Contract Costing - Dani Ki Costing - CA IPCC Video Lectures
Contract Costing - Dani Ki Costing - CA IPCC Video Lectures | Contract Costing - Dani Ki Costing - CA IPCC Video Lectures | Contract Costing - Dani Ki Costing - CA IPCC Video Lectures | Contract Costing - Dani Ki Costing - CA IPCC Video Lectures | Contract Costing - Dani Ki Costing - CA IPCC Video Lectures
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Dani
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Contract
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Contract Costing
It is reasonable that the costing of production or service in made
after is completion. But when there is a series of activities connected to
carry out the work, and it takes relatively longer period of time which may
exceed one year requires recording of costing is to be so done that the profit
of each contract in progress is transferred to profit and loss account on
timely basis. Thus contract costing in simple words is a form of specific order
costing where job undertaken is relatively larger and may continue for a longer
period of time.
There are different formulas to calculate profit / loss of
incomplete contracts based on the state of completion of contract. Different
terms and conditions are kept in the contract which may affect the amount of
profit on such contract. One of such example is inclusion of escalation clause.
It is helpful for the contractors to maintain their profit in case of very
heavy price rice of material, labour or other inputs.
Costing of contract has characteristics like bulk of expenses are
considered as direct expense, Separate accounts are maintained for all the
contracts, etc. The base of calculating cost of the contract is contract
itself. Different calculations are considered for calculation of contract cost
such as material cost, labor cost, direct expenses, indirect expenses etc.
Major calculation required to ascertain the true profit of contract
is calculation of progress payment, retention of money, notional profit, etc.
Where, notional profit is the difference between value of work certified and
actual cost of work certified. Estimated profit is also calculated at the time
of preparing budget of the contract.
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