ANUJ KUMAR SINGH +919899600701

CONTRACT ACCOUNTING
Illustration 7.6. Utkal Construction Limited took a contract in 2012 for road
construction. The contract price was ` 10,00,000 and its estimated cost of completion
would be ` 9,20,000. At the end of 2012, the company had received ` 3,60,000
representing 90 per cent of work certified. Work not yet certified was ` 10,000.
Expenditure incurred on the contract during 2012 was as follows :
Materials ` 50,000; Labor ` 3,00,000, Plant ` 20,000.
Materials costing ` 5,000 were damaged and had to be disposed of for ` 1,000. Plant
is considered as having depreciated by 25 per cent.
Prepare Contract Account for 2012 in the books of Utkal Construction Limited. Also
show all possible figures that can be reasonably credited to Profit and Loss Account
in respect of the contract.
Utkal Construction Limited
CONTRACT ACCOUNT FOR 2012
` `
To Materials 50,000 By Materials damaged 5,000
To Labour 3,00,00 By Plant at site 15,000
0
To Plant 20.000 By Work-in-progress:
To Profit c/d 60.000 Value of Work certified
4,00,000
Cost of Work uncertified 4,10,000
10,000
4,30.000 4,30,000
To P & L A/c 18.000 By Profit b/d 60,000
To Work-in-Progress 42,000 .,—
(Reserve)
60,000 60,000
Amount of Profit that may be taken to Profit & Loss Account:
(() The Contract Price is ` 10,00.000 and the value of work certified is ` 4,00,000.
(a) 1/3 of the profit earned to date may be transferred to P & L A/c :
 ANUJ KUMAR SINGH +919899600701

60,000 x 1/3= ` 20,000

(b) Alternatively, the amount calculated under (a) above may be reduced on cash
basis :
20,000 x 90/100 =` 18,000
(ii) The estimated profit is ` 80,000
(a) Profit to be transferred to P & L account may be calculated on the basis of work
certified :
80,000x4,00,000/10,00,000 = ` 32,000
(b) Profit calculated under (a) above may further be reduced on cash basis :
32,000 x 90/100 = ` 28,800
Illustration 7.7. Modern Construction Ltd. has taken two contracts on 1 st October,
2007. The position of contracts on 30th September, 2008 is as follows :
Contract I Contract II
` `
Contract Price 27,00,000 60,00,000
Materials 5,80,000 10,80,000
Wages Paid 11,24,000 16,50,000
Other Expenses 28,000 60,000
Plant at Site 1,60,000 3,00,000
Unused Materials at Site 40,000 60,000
Wages Payable 36,000 54,000
Other Expenses Due 4,000 9,000
Work Certified 16,00,000 30,00,000
Cash Received 12,00,000 , 22,50,000
Work completed but not yet certified 80,000 90,000
The Plant at site is to be depreciated at 10%.
Prepare the contract accounts in respect of each contract showing the notional profit
and also the profit to be transferred to Profit & Loss A/c. [B.Com. (Pass), Delhi
2010]
Solution :
 ANUJ KUMAR SINGH +919899600701

CONTRACT ACCOUNT
Particulars Contra Contra Particulars Contract Contra
ct 1 ct ct
I II I II
To Materials 5,80,00 10,80,0 By Work-in
0 00 Progress
To Wages paid 11,24,0 16,50,0 Work Certified 16,00,00 30,00,0
00 00 0 00
To Other Expenses 28,000 60,000 Work Uncertified 80,000 90,000
To Depreciation on Plant 16,000 30,000 By Materials at 40,000 60,000
Site
To P&LA/c 1,15,000* By P&LA/c 28,000**
To Work-in-Progress 3,30,00
1,15,000 0
(Reserve)
17,48,0 31,50,0 17,48,00 31,50,0
00 00 0 00
Working Notes:
*Contract I : Profit to be taken to P & L A/c
: 3,30,000 x 2/3 x 3/4
: ` 1,15,000
**Contract 2 : The whole loss has been transferred to P & L Account.
Illustration 7.8. Delux Limited undertook a contract for ` 5,00,000 on 1st July,
2006. On 30th June 2007 when the accounts were closed, the following details about
the contract were gathered :
`
Materials purchased 1,00,000
Wages paid 45,000
General Expenses 10,000
Plant Purchased 50,000
 ANUJ KUMAR SINGH +919899600701

Materials on hand 30.6.2007 25,000

Wages Accrued 30.6.2007 5,000
Work Certified 2,00,000
Cash Received 1,50,000
Work Uncertified 15,000
Depreciation on Plant 5,000
The above contract contained an escalation clause which read as follows :
"In the event of price of materials and rates of wages increase by more than 5% the
contract price will be increased accordingly by 25% of the rise in the cost of
materials and wages beyond 5% in each case."
It was found that since the date of signing the agreement the prices of materials and
wage rates increased by 25%. The value of work certified does not take into account
the effect of the above clause.
Prepare the contract account. Your workings should form part of the answer.
Solution :
CONTRACT ACCOUNT
` `
To Materials 1,00,00 By Work-in-
0 Progess:
To Wages (45,000 + 5,000) 50.000 Work Certified 2,00,000
To General Expenses 10.000 Work Uncertified 15,000 2,15,000
To Depreciation on Plant 5,000 By Contract
escalation
To Profit transferred to : P. & 20,000 (Working Note 1) 5,000
L. A/c
Work-in-progress By Materials in hand 25,000
(Working Note 2) 60,000
2.45,00 2,45,000
0
Working Notes :
 ANUJ KUMAR SINGH +919899600701

1. Escalation Charges :
(a) Materials
Effect of increase in price of materials :
Total Increase (`) Upto 5% (`) Beyond (`)
75,000 x 25/125 75,000 x 5/125
= 15,000 =3,000 =12,000
(b) Wages
Effect of increase in wage rates :
50,000 x 25/125 50,000 x 5/125
= 10,000 =2,000 =8,000
Total Increase (a) + (b)
= 25,000 =5,000 =20,000
Increase in Contract
Price (25% increase beyond 5%) = 20,000 x 25/100 = 5,000
2. Computation of Profit transferred to Profit and Loss Account: ,
Since more than 1 /4th but less than 1/2 of the contract has been completed, 1 /3 or
the profit earned as reduced on cash basis has been transferred to Profit & Loss
Account.
80,000 x 1/3 x 1,50,000/2,00,000 = ` 20,000
Illustration 7.9. The Hindustan Construction Company Ltd. has undertaken the
construction of a bridge over the river Yamuna for a Municipal Corporation. The
value of the contract is ` 12,50,000, subject to a retention of 20% until one year after
the certified completion of the contract, and final approval of the corporation's
engineer. The following are the details as shown in the books on 30th June, 2000 :
`
Labour on site 4,05,000
Materials direct to site less returns 4,20,000
Materials from store 81,200
Hire and use of plant—plant upkeep account 12,100
Direct Expenses 23,000
General overhead allocated to the Contract 37,100
 ANUJ KUMAR SINGH +919899600701

