory
3(a)
Material Costs
5
Practical
Material Costs
2
Theory
3(b)
Employee Costs
8
Practical
4(a)
Overheads
7
Practical
4(b)
Cost Book Keeping
8
Practical
5(a)
Batch Costing
7
Practical
I-9
PREVIOUS EXAMS TREND ANALYSIS
Year
MTP Dec. 2023
QuesComtion No. pulsory
Chapter Name
Marks
Category
5(b)
Contract Costing
8
Practical
6(a)
Process Costing
7
Practical
6(b)
Operating Costing
8
Practical
7(a)
Marginal Costing
7
Practical
7(b)
Marginal Costing
8
Practical
8(a)
Standard Costing & Variance Analysis
7
Practical
8(b)
Budget & Budgetary Control
8
Practical
Employee Costs
4
Theory & Practical
Direct Expenses
2
Practical
Overheads
2
Theory
1
[Syllabus 2022]
Yes
2
Theory
Cost Book Keeping
2
Theory
Batch Costing
2
Theory
Process Costing
4
Theory & Practical
Operating Costing
2
Practical
Marginal Costing
4
Theory & Practical
Standard Costing & Variance Analysis
4
Theory & Practical
Budget & Budgetary Control
2
Theory
2(a)
Introduction to Cost Accounting
7
Practical
2(b)
Material Costs
7
Practical
3(a)
Overheads
7
Practical
3(b)
Cost Book Keeping
7
Practical
4(a)
Operating Costing
7
Practical
4(b)
Contract Costing
7
Practical
5(a)
Process Costing
7
Practical
5(b)
Standard Costing & Variance Analysis
7
Practical
6
Marginal Costing
14
Practical
7(a)
Budget & Budgetary Control
7
Practical
7(b)
Cost Accounting Standards
7
Theory
TAXMANN®
Cost Accounting Standards
I-10
TAXMANN®
Year
PREVIOUS EXAMS TREND ANALYSIS
QuesComtion No. pulsory
Chapter Name
Marks
Category
8(a)
Introduction to Cost Accounting
4
Theory
8(b)
Cost Accounting Standards
5
Theory
8(c)
Material Costs
5
Theory
CHAPTER-WISE COMPARISON WITH STUDY MATERIAL
Chapter No.
Name of Chapter
Study Material Module
Introduction to Cost Accounting
Module 1
2.
Material Costs
Module 2
3.
Employee Costs
Module 2
4.
Direct Expenses
Module 2
5.
Overheads
Module 2
6.
Cost Accounting Standards
Module 3
7.
Cost Book Keeping
Module 4
8.
Job Costing
Module 5
9.
Batch Costing
Module 5
10.
Contract Costing
Module 5
11.
Process Costing
Module 5
12.
Operating Costing
Module 5
13.
Marginal Costing
Module 6
14.
Standard Costing & Variance Analysis
Module 6
15.
Budget & Budgetary Control
Module 6
I-11
TAXMANN®
1.
Contents PAGE
Chapter-wise Marks Distribution
I-5
Previous Exams Trend Analysis
I-7
Chapter-wise Comparison with Study Material
I-11
Chapter 1
INTRODUCTION TO COST ACCOUNTING
1.1
MATERIAL COSTS
2.1
Chapter 3
EMPLOYEE COSTS
3.1
Chapter 4
DIRECT EXPENSES
4.1
Chapter 5
OVERHEADS
5.1
Chapter 6
COST ACCOUNTING STANDARDS
6.1
Chapter 7
COST BOOK KEEPING
7.1
Chapter 8
JOB COSTING
8.1
Chapter 9
BATCH COSTING
9.1
I-13
TAXMANN®
Chapter 2
I-14
CONTENTS PAGE
Chapter 10
CONTRACT COSTING
10.1
Chapter 11
PROCESS COSTING
11.1
Chapter 12
OPERATING OF COSTING
12.1
Chapter 13
MARGINAL COSTING
13.1
Chapter 14
STANDARD COSTING AND VARIANCE ANALYSIS
14.1
Chapter 15
BUDGET AND BUDGETARY CONTROL
TAXMANN®
Chapter-wise Solved Paper : December 2023 (Suggested Answers)
15.1
P.1
10
2>=CA02C 2>BC8=6
CHAPTER
A Quick Review Contract Costing is a form of specific order costing where costs are attributed to contracts. Essential features of contract costing: (a) A formal contract is made between customer and supplier. (b) Work is undertaken to customers’ special requirements. (c) The work is for a relatively long duration. (d) The work is frequently constructional in nature. (f) The work is frequently based on site. (g) It is not unusual for a site to have its own cashier and time-keeper. Types of Contracts: (1) Cost-Plus Contracts: Cost-plus contract is a contract where the value of the contract is determined by adding an agreed percentage of profit to the total cost. These types of contracts are entered into when it is not possible to estimate the contract cost with reasonable accuracy due to unstable condition of factors that affect the cost of material, employees, etc. (2) Target-price contracts: In such cases, the contractor receives an agreed sum of profit over his pre-determined costs. In addition, a figure is agreed