AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |
Back to Blog
Accounting for contractor expenses8/18/2023 ![]() The following example shows how different material items should be treated in the contract account. If so, then the contract receiving the materials is debited and the contract sending the materials is credited. Sometimes, materials are transferred from one contract to another contract. The values of the material in hand at the end of the accounting period will appear on the credit side of the contract account. Materials that are lost, stolen, or destroyed by accident (e.g., in a fire) will be charged to the profit and loss account by way of abnormal loss. Materials returned to suppliers and stores will appear on the credit side.Īmounts received from the sale of surplus materials will be credited to the contract account, while any profit or loss arising from them is to be transferred to the profit and loss account by way of abnormal items. The cost of materials purchased directly or issued from stores will appear on the debit side of the contract account. This section provides an overview of the treatment of the various items that are included in the contract account. Treatment of Specific Items in a Contract Account Example of Contract AccountĪn example of a contract account is given below. The other items to be shown on the credit side of the contract account are contract price (in completed contracts) and the work-in-progress, which consists of the value of certified work and the cost of uncertified work (in incomplete contracts). Similarly, profit or loss arising from the sale of the plant or materials should also be transferred to the profit and loss account by way of abnormal items. Materials and plant stolen or destroyed are abnormal losses and should be charged to the profit and loss account. Materials transferred to other contracts, stolen, destroyed, sold, or in hand.Similarly, expenses accrued or outstanding on the contract at the end of the accounting period are also debited to the contract account.Īt the end of the accounting period, the following will appear on the credit side of the account: Explanation of Contract AccountĪll expenses incurred in fulfilling a contract (e.g., materials, wages, direct expenses, cost of sub- contracts, cost of special plants, and indirect expenses) are debited to a contract account. When a contractor has accepted a contract, a separate account is opened for each contract, bringing together all the costs relating to a particular contract.Ī serial number is assigned to each contract, which is known as a contract account.
0 Comments
Read More
Leave a Reply. |