Material in hand on June 30,2000 6,300

Wages accrued on June 30, 2000 7,800
Direct expenses accrued on June 30, 2000 1,600
Work not yet certified at cost 16,500
Amount certified by the Corporation Engineer 11,00,000
Cash received on account 8,80,000
Prepare (a) Contract account, (b) Contractee's account and (c) how the relevant items
would appear in the Balance Sheet. [B.Com. (Pass), Delhi 2011]
Solution :
CONTRACT ACCOUNT
` `
To Materials : By Materials in 6,300
Hand
direct to site 4,20.000 By Work-in-
Progress :
from store 81.200 5,01,20 Work certified 11,00,000
0
To Labour at site 4,05 000 Work uncertified 16.500 11,16,5
00
Add: accrued 7.800 4,12,80
0
To Direct expenses 23,000
Add: accrued 1.600 24,600
To Hire and use of 12,100
plant
To General overhead 37.100
To Profit c/d 1.35.00
0
11.22.8 11,22,8
00 00
 ANUJ KUMAR SINGH +919899600701

To Profit and Loss 72,000 By Profit b/d 1,35,00

A/c* 0
To Work-in-Progress
A/c
(Reserve) 63,000
1,35,00 . 1,35,00
0 0
*The profit taken to Profit and Loss Account has been arrived at as follows :
1,35,000 x 2/3 x 80/100 =` 72,000
If it is desired that the contract account should show the value of work-in-progress,
and only the amount of profit taken to the Profit and Loss Account, the Contract
Account will appear as given below:
CONTRACT ACCOUNT
` `
To Materials: By Materials in Hand 6,300
direct to site 4,20,000 By Work-in-Progress2: 10,53,5
00
from store 81.200 5,01,200
To Labour at site 4,05,000
Add: accrued 7.800 4,12,800
To Direct expenses 23,000
Add: accrued 1,600 24,600
To Hire and use of 12,100
plant
To General 37,100
overhead
To Profit transferred to Profit
and
Loss A/c1 72,000
10,59,80 10,59,8
 ANUJ KUMAR SINGH +919899600701

0 00
1. & 2. Please see working notes.
CONTRACTEE'S ACCOUNT
` `
To Balance c/d 8,80,00 By Cash A/c 8,80,000
0
EXTRACTS FROM BALANCE SHEET AS ON 30TH JUNE, 2000
Liabilities ` Assets `
Work-in-Progress: `
Wages Accrued 7,800 Value of work 11,00,00
Certified 0
Cost of work 16,500
Uncertified
Direct Expenses 1,600 11,16,50
0
accrued Less : Reserve 63,000
10,53,50
0
Less : Amount received from
the contractee 8,80,000 1,73,50
0

`
Total expenditure on the contract 9,87,800
Less : Value of materials in hand 6,300
9,81,500
Value of work certified 11,00,000
Cost of work uncertified 16,500 11,16,50
0
 ANUJ KUMAR SINGH +919899600701

Total profit made to date ? 1,35,000

Profit to be transferred to profit and loss account = 1,35,000 x 2/3 X 80/100 = `
72,000
Profit to be carried forward as Reserve = ` 63,000
(2) The value of work-in-progress has been ascertained as follow : `
Value of work certified 11,00,00
0
Cost of work uncertified 16,500
11,16,50
0
Less : Reserve 63,000
10,53,50
0
Illustration 7.10. A company undertook a contract for construction of a large
building complex. The construction work commenced on 1st April, 2006 and the
following data are available for the year ended 3 i st March, 2007.
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
Plant Hire Charges 1,750
Wage K(sic)ed Costs 500
Site Office Costs 678
Head Office Expenses Apportioned 375
 ANUJ KUMAR SINGH +919899600701

Direct Expenses Incurred 902

Work Not Certified 149
The contractors own a plant which originally costed ` 20 lacs has been continuously
in use in this contract throughout the year. The residual value of the plant after 5
years of life is expected to be ` 5 lacs. Straight Line Method of depreciation is in use.
As on 31 st March, 2007 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 31 st March, 2007.
(ii) Show the calculation of profit to be taken to the profit and loss account of the
year.
(iii) Show the relevant balance sheet entries.
Solution :
CONTRACT ACCOUNT
for the year ended 31st March, 2007 (` in '000)
` `
To Materials issued to Site 7,500 By Plant at Site 1,700
To Planning and Estimating 1,000 (20,00,000 - 3,00,000)
Costs
To Direct Wages paid 4,000 By Materials at Site 200
Add: Due 270 4,270 By Materials Returned 250
To Plant 2,000 By Work-in-Progress :
To Plant Hire Charges 1,750 Work Certified 20,000
To Wages Related Costs 500 Work Uncertified 149 20,149
To Site Office Costs 678
To Head Office Expenses 375
apportioned
To Direct Expenses Incurred 902
To Profit c/d 3,324
22,299 22,299
 ANUJ KUMAR SINGH +919899600701

To P. & L. A/c 1,662 By Profit b/d 3,324

To Work-in-Progress (Reserve) 1,662
3,324 3,324
EXTRACTS FROM BALANCE SHEET
as on 31st March, 2007 (` in '000)
Liabilities ` Assets `
Direct Wages Due 270 Work-in-Progress:
Work Certified 20,000
Work Uncertified 149
20,149
Less: Reserve 1,662
18,487
Less : Cash Received 15,000 3,487
Plant at Site 1,700
Material at Site 200
1. Profit to be taken to P. & L. account = ` 3,324 x 2/3 x 15,000/20,000 = ` 1,662.
Illustration 7.11. The following information relates to a building contract for `
10,00,000 :
Particulars 2005 2006
` `
Materials issued 3,00,000 84,000
Direct wages 2,30,000 1,05,000
Direct expenses 22,000 10,000
Indirect expenses 6,000 1,400
Work certified 7,50,000 10,00,000
Work uncertified 8,000 —
Material at site 5,000 7,000
 ANUJ KUMAR SINGH +919899600701