as the target figure and if actual costs are below this target, the contractor is eligible for bonus for the savings. IMPORTANT DEFINITIONS Cost of Work Certified or Value of Work Certified: A contract is a continuous process and to know the cost or value of the work completed as on a particular date; assessment of the completion of work is carried out by an expert (it may be any professional like surveyor, architect, engineer etc.). The expert, based on his assessment, certifies the work completion in terms of percentage of total work. The cost or value of certified portion is calculated and is known as Cost of work certified or Value of work certified respectively. Payment is made on the basis of work certified. 10.1
TAXMANN®
(e) The method of costing is similar to job costing.
10.2
CH. 10 : CONTRACT COSTING
Cost of Work Uncertified: It represents the cost of the work which has been carried out by the contractor but has not been certified by the expert. It is always shown at cost price. There is no role of work uncertified in payment. Work-in-Progress: It costing refers to the work which is not complete on the reporting date. Value of the work-in-progress = the cost of work completed, both certified and uncertified + the cost of work not yet completed + amount of estimated/notional profit (reserve for contingencies). [amount received from the contractee is subtracted from the WIP in the Balance Sheet] Retention Money: In a contract, a contractee generally keeps some amount payable to contractor with himself as security deposit. To ensure that the work carried out by the contractor is as per the plan and specifications, it is monitored periodically by the contractee. This security money upheld by the contractee is known as retention money. Retention money = Value of work certified- Payment made to contractor.
TAXMANN®
Notional Profit: It represents the difference between the value of work certified and cost of work certified. Estimated Profit: It is the excess of the contract price over the estimated total cost of the contract. [can be calculated and feasible to calculate only in case of contracts whose end is near]. Escalation Clause: In order to protect the contractor from the rise in the price, an escalation clause may be inserted in the contract. Escalation clause in a contract empowers a contractor to revise the price of the contract in case of increase in the prices of inputs due to some macro-economic or other agreed reasons. As per this clause, the contract price is increased proportionately if there is a rise in input costs like material, labour or overheads. IMPORTANT FORMULAS Degree of completion of the contract (%) = Work Certified × 100/Contract Price Formulas for transfer of Profit/Loss to Profit and Loss Account If the contract is in its early stages: No profit should be credited to Profit and Loss Account. As a general rule, no profit should be recognised unless a contract is at least 25% complete. If the contract is reasonably advanced: In this case the portion of notional profit to be transferred to Profit & Loss Account is based on the degree of completion of the contract. 1. If the degree of completion of work is above 25% but less than 50% of total work 1/3 × Notional Profit × Cash Received/Work Certified
CH. 10 : CONTRACT COSTING
10.3
2. If the degree of completion of work is more than or equal to 50% of the total work but less than 90%, 2/3 × Notional Profit × Cash Received/Work Certified If the contract is almost complete (Degree of composition is 90% or more): 1. Estimated Profit × Work Certified/Contract Price 2. Estimated Profit × Work Certified/Contract Price × Cash Received/Work Certified 3. Estimated Profit × Total Cost to date/Estimated Total Cost 4. Estimated Profit × Total Cost to date/Estimated Total Cost × Cash Received/ Work Certified When an incomplete contract reveals a loss:
The whole amount of the loss must be charged to the profit and loss account of the accounting year.
