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Costing
Multipl Batch
e Costin
Costing g
COSTIN
G
“The technique
Operati Single
and process
ng Costin
Costing
of g
ascertaining
costs.”
Process
Job
Costing
Costin
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 Contract
• Fixed Price is agreed
• Deductions are made for Defectives and Penalties
• Extra money for additional work
WORK WORK
CERTIFIED UNCERTIFIED
If Loss,
Transferred to Debit
side of P&L
Account
If Profit,
1 Part Transferred to
Credit side of P&L
Account as per the
work Completed
Another to WIP A/c
If Loss,
Transferred to Debit
side of P&L
Account
As per the % of Work Completion, 3 stages of work completed
is made which helps in transferring the amount to P&L Account.
% of Work
Stage Name Formulae
Completion
Substantial
50% to 100%
Work Done
LIABILITIES Amount ASSETS Amount
Work in Progress:
Work Certified XXX
Costing P&L Account (+)Work
XXX Uncertified XXX
Contractee A/c XXX (-) Cash Received (XXX)
Unpaid Expenses XXX (-) WIP Reserve (XXX) XXX
Unpaid Wages Plant in Hand
XXX (Less Depreciation) XXX
Material on Hand XXX
Cash XXX
Shubham Verma
varma.shubham0365@gmail.com