Plant issued 14,000 2,000

Cash received from contractor 6,00,000 10,00,000
The value of plant at the end of 2005 and 2006 was ` 7,000 and ` 5,000 respectively.
Prepare (i) Contract Account, (ii) Contractee Account for two years 2005 and 2006
taking into consideration such profit for transfer to Profit and Loss Account as you
think proper.
Solution :
CONTRACT ACCOUNT FOR 2005
` `
To Materials issued 3,00,000 By Materials as site 5,000
To Direct wages 2,30,000 By Plant at site 7,000
To Direct expenses 22,000 By Work-in-
progress:
To Indirect expenses 6,000 Work certified 7,50,000
To Plant issued 14,000 Work uncertified 8,000 7,58,000
To Profit c/d 1,98,000
7,70,000 7,70,000
To Profit & Loss a/c* 1,05,600 By Profit b/d 1,98,000
To Work-in-progress 92,400
1,98,000 1,98,000
*Profit taken to Profit & Loss A/c :
= Total Profitx 2/3 x Cash Received/Work Certified
= ` 1,98,000 x 2/3 x 6,00,000/7,50,000 = ` 1,05.600
CONTRACTEE'S ACCOUNT
1998 ` `
To Balance c/d 6,00,000 By Cash 6,00,000
1999
To Contract A/c 10,00,00 By Balance b/d 6.00,000
0
 ANUJ KUMAR SINGH +919899600701

By Cash 4,00,000
10,00,00 10,00,00
0 0
CONTRACT ACCOUNT FOR 2006
` `
To Materilsat site b/d 5,000 By Materials at site 7,000
To Plant at site b/d 7,000 By Plant at site 5,000
To Work in progress b/d 6,65,60 By Contractee's A/c 10,00,00
0 0
(` 7,58,000-` 92,400)
To Material issued 84,000
To Direct wages 1,05,00
0
To Direct Expenses 10,000
To Indirect Expenses 1,400
To Plant issued 2,000
To Profit & Loss A/c 1.32,00
0
10,12,0 10,12,00
00 0
Illustration 7.12. Mr. Richardson undertook a contract for` 75,00,000 on an
arrangement that 80% of the value of the work done, as certified by the architects of
the contractee should be paid immediately, and the remaining 20% be retained until
the contract was completed.
In 2004, the amounts expended were : Materials ` 9,60,000, Wages ` 8,50,000,
Carriage ` 30,000, Cartage ` 5,000, Sundry expense ` 35,000. The work was certified
for ` 18,75,000 and 80% of this was paid as agreed.
In 2005, the amounts expended were: Materials ` 11,00,000, Wages ` 11,50,000
Carriage ` 1,15,000, Cartage ` 10,000, Sundry expenses ` 20,000. Three-fourths of
the contract was certified as done by 31 st December and 80% of this was received
accordingly. The value of the unused stock and work-in-progress uncertified was
 ANUJ KUMAR SINGH +919899600701

ascertained at ` 1,00,000.
In 2006, the amounts expended were : Materials ` 6,30,000, Wages ` 8,50,000,
Cartage ` 30,000, Sundry expenses ` 15,000. The whole contract was completed on
30th June.
Show how the contract account, work-in-progress account and the contractee's
account would appear in each of these years in the books of the contractor assuming
that balance due to him was received on completion of the contract. Also show the
relevant items in the Balance Sheet.
Solution :
CONTRACT ACCOUNT
2004 ` `
To Materials 9,60,000 By Work-in-progress :
To Wages 8,50,000 Work certified 18,75,00
0
' To Carriage 30,000 By Profit and Loss A/c
To Cartage 5,000 (loss transferred) 5,000
To Sundry expenses 35,000
18,80,00 18,80,00
0 0
2005
To Work-in-
progress :
Work certified 18,75,00 By Work-in-progress:
0
To Materials 11,00,00 Work certified 56,25,00
0 0
To Wages 11,50,00 Work uncertified 1,00,000
0
To Carriage 1,15,000
To Cartage 10,000
To Sundry expenses 20,000
 ANUJ KUMAR SINGH +919899600701

To Profit and Loss 7,76,000

A/c*
To Work-in-progress A/c 6,79,000
(Reserve)
57,25,00 57,25,00
0 0
2006 ` `
To Work-in- By Contractee's Account 75,00,00
progress : 0
Work certified 56,25,000
Work uncertified 1,00,000
57,25,000
Less : Reserve 6,79,000 50,46,00
0
To Materials 6,30,000
To Wages 8,50,000
To Cartage 30,000
To Sundry expenses 15,000
To Profit and Loss 9,29,000
A/c
75.00,00 75,00,00
0 0
Working Notes:
*Profittodate ` 14,55,000
Work certified is more than half of the contract price.
2/3 of profit made to date reduced on cash basis has been transferred to Profit and
Loss Account:
14,55,000 x 2/3 x 80/100 = ` 7,76,000
WORK-IN-PROGRESS ACCOUNT
2004 ` `
 ANUJ KUMAR SINGH +919899600701

To Contract Account 18,75,0 By Balance c/d 18,75,00

00 0
2005
By Balance b/d 18.75,0 By Contract Account (transfer) 18,75,00
00 0
To Contract Account 57,25,0
00
By Contract Account (Reserve) 6,79,000
By Balance c/d 50,46,00
0
76,00,0 76,00,00
00 0
2006
To Balance b/d 50,46,0 By Contract Account (transfer) 50,46,00
00 0
CONTRACTEE'S ACCOUNT
2004 ` `
To Balance c/d 15,00,00 By Cash (80% of` 18,75,000) 15,00,00
0 0
2005
To Balance c/d 45,00,00 By Balance b/d 15,00,00
0 0
By Cash (80% of` 37,50,000) 30,00.00
0
45,00,00 45.00,00
0 0
2006
To Contract Account 75,00,00 By Balance b/d 45,00,00
0 0
By Cash 30,00,00
 ANUJ KUMAR SINGH +919899600701