OBJECTIVE QUESTIONS Q.1. Fill in the blanks: WIP appears on the credit side of the contract account when the contract is ……………… at end of the accounting period. [Dec. 2013, 1 Mark] Ans. Incomplete Q.2. A JBC machine was used on a contract site for the period of 7 months and depreciation on it was charged to the contract ` 78,750. If the working life of the machine is 5(five) years and salvage value is ` 25,000, then the cost of JBC machine will be: (A) ` 7,00,000 (B) ` 4,18,750 (C) ` 6,75,000 (D) ` 3,93,750
[Dec. 2014, June 2015, 1 Mark]
Ans. (A) ` 7,00,000 Working Note: Depreciation for one year 78,750 × 12/7 = ` 1,35,000 Depreciation for 5 years 1,35,000 × 5 = ` 6,75,000 Cost of Machine = Total Depreciation plus salvage value ` 6,75,000 + 25,000 = ` 7,00,000
TAXMANN®
PAST EXAMINATION QUESTIONS
10.4
CH. 10 : CONTRACT COSTING
Q.3. Match the items in Column I with the most appropriate items in Column II. State the item No. only: Item
Column I
Item
Column II
(i)
Escalation Clause
(A)
Operating Costing
(B)
Contract Costing
[June 2015, Dec. 2018, Dec. 2019, Dec. 2021, 1 Mark] Ans. (B) Contract Costing Q.4. A contract is expected to be 80% complete in its first year of construction, as certified. The Contractee pays 75% of the work certified as and when certified and makes final payment on the completion of the Contract. The following information is available for the first year: (`) Cost of Work uncertified
80,000
Profit transferred to Profit and Loss Account at the end of year 1 on incomplete contract
60,000
TAXMANN®
Cost of Work to date
8,80,000
Compute the Notional Profit. [Dec. 2015, 2 Marks] Ans. As the Contract is 80% complete, 2/3rd of Notional Profit on Cash basis has been transferred to P/L A/C in the 1st year of the contract. Thus, amount transferred to P/L A/C = 2/3 × Notional Profit × % of cash received Or, ` 60,000 = 2/3 × Notional Profit × 75% Or, Notional Profit = 60,000 × (3/2) × (100/75) = ` 1,20,000 Q.5. Match the items in Column I with the most appropriate items in Column II. State the item no. only Item
Column I
Item
Column II
(i)
Profit earned on a contract Account
(A)
Actual profit
(B)
Notional Profit
[June 2017, 1 Mark]
Ans. (B) Notional Profit Q.6. In the context of Contract a/c, work completed and not yet certified will be shown (A) at cost plus + 2/3rd of the notional profit under ‘Completed Work’. (B) at cost plus notional profit less retention money under ‘Completed Work’.
10.5
CH. 10 : CONTRACT COSTING
(C) at cost under ‘Completed Work’. (D) at cost under WIP a/c.
[June 2017, Dec. 2021, 1 Mark]
Ans. (D) at cost under WIP a/c Q.8. _______ is to provide for any future decrease in price etc., so that the benefit may be passed on to the contractee. (A) Reserve Clause (B) Escalation Clause (C) Contract clause (D) Retrospective Clause
[Dec. 2017, 1 Mark]
Ans. (B) Escalation Clause Q.9 Contract Costing is often termed as a variant of the Job Costing System. [True/False] [Dec. 2017, 1 Mark]
Ans. True Q.10 In contract costing, the cost unit is ________________. [June 2019, 1 Mark]
Q.11. Cost plus contract is usually entered into those cases where: (A) Cost of certified and uncertified work (B) Cost can be easily estimated (C) Cost of certified work (D) None of the above
[Dec. 2022, 1 Mark]
Ans. (D) None of the above
THEORY QUESTIONS Q.1. Explain the treatment of profits on incomplete work in contract accounts. [June 2013, 5 Marks]
Ans. Treatment of profits on incomplete work in contract accounts: (i) In case of contracts which are less than 25% complete, on profits should be taken into consideration and consequently no credit should be taken to Profit and Loss Account. (ii) In case of contracts which are more than 25% complete, but less than 50% complete, the following method should be used for computing the profit to be credited to the Profit and Loss Account:-1/3 x Notional Profit x Cash Received/ Work Certified.