0
75,00,00 75,00,00
0 0
EXTRACTS FROM BALANCE SHEET (2004)
Liabilities Amount Assets Amount
` `
Work-in-progress 18,75,000
Less: Cash received 15,00,000 3,75,00
0
EXTRACTS FROM BALANCE SHEET (2005)
Liabilities Amount Assets Amount
` `
Work-in-progress : `
Work certified 56,25,000
Work uncertified 1,00,000
57,25,000
Less: Reserve 6.79,000
50,46,000
Less : Cash received 45,00,000 5,46,000
Illustration 7.13. A firm of building contractors began to trade on 1st April, 2000.
The following was the expenditure on the contract for ` 4,00,000 :
Materials issued to contract ` 50,000
Plant used for contract 20,000
Wages 71,000
Other expenses 10,000
Cash received on account to 31 st March, 2000, amounted to ` 1,44,000. The work
certified was of` 1,80,000. Of the plant and materials charged to the contract, plant
which cost ` 4,000 and materials which cost ` 3,000 were lost. On 31st March, 2000
plant which cost ` 3,000 was returned to stores. The cost of work done but uncertified
was ` 1,500 and materials costing ` 2,500 were in hand on site.
 ANUJ KUMAR SINGH +919899600701

Charge 15% depreciation on plant, and take to profit and loss account 2/3 of the
profit received. Prepare a Contract Account, Contractee's Account and Balance
Sheet from the above particulars.
Solution :
CONTRACT ACCOUNT
` `
To Materials ; 50,000 By P. & L.A/c (Plant and
To Plant 20,000 Materials lost)1 7,000
To Wages 71,000 By Plant returned to store
To Other Expenses 10,000 (3,000-450) 2,550
To Profit c/d 53,600 By Materials at site 2,500
By Work-in-progress:
Work uncertified 1,500
Work certified 1,80,00
0
By Plant at site (13,000 - 1,950) 11,050
.. 2,04,60 2,04,60
0 0
To P. & L. Account 28,587 By Profit b/d 53,600
To Work-in-progress A/c 25,013
(Reserve)
53,600 53,600
Notes : (1) Profit to be taken to P. & L. A/c has been calculated as under:
` 53,600 x 2/3 x 1,44,000/1,80,000 = ` 28,587

(2) Value of plant at site- `

Cost of Plant ` 20,000
Less: Plant lost 4,000
Plant returned 3,000 7,000
 ANUJ KUMAR SINGH +919899600701

13,000
Less : Depreciation @ 15% 1,950
11,050
CONTRACTEE'S ACCOUNT
` `
To Balance c/d 1,44,00 By Cash 1,44,00
0 0
EXTRACTS FROM BALANCE SHEET
as on 31st March, 2000
Liabilities ` Assets ` `
Work-in-Progress:
Value of work certified 1,80,00
0
Cost of work 1,500
uncertified
1,81,50
0
1. It has been presumed that plant was lost before it could be used. In case of loss of
plant after being used for some period, contract account would be credited with the
depreciated value of plant.
Less: Reserve 25,013
1,56.487
Less: Amount
received
from contractee 1,44,000 12,487
Materials at site 2,500
Plant in store 2,550
Plant at site 11,050
Illustration 7.14. Contractors Ltd. began to trade on 1st January, 2006. During 2006
 ANUJ KUMAR SINGH +919899600701

the company was engaged on only one contract of which the contract price was `
5,00,000.
Of the plant and materials charged to the contract, plant which costs ` 5,000 and
materials which cost ` 4,000 were lost in an accident.
On 31st December, 2006 plant which cost ` 5,000 was returned to the store, the cost
of work done but uncertified was ` 2,000 and materials costing ` 4,000 were in hand
on site.
Charge 10% depreciation on plant crediting P.&L. A/c with two-thirds of the profit
received and compile Contract Account and Balance Sheet from the following :
TRIAL BALANCE
on 31st December, 2006
`
Share Capital 1,20,00
0
Creditors 10,000
Cash received on contract (80% of 2,00,00
work certified) 0
Land and Building etc. 43,000
Bank Balances 25,000
Charged to Contract—
Materials 90,000
Plant 25,000
Wages 1,40,00
0
Expenses 7,000
3,30,00 3,30,00
0 0
Solution :
CONTRACT ACCOUNT
` `
 ANUJ KUMAR SINGH +919899600701

To Materials 90,000 By Work-in-progress:

To Plant 25,000 Work certified 2,50,0
00
To Wages 1,40,00 Work uncertified 2,000
0
To Expenses 7,000 By P. & L. A/c (Abnormal loss)1 9,000
To Profit & Loss A/c By Plant returned to store
(profit transferred) 11,200 (Cost ` 5,000, Dep.` 500) 4,500
To Work-in-progress A/c By Plant at site 13,500
(Reserve) 9,800 By Materials at site 4,000
2,83,00 2,83,0
0 00
1. Presumed that plant was lost before it could be used.
BALANCE SHEET
as on 31st December, 2006
Liabilities Amoun Assets Amoun
t t
` ` ` `
Share Capital 1,20,00 Land and Buildings 43,000
0
Profit and Loss Plant: in store 4,500
Account:
Profit transferred from at site 13,500 18,000
the
contract 11,200 Materials at site 4,000
Less : Abnormal loss of Work-in-progress:
materials and plant 9,000 2,200 Work certified 2,50,000
Creditors 10,000 Work uncertified 2,000
2,52,000
 ANUJ KUMAR SINGH +919899600701

Less: Reserve 9,800

2,42,200
Less : Cash reed, from
the
contractee 2,00,000 42,200
Bank Balance 25,000
1,32.20 1,32,20
0 0
7. How much profit will be credited to profit and loss account in the following case
:
Contract price ` 20,00,000
Cost incurred ` 11,20,000
Cost received (90% of work certified) ` 10,80,000
Work not certified ` 1,20,000
[B.Com. (Pass), Delhi, 2009]
[Ans.` 1,20,000]
8. The following expenditure was incurred for the contract on construction of the
building of ` 12,00,000 for the year ending 31 -12-2011 :
`
Materials 2,40,000
Wages —3,28,000
Plant 40,000
Overheads 17,200
Cash received on account of the contract to 31 st Dec. 2011 was ` 4,80,000, being
80% of the work certified. The value of materials in hand was ` 20,000. The plant
had undergone 20% depreciation. Prepare Contract Account. [B.Com. (Pass), Delhi,
2012]
[Ans. Profit to P&L A/c ` 14,293; Work-in-Progress A/c ` 12,507]
9. Following amounts have been spent on a contract still unfinished on 31st
December, 2006 : Materials ` 80,000
 ANUJ KUMAR SINGH +919899600701

Wages ` 70,000
Direct Charges ` 50,000
` 2,00,000 have been received from the contractee being 80% of the work certified.
Calculate profit to be credited to Profit and Loss Account, uncertified work in
progress being ` 10,000. Total value of the Contract is ` 4,00,000.
[Ans. Profit to P.& L. A/c ` 32,000, Balance being Reserve ` 28,000.]
10. X Limited took a contract for construction of a building for ` 12 lakhs on 1 st
January, 2006. The following information is available from the records maintained
by .Y Limited.
You are informed that it is the practice of the company to take credit for 60% of the
profit earned on the contracts in progress after taking into account the value of the
work certified for payment by architect.
You are required to show the contract account and the contractee's account as on 31-
12-2006 from the following data:
Contract price `
12,00,000
Direct materials issued 3,25,000
Direct labour 4,00,000
Plant installed at cost 2,50,000
Establishment charges 75,000
Direct Expenses 1,00,000
Work certified by architect 10,50,000
Cost of work not certified 50,000
Value of plant as at 31-12-2006 2,00,000
Materials at site on 31-12-2006 25,000
Cash received from contractee 9,45,000
[Ans. Profit taken to P. & L. A/c 1,05.000; Reserve ` 70,000.]
[Hint. Since the words are 60% of profit "earned" and not "received", profit has not
been reduced on cash basis.]
11. Shiwalik Constructions Limited took a contract in 2007 for road construction.
The contract price was ` 5,00,000 and its estimated cost of completion would be `
4,60,000.
 ANUJ KUMAR SINGH +919899600701

At the end of 2007, the Company has received ` 1,80,000 representing 90 per cent
of work certified. Work not yet certified had cost ` 5,000.
Expenditure incurred on the contract during 2007 were as follows :
Materials ` 25,000
Labour ` 1,50,000
Plant ` 10,000
Materials costing ` 2,500 were damaged and had to be disposed off for ` 500. Plant
is considered as having depreciated by 25 per cent.
Prepare Contract Account for 2007 in the books of Shiwalik Construction Limited.
Also show all possible figures that can be reasonably credited to Profit and Loss
Account in respect of the contract.
[Ans. Profit ` 30,000. Profit taken to P. & L.: (a) ` 10,000 (without reducing on cash
basis),
(b) ` 9,000 (after reducing on cash basis), (c) ` 16,000 (i.e. 40,000 x 2/5),
(d) ` 14,400 (i.e. 40,000 x 2/5 x 90/100). Most reasonable ` 9,000.]
12. A contract account in the books of Contractors Ltd. appears as follows :
2000 `
June 30 Materials issued to site 5,000
Plant issued to site 12,500
Direct labour 4,600
Indirect labour 640
Overhead expenses 1,950
You are informed that it is the practice of the firm to take credit for two-thirds of the
profit earned on the contracts in progress after taking into account the value of the
work certified for payment by architects. You are required to :
(a) complete the contract account to June 30,
(b) show the amount which you would transfer to Profit and Loss account along with
necessary calculations.
(c) show relevant entries in the Balance Sheet as on 30th June.
For this purpose, you are supplied with the following information as at that date :
`
Value of work certified for payment 10,000
 ANUJ KUMAR SINGH +919899600701

Cost of work carried out, but not certified 3,800

Stock of materials not used 950
Value of plant on site after depreciation 11,875
[Ans. Profit to Profit and Loss A/c ` 1,290.]
13. A firm of builders carrying out large contracts kept in contract ledger separate
account for each contract. On 30th June, 2000 the following was shown as being the
expenditure in connection with contract
No. 777 :
`
Material purchased 58,063
Materials from stores 9,785
Plant which had been used on Other contracts 12,523
Additional plant purchased 3,610
Wages 73,634
Direct expenses 2,026
Production or establishment charges 8,720
The contract which had been commenced on 1st Feb., 2000, was of` 3,00,000 and
the amount certified by the architect after deduction of 20% retention money, was `
1,20,800 representing 80% of work certified upto 30th June, 2000. The materials on
the site at that date were valued at ` 9,858.
A contract plant ledger was also kept, in which depreciation was dealt with monthly,
the amount debited in respect of plant on contract No. 777 to 30th June, 2000 was `
1,130. You are required to prepare an account showing the profit on the contract to
30th June, 2000.
[Ans. Profit transferred to P.& L. A/c. ` 4,000; to Reserve ` 3,500.]
14. The following particulars relate to houses which a firm of builders had in course
of construction under contract:
House A House B
Work-in-progress on 1st Jan.. 2006 (excluding ` 800 ` `
estimated
profit which was taken to profit and loss account in 2005) 14,000
 ANUJ KUMAR SINGH +919899600701

Materials purchased 23,000 16,600

Wages 20,000 14,000
Electrical services and fittings 1,400 300
Road making charges 8,000
Contract price (including road making) 60,000 40,000
Cash received to 31 st Dec, 2006 60,000 24.000
Percentage of cash received to work certified 100% 66 2/3%
Value of materials in hand on 31st Dec, 2006 400 540
Completed work not certified 2,500
Value of plant used on sites 12,000 6,000
Period for which plant remained on sites during the year 10 months 8 months
The total establishment expenses incurred during the year 2006 amounted to `
12,240. These are to be charged to the two contracts in proportion to wages.
Depreciation of plant is to be taken into account at the rate of 10% per annum.
Prepare the two contract accounts (in columnar form) showing the profit or loss on
each house for the year 2006 and the sums which you consider appropriately
transferable to the profit and loss account.
[Ans. Loss on House A ` 15,000; Profit on House B ` 2,700,
transferred to P. & L. A/c. ` 1,200]
16. A building contractor, having undertaken construction work at a contract price
of` 5,00,000 began the execution of the work on 1 st January 2006. The following
are the particulars of the contract upto 31st Dec, 2006:
`
Machinery installed at site 30,000
Materials sent to site 1,70,698
Labour at site 1,48,"/50
Direct expenses 6,334 .
Overhead charges allocated 8,252
Materials returned from site 1,098
 ANUJ KUMAR SINGH +919899600701