TAXMANN®
Ans. Per Contract
10.6
CH. 10 : CONTRACT COSTING
Notional Profit is the difference between the value of work certified and cost of work certified. It is computed in the following manner. Notional Profit = Value of work certified – [cost of work to date – cost of work completed but not certified]. (iii) In case of contracts complete between 50% and 90% [more than 50% but less than 90%] the following method is used for computing the profit to be credited to the Profit and Loss Account:- 2/3 × Notional Profit × Cash Received/Work Certified. (iv) In case of contracts completed 90% or more than that, it is considered to be almost complete. In such cases, the estimated total profit is first determined by deducting the total costs to date and additional expenditure necessary to complete the contract from the contract price.
The portion of profit so arrived is credited to the Profit and Loss Account by suing any of the following formula:— Method I – Estimated Profit × Work Certified/Contract Price Method II – Estimated Profit × Work Certified/Contract Price × Cash Received/ Work Certified or Estimated profit × Cash Received/Contract Price TAXMANN®
Q.2. What are the advantages of cost plus contract?
[June 2014, 5 Marks]
Ans. Advantages of Cost Plus contract: The advantages of cost plus contract are discussed below: — (a) It protects the contractor from the risk of fluctuation of price of factor of production. (b) Reasonable profit of the contractor is ensured as such profit is added to the actual cost incurred by him to determine the price of the contract. (c) The contractor pay a fair price for the work as price is based on actual cost which can be verified by the contractee from the books and documents of the contractor. (d) At the time of unstable conditions this type of contract is most advantageous both to the contractor and the contractee. Q.3. Write short note on Retention money in contract costing [June 2014, 5 Marks]
Ans. Usually the contractee stipulates in the contract deed that he would withhold a part of the contract price to be paid at a later stage after completion of the contract. This is to make sure that the contractor has performed all work relating to contract on the most satisfactory manner and that no repair work arises within a prescribed time limit. The amount so withheld by the contractee is known as retention money. It safeguards the interest of the contractee against the contractor, who may at time perform sub-standard work and gain there from.
CH. 10 : CONTRACT COSTING
10.7
This is done on the value of contract completed and certified by the architect/ surveyor appointed by the contractee. The retention money will be paid once the contract is completed to the customer’s satisfaction. The main advantage of Retention Money is safe-guarding the contractee against the default risk of contract. Q.4. Write Short Note on Cost Plus Contract [Dec. 2014, 5 Marks; Dec. 2021, 3 Marks]
Ans. In this type of contracts the contractor is usually entitled to a stipulated amount of profit in addition to actual cost of the service. The amount of profit to be added to the actual cost of contract may be in the form of fixed amount on a percentage on actual cost. This type of contract is generally entered into for executing special type of work which is not usually undertaken by the contractor.
Contractor generally receives a reasonable profit. He is protected from any loss or unusual risk. Contractee can ensure a fair price of the contract because the contractee is entitled to verify the books of contractor.
NUMERICAL PROBLEMS Q.1. Compute a conservative estimate of profit on a contract (which has been 90% complete) from the following particulars. Also calculate the proportion of profit to be taken to Profit & Loss Account under any three methods. ` 4,50,000
Total expenditure to date Estimated further expenditure to complete the contract (including contingencies) 25,000 Contract price 6,12,000 Work Certified 5,50,800 Work not certified 34,000 Cash received 4,40,640 [Dec. 2013, 5 Marks]
TAXMANN®
Examples of this type of contracts are construction work during war, production of newly designed ship, etc. This type of contract is advantageous both to the contractor and the contractee.