Work certified by architect 3,90,000

Cash received 3,60,000
Cost of work not certified yet 9,000
Materials in hand as at 31 -12-2006 3,766
Wages accrued due on 31 -12-2006 5,380
Value of machinery as at 31 -12-2006 22,000
It was decided that the profit made on the contract in the year should be arrived at
by deducting the cost of the work certified from the total value of the architect's
certificates, 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 A/c only such portion of the 2/3 profit as the cash received
bore to work certified.
Prepare the contract account for the year and show the amount taken to the credit of
the profit and Loss account.
[Ans. Amount credited to P. & L. A/c ` 34,738.]
[Hint. Take 2/3 profit after reducing on cash basis to P. & L. A/c]
17. On 31 st December, 2006 when the annual accounts of the National Engineering
Company Ltd., were prepared, the position of a Bridge Contract which was
commenced on 1st April, 2006, was as follows:
Materials `
5,95,000
Wages 6,87,000
Sundries 41,000
Plant despatched at site 1,00,000
Wages accrued 17,000
Materials in hand 24,000
The value of the work certified was ` 14,40,000 of which ` 10,80,000 had been
received. Work finished but uncertified was valued at ` 40,000. The plant on the site
on 31 st December, 2006, was valued at ` 80,000. The contract price was ` 24,00,000
and the cost of the work to date was within the estimates. You are required to give
an appropriate account in the Contract Ledger and after taking credit any profit
which may reasonably be brought into account, to show how the particulars relating
 ANUJ KUMAR SINGH +919899600701

to contract should appear in the Balance Sheet of the company, as at 31st December.
[Ans. Profit to be credited ` 72,000; Work-in-progress to be shown in Balance Sheet
(Net) ` 3,28,000.]
18. A contractor obtained a contract for ` 6,00,000 on 1st January, 2006. The
expenses incurred during the year ended 31 st December, 2006 were as under:
`
Materials 1,80,000
Wages paid 1,60,000
Wages accrued 10,000
Other expenses 25,000
The plant, specially installed for the contract, worth ` 45,000 was returned to the
stores subject to a depreciation of 20 per cent. Materials on 31 st December, 2001
were valued at ` 24,000.
Upto 31 st December, 2001, the contractor had received ` 3,60,000 in cash
representing 80 per cent of the work certified. Work uncertified was estimated at `
4,000. Prepare the Contract Account, showing the profit for the year. Also show how
the value of work-in-progress would appear in the Balance Sheet as on 31st
December, 2001.
[Ans. Profit to P. & L. A/c ` 50,133.33, Profit to Reserve ` 43,866.67.]
19. M/s Bricks & Stones began to trade on 1st April, 1999. The following was the
expenditure on the contract for ` 3,00,000 :
`
Materials issued to contract 51,000
Plant used for contract 15,000
Wages incurred 81,000
Other expenses incurred 5,000
Cash received on account to 31 st March, 2000 amounted to ` 1,28,000 being 80%
of the work certified. Of the plant and materials charged to the contract, Plant which
cost ` 3,000 and materials which cost ` 2,500 were lost. On 31st March, 2000 plant
which cost ` 2,500 was returned to stores; the cost of work done but uncertified was
` 1,000 and materials costing ` 2,300 were in hand on site.
Charge 15% depreciation of plant, keep in reserve 1/2 profit received and prepare a
 ANUJ KUMAR SINGH +919899600701

contract from the above particulars.

[Ans. Profit to P. & L. A/c ` 16,200, Reserve ` 10,800.]
[Hint. Calculate Reserve first on cash basis.]
20. The following figures are extracted from the books of Ram Dass, a contractor,
for the year ending 31st Dec. 2006:
` `
Work-in-progress on 31st Dec, 2006 17.00,000
Less : Advance from contractees 11,00,000
6,00,000
Materials supplied to contracts direct 1,20,000
Materials issued from store 2,10,000
Wages 1,70,000
Working expenses 30,000
Materials returned to store 11,000
Contracts finished 4,50,000
Work certified 3,00,000
Profit taken to P. & L. upon contracts completed 2,30,000
Administrative expenses (of which ` 5,000 is chargeable to P. & L. A/c) 25,000
Plant issued 50,000
Materials returned from contracts direct to suppliers 9,000
Advances from contractees 8,00,000
Plant at site 40,000
Prepare the Contract Ledger Control A/c as in General Ledger and Total Contractees'
A/c. Show also how the Work-in-progress would appear in the Balance Sheet as on
31 st December, 2006.
[Ans. Profit ` 2,30,000; Work uncertified ` 17,20,000.]
21. The following balances were extracted from the books of a building contractor
at 31st March, 2000:
Contract III `
 ANUJ KUMAR SINGH +919899600701

Material issued to site 62,720

Wages paid 73,455
Wages outstanding on 31.3.2000 720
Plant issued to site 6,000
Direct charges paid 2,515
Direct charges outstanding on 31.3.2000 210
Establishment charges 5,650
Stock of materials at site on 31.3.2000 1,200
Value of work certified 31.3 2000 1,65,000
Cost of work not yet certified 3,500
Cash received on account of architect's certificate after deduction by
customer
of 14.5% retention money 1,41,075
The work was started on 1st April 1999 and the contract price was agreed at `
2,45,000. Prepare Contract Account for the year, providing for depreciation of plant
at 25%. Calculate the profit or loss on contract to date and make such provisions in
the Contract Account as you consider desirable. Set out also the contractor's Balance
Sheet so far as it relates to the contract.
[Ans. Total profit ` 22,930, Profit taken to Profit and Loss A/c ` 13,070.]
22. The following figures were in respect of Contract No. 007 of Jaya Constructions
Ltd. for the year 2006:
`
Materials purchased and delivered to work site 45,000
Materials issued from site stores 4,500
Materials returned to stores 500
Site wages 15,000
Site office expenses 2,000
Plant transferred to site 5,000
Plant returned from site 1,500
 ANUJ KUMAR SINGH +919899600701

Consulting and design fees 1,300

Sub-contract work 5,200
Central office overhead @ 10% of site wages.
The year end figures were
Plantat site 1,800
Material at site 1,000
Prepayments 200
Accruals 300
Cost of work done but not certified 3,500
Value of work certified by architect 86,300
On account payment received by Jaya Constructions less 10% retention money.
Prepare (a) Contract Account (b) Profit and Loss on Contract and (c) Customer's
Account.
[Ans. Total Profit ` 15,000; Profit taken to Profit and Loss A/c. ` 9,000.] 23. Two
contracts, commenced on 1 st January and 1st July 2006 respectively, were
undertaken by a contractor and their accounts on 31st December, 2006 showed the
following position :
Contract 1 Contract
2
` `
Contract price 4,00,000 2,70,000
Expenditure :
Materials 72,000 58,000
Wages paid 1,10,000 1,12,000
General charges 4,000 2,800
Plant installed 20,000 16,000
Materials on hand 4,000 4,000
Wages accrued 4,000 4,000
 ANUJ KUMAR SINGH +919899600701

Work certified 2,00,000 1,60,000

Cash received in respect thereof 1,50,000 1,20,000
Work done but not certified (at cost) 6,000 8,000
The plant was installed on the date of commencement of each contract; depreciation
thereon is to be taken at 10% per annum.
Prepare the Contract Accounts in the tabular form and ascertain the profit or loss to
be taken to Profit and Loss Account.
[Ans. Contract 1—Total Profit ` 18,000; Profit taken to P. & L. A/c. ` 9,000,
Contract 2—Loss ` 6,000.]
24. The following information is available in respect of a contract undertaken by a
building contractor on 1st January, 2006. The contract was for ` 4,00,000.
`
Materials issued 75,000
Wages paid - 1,10,000
General Charges 4,000
Plant installed at site on 1st July, 2006 20,000
Materials in hand on close 4,000
Wages accrued due 4,000
Work certified 2,00,000
Work completed but not certified 6,000
Cash received 1,50,000
Materials transferred to other contracts 4,000
Materials received from other contracts 1,000
Depreciation on plant is to be provided at 10% per annum.
Prepare Contract A/c and show what part of the profit on contract should be taken
credit in 2006.
[Ans. Profit to Profit & Loss A/c ` 9,500; Balance as Reserve ` 9,500.]
25. The following Trial Balance was extracted on 31st December, 2004 from the
Books of Swastik Co. Ltd. Contractors:
 ANUJ KUMAR SINGH +919899600701

` `
Share Capital: Shares of ` 10 each 3,51,800
Profit & Loss A/c on 1st Jan. 2004 25,000
Provision for depreciation on machinery 63,000
Cash received or, account: Contract 7 12,80,00
0
Creditors 81,200
Land and Building (Cost) 74,000
Machinery (Cost) 52,000
Machinery (Cost) 45,000
Bank
Contract 7 :
Materials 6,00,000
Direct Labour 8,30,000
Expenses 40,000
Machinery on site (Cost) 1,60,000
18,01,000 18,01,00
0
Contract 7 was begun on 1 st Jan., 2004. The contract price is ` 24,00,000 and the
customer has so far paid ` 12,80,000 being 80% of the work certified.
The cost of the work done since certification is estimated at ` 16,000.
On 31st December 2004, after the above Trial Balance was extracted, machinery
costing ` 42,000 was returned to stores, and materials then on site were valued at `
27,000.
Provision is to be made for direct labour accrued ` 6,000 and for depreciation of all
machinery at 12 1/2% on cost.
You are required to prepare (a) the contract account (6) a statement of profit, if any,
to be properly credited to Profit and Loss A/c for 2004 and (c) the Balance Sheet of
Swastik Co. Ltd. as on 31 st Dec, 2004.
[Ans. Total Profit` 1,47,000, Profit credited to P. & L. ` 78,400; Balance Sheet.
 ANUJ KUMAR SINGH +919899600701

Total ` 6,25,400 (provision for depreciation if shown on liabilities side.]

[Hint. Charge depreciation on the total machinery.]
 ANUJ KUMAR SINGH +919899600701

TEN YEAR
Q2 A construction company has undertaken to construct a bridge. The following details relate to
this contract for the year ended 31st
December, 2008.
Materials General plant in use :
Direct purchases Rs. 50,000 Written down value Rs. 1,00,000
Issued from store 10,000 Depreciation thereon 10,000
Wages for labour 45,000 Direct expenses 3,500
Share of overhead 2,000 Materials on hand 1,000
Materials lost by fire 500 Salvage value of material lest 150
Wages accrued due 5,000 Value of work certified 1,59,000
Direct expenses accrued due 500 Cost of work uncertified 4,500
The value of the contract is Rs. 2,15,000 and it is the practice of the contractee to retain 100/o of
work certified. From the above, prepare a -Contract Account and show how the \various items
would appear in the Balance Sheet. 8 (DU 2006)
Dr. Contract Account for the year ending 31st Dec., 2008 Cr.
Particulars Rs. Particulars Rs.
Materials : Work certified 1,59,000
Direct purchases 50,000 Work uncertified 4,500
.Issued from store 10,000 Materials on hand at the end 1,000
Wages 45,000 Plant on hand at the end 90,000
Wages accrued due 5,000 (1,00,000 - 10,000)
Direct expenses 3,500 Costing P & L A/c : - 500
Expenses accrued due 500 (Loss of materials)
Share of overheads 2,000
Plant 1,00,000
Notional profit c/d 39,000
2,55,000 2,55,000
Profit credited to P & L A/c

(39,000 × × ) 23,400 Notional profit b/d 39,000

Reserve on work-in-progress
(39,000-23,400) 15,600
39,000 39,000

Balance Sheet (extract) as on 31st Dec., 2006

 ANUJ KUMAR SINGH +919899600701

Liabilities Rs. Assets Rs.

Reserve and Surplus : Fixed Assets :
Profit on contract 23,400 Plant 1,00,000
Less : Loss by fire Less : Depreciation - 10,000 90,000
(Rs. 500 - 150) - 350 23,050 Current Assets : .
Current Liabilities : Materials on hand 1,000
Wages accrued 5,000 Work-in-progress :
Direct expenses accrued 500 Work certified 1,59,000
Work uncertified 4,500
1,63,500
b.f 1,63,500
Less : Reserve on WIP - 15,600
1,47,900
; Less \ Contractee
advance 1,43,100 4,800
Note : Since it is the practice of the contractee to retain 10% of work certified, profit has been computed
by taking 90%, i.e., percentage of money received to work certified. Contractee advance = 90% of Rs.
1,59,000 = Rs. 1,43,100
Q3(c) The following is the information relating to Contract Account No. 123 :
Contract price Rs. 6,00,000; Wages Rs. 1,64,000; General expenses Rs. 8,600; Raw materials Rs.
1,20,000; Plant Rs. 20,000.
As on date, cash received was Rs. 2,40,000 being 80% of work certified. The value of materials
remaining at site was Rs. 10,000. Depreciate plant by 10%. 7
Prepare the Contract Account sol(2006).
(c) Contract Account No. 123
Rs. Rs.
Materials 1,20,000 Work certified
Wages 1,64,000 (2,40,000 x 100/80) 3,00,000
General expensed 8,6dθ Materials on site at the end 10,000
Plant 20,000 Plant on site at the end 18,000
Notional profit c/d 15,400 (20,000 - 2,000)
3,28,000 3,28,000
Profit credited P & L A/c
(15,400 × 2/3 × 80/100) 8,213 Notional profit b/d 15,400
Reserve on Work-in-progress 7,187
(15,400 - 8,213) 15,400 15,400