10.8
CH. 10 : CONTRACT COSTING
Ans. Computation of estimated Profit Particulars Contract Price Cost till date Further estimated cost Estimated profit
Amount (`) 6,12,000 (4,50,000) (25,000) 1,37,000
Computation of PROFIT to be transferred to profit & Loss Account under different Methods: (i) Estd. Profit × Work certified/contract price = 1,37,000 × 5,50,800/6,12,000 = ` 1,23,300. (ii) Estd. Profit × [Work certified/contract price] × [cash received/work certified] = 1,37,000 × [5,50,800/6,12,000] × [4,40,640/5,50,800] = ` 98,640. (iii) Estd. Profit × Cost of work to date/Estd. Total cost = 1,37,000 × 4,50,000/4,75,000 = ` 1,29,789.47
TAXMANN®
(iv) Estd. Profit × [cost of work to date/Estd. Total cost] × [cash received/work certified] = 1,37,000 × [4,50,000/4,75,000] × [4,40,640/5,50,800] =` 1,03,831.58
Q.2. BATRON LTD., a contractor commences the contract No. HB-108 on 1st July, 2013. The details about the contract for the year ending 31st March, 2014 were following: (`) Contract Price 3,000,000 Materials issued 800,000 Material transferred from contract no. 101 50,000 Wages paid 631,000 Wages outstanding 35,000 Supervisor’s Salary 180,000 Establishment Exp. 41,000 Plant Issued 1,000,000 Material costing ` 15,000 was sold for ` 11,000 and plant costing ` 80,000 returned to stores on 31st December, 2013. A crane costing ` 2,000,000 has been on the contract site for 73 days. Its working life is estimated at 6 years and its scrap value at ` 110,000. Depreciation on plant is to be charged @15% per annum. Up to 31st March, 2014, 3/4 (Three-fourth) of the contract was completed but architect’s certificate has been issued covering 2/3 of the contract price and 15,00,000 had been received in cash on account.
Required: (a) Prepare the Contract No. HB-108 Account for the year ended March 31, 2014.
CH. 10 : CONTRACT COSTING
10.9
(b) State as to how much Profit should be credited to Profit and Loss Account for the year ended March 31, 2014. [Dec. 2014, 10 Marks]
Ans. BATRON LTD. Contract No. HB-108 Account for the year ended March 31, 2014 Particulars To Material Issued To Material Transferred from contract no. 101 To Wages Paid To Wages Outstanding To Supervisor’s salary
` Particulars 8,00,000 By Bank A/c (Material Sold) 50,000 By Profit & Loss A/c (loss on sale of material) 6,31,000 By Plant returned 35,000 By Plant at site 1,80,000 By Work in Progress:
` 11,000 4,000 74,000 8,16,500
41,000 Work Certified
20,00,000
10,00,000 Work uncertified 63,000
1,57,875
To Notional Profit c/d
2,63,375 30,63,375
To Profit & Loss A/c To WIP A/c (Reserve)
30,63,375
1,31,687 By Notional Profit b/d 1,31,688
2,63,375
2,63,375
2,63,375
Working Notes: (i) Cranes depreciation = [ (2000000 – 110000)/6] × 73/365 = ` 63000 (ii) Value of the plant returned to store on 31st December, 2013: Cost of plant returned on 1/7/13 Less: Depreciation from 1/7/13 to 31/12/13 = (80000 × 15/100) × 6/12
` 80,000 ` 6,000 ` 74,000
(iii) Plant at site on 31/3/14 = 10,00,000 – 80,000 = 9,20,000 – Dep. 9,20,000 × 15/100 × 9/12 = 9,20,000 – 1,03,500 = ` 8,16,500 (iv) Value of work certified = 30,00,000 × 2/3 = ` 20,00,000 (v) Cost of work uncertified: Total cost upto 31/3/14 = 8,00,000 + 50,000 + 6,31,000 + 35,000 + 1,80,000 + 41,000 + 10,00,000 + 63,000 – 11,000 – 4,000 – 74,000 – 8,16,500 = ` 18,94,500 Work completed upto 31/3/14 = ¾ but work certified = 2/3 So, work uncertified = 3/4 – 2/3= (9 – 8)/12 = 1/12 Hence, cost of work uncertified = 18,94,500 × 1/12 = ` 1,57,875
TAXMANN®
To Establishment Expenses To Plant Issued To Crane Depreciation
10.10
CH. 10 : CONTRACT COSTING
(vi) Since, work certified is 50% or above, Profit transferred to P/L A/c = Notional profit × 2/3 × (cash received/work certified) = ` 2,63,375 × 2/3 × (15,00,000/20,00,000) = ` 1,31,687 Q.3. A company undertook a contract for construction of a large building complex. The construction work commenced on 1st April 2016 and the following data are available for the year ended 31st March 2017: Particulars
(` ’000)
Contract price
35,000
Work certified
20,000
Progress payments received
15,000
Materials issued to site
7,500
Planning and estimating costs
1,000
Direct wages paid
4,000
Materials returned from site
250
TAXMANN®
Equipment hire charges
1,750
Wage related costs
500
Site office costs
678
Head office expenses apportioned
375
Direct expenses incurred
902
Work not certified
149
The contractor owns a plant which originally cost ` 20 lakhs and has been continuously in use only in this contract throughout the year. The residual value of the plant after 5 years of life is expected to be ` 5 lakhs. Straight line method of depreciation is in use. As on 31st March 2017, the direct wages due and payable amounted to ` 2,70,000 and the materials at site were estimated at ` 2,00,000. (i) Prepare the contract account for the year ended 31st March 2017. Present figures in (` ’000) (ii) Compute the amount of profit/loss to be taken to the profit and loss account of the year ending 31-3-2017. [June 2017, 7 Marks] Ans. Contract Account for the year ended March 31, 2017 Particulars
` ’000
` ’000
Particulars
To Material Issued
7,500 By Material returned to stores
250
To Direct Wages Paid and accrued
4,270 By Material at site
200
To Wage related costs
500 By Work-in-progress:
To Direct Expenses
902 Work Certified
20,000
CH. 10 : CONTRACT COSTING
Particulars
` ’000
Particulars
To Equipment Hire Charges
1,750 Work Uncertified
To Planning and estimation cost
1,000
To Site office Costs
678
To HO Expenses (Apportioned)
375
To Depreciation (2000500)/5
300
To Notional Profit c/d
3,324 20,599
10.11 ` ’000 149
20,599
To Profit & Loss A/c
1662 By Notional Profit b/d
To WIP A/c (Reserve)
1662 3324
3324
3324
% of Work Certified: (20,000/35,000) × 100 = 57.14%
Q.4. A contractor has undertaken a construction work at a price of ` 5,00,000 and begun the execution of work on 1st January, 2016. The following are the particulars of the contract up to 31st December, 2016. Particulars Amount (`) Machinery 30,000 Materials 1,70,698 Wages 1,48,750 Direct expenses 6,334 Uncertified work 9,000 Wages outstanding 5,380 Value of plant on 31-12-2016 23,000
Particulars Amount (`) Overheads 8,252 Materials returned 3,098 Work certified 3,90,000 Cash received 3,60,000 Materials on 31-12-2016 3,766
It was decided that the profit made on the contract in the year should be arrived at by deducting the cost of work certified from the total value of the architect’s certificate, that 1/3 of the profit so arrived at should be regarded as a provision against contingencies and that such provision should be increased by taking to the credit of Profit and Loss Account only such portion of the 2/3rd profit, as the cash received to the work certified. Prepare the Contract Account showing the profit on the Contract. [Dec. 2017, 7 Marks]
TAXMANN®
Profit to be taken to Profit & loss Account = 2/3rd Notional Profit × Cash received/ Work certified = 2/3 × 3,324 × 15,000/20,000 = ` 1,662
Cost Accounting (CA) | CRACKER AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE
: : : : : : :
TARUN AGARWAL TAXMANN 01/01/2024 2ND EDITION 9789357784627 506 PAPERBACK
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Description This book is prepared exclusively for the Intermediate Level of Cost & Management Accountancy Examination requirement. It covers the past exam questions & answers per the new ICMAI syllabus. The Present Publication is the 2nd Edition for the CMA Intermediate | New Syllabus | June 2024 Exam. This book is authored by CA Tarun Agarwal, with the following noteworthy features:
Strictly as per the New Syllabus of ICMAI
Coverage of the book concludes: n
n
n
[Past Exam Questions] till CMA-Intermediate Dec. 2023 Exam (Chapterwise) u
Part I – Objective Questions [MCQs, Blanks, True/False, Match and Short Sums]
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Part II – Descriptive Question
u
Part III – Numerical Problems
[Introduction] to each Chapter covering: u
Important Definitions
u
Concepts
u
Formulas
[Sample Questions] for Topics newly introduced in the syllabus
[Marks Distribution] is given Chapter-wise from June 2017 onwards
[Previous Exam Trend Analysis] is provided in this book from Dec. 2023 onwards
[ICMAI Study-Material Comparison] is also given Chapter-wise
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