Q3(b) From the following particulars, write up Contract No. 5 Account and find out the value of
tender (contract) price :
 ANUJ KUMAR SINGH +919899600701

Materials used Rs. 30,000; Productive wages Rs. 25,000; Direct expenses Rs. 500.
Provide 60% on productive wages for works overhead and 12Vi% on works cost for office
overhead. Profit to be realised 15% on the tender price. 5du(2007)
(b) Contract No. 5 Account
Rs. Rs.
Materials used 30,000 Contract price to be tendered, 93,308.82
Productive wages 25,000
Direct expenses 500
Prime Cost 55,500
Work overhead :
60% of Rs. 25,000 15,000
Works Cost 70,500
Office overhead:
12 ½% of Rs. 70,500 8,812.50
Total Cost 79,312.50
Add : Profit 15% on Tender
price or 15/85 13,996.32
of 79,312.50 93,308.82 93,308.82

Q4(b) Engineers Ltd. undertook several contracts during the year 2002. The following information
relate to contract No. 107 :
Rs.
Direct Materials 20,250
Direct wages 15,500
Stores issued 10,500
Loose Tools 2,400
Tractor Expenses:
Running Material Rs. 2,300
Wages of Driver Rs. 3,000 5,300
Other Direct charges 2,650
The contract took 13 weeks on its completion. The values of loose tools and stores returned at
the end of the period were Rs. 200 and Rs. 3,000 respectively. The plant was also returned at a value
of Rs. 16,000 after charging depreciation at 20%. The value of tractor was Rs. 20,000 and the
depreciation was to be charged to the tractor @ 15% per annum. The administration and office
expenses are to be provided at 10% on works cost. Profit to be charged at 20% of the total cost.
Prepare the aforesaid Contract Account assuming the balance of the contract was duly received
from the contractee. 9sol(2007)
Dr. Contract Account Cr.
Particulars Amount Particulars Amount
 ANUJ KUMAR SINGH +919899600701

Rs. Rs.
To Direct Materials 20,250 By Loss Tools returned 200
To Direct Wages 15*500 By Stores returned 3,000
To Stores 10,500 By Contractee’s Account 76,758
To Loose Tools 2,400 (Balancing Figure)
To Tractor expenses
(Rs. 2,300 + 3,000) 5,300
To Depredation on Tractor*1 750
To Depreciation on Plant
(Rs. 20,000 - 16,000) 4,000
To Other Direct Charges 2,650
To Administrative and Office
Expenses
(10% of Works Cost*1) 5,815
To Profit & Loss A/c
(20% of Total Cost*2) 12,793
79,958 79,958
Working Notes :
*1 Works Cost = Rs. 20,250 + 15,500 + 10,500 + 2,400 + 5,300 + 750 + 4,000 + 2,650 - 3,000 - 200 = Rs.
58,150
*2 Total Cost = Rs. 58,150 + 5,815 = Rs. 63,965
*3 Depreciation on Tractor :
15% of Rs. 20,000 = Rs. 3,000
1/4 of Rs. 3,000 = Rs. 750

Q5 b) The following is the summarised information relating to contract account number 100 :
Rs.
Contract price 6,00,000
Wages 1,64,000
General expenses 8,600
Materials 1,20,000
Cash received (80% of certified work) 2,40,000
Materials at site 10,000
Plant 20,000
Included in the above informations are wages Rs. 3.500, materials Rs. 4,000 and other expenses
Rs. 2,500 which were incurred since certification.
Depreciate plant at 10%.
Prepare Contract A/c No. 100. 4 du(2008)
 ANUJ KUMAR SINGH +919899600701

(b) Contract Account No. 100

Particulars Rs. Particulars Rs.
To Materials 1,20,000 By Work in progress :
To Wages 1,64,000 certified, 3,00,000
To General expenses 8,600 uncertified 10,000
To Plant Depreciation 2,000 (3,500 + 2,500 + 1,000)
To P & L A/c*1 13,547 By Materials at site 10,000
To Reserve 11,853 25,400
3,20,000 3,20,000
Working Notes :
*1 25,400 × × = Rs. 13,547

Q6 company undertook a contract for a total value of Rs. 24,00,000. Prepare a Contract Account
for the year ending 31st March, 2008 from the following particulars : ’’ * .
(i) Wages Rs. 6,00,000.
(ii) Plant Rs. 2,00,000.
(iii) Materials Rs. 3,00,000
(iv) Overheads Rs. 1,20,000
(v) Depreciation @ 10% to be provided on plant.
(vi) Materials lying at the site on 31st March, 2008 Rs. 40,000.
(vii) Work certified was to the extent of Rs. 16,00,000 and 80% of the same was received in cash.
(viii) 5% of the value of materials issued and 6% of the wages may be taken to have been incurred
for the portion of the work completed but not yet certified.
(ix) Overheads are charged as percentage of direct wages.
(x) Ignore depreciation on plant for use on uncertified portion of the work.
(xi) Ascertain notional profit and the amount to be transferred to Profit and Loss Account.
(xii) Show the workings clearly. 15 sol(2009)
Ans. Contract Account
Particulars Rs. Particulars Rs.
To Materials 3,00,000 By Work-in-Progress
To Wages 6,00,000 Work certified 16,00,000
To overhead charges Wor uncertified 58,200* 116,58,200
(20% of wages) 1,20,000 By plant at site 1,80,000
To Plant 2,00,000 By material at site 40,000
To Notional Profit c/d 6,58,200
18,78,200 18,78,200
To Profit & Loss A/c By Notional Profit b/d 6,58,200
[Rs 6,58,200 × 2/3× 4/5) 6,51,040
To Work- in-Progress Reserve) 3,07,160
 ANUJ KUMAR SINGH +919899600701

6,58,200 1 6,58,200
* Calculation of Work uncertified
Rs.
Materials 5% of Rs 3,00,000 15,000
Wages 6% of Rs 6,00,000 36,000
Overheads (20% of Wages) 7,200
58,200

Q7 (b) The following was the expenditure on the contract for Rs. 6,00,000. Work
commenced on 1st January, 2008 :
Materials Rs. 1,30,000
Wages Rs. 1,44,000
Plant Rs. 20,000
Other expenses Rs. 18,600
Cash received on account was Rs. 2,40,000, being 80% of work certified. Value of
materials on hand at 31st December, 2008 was JRs. 10,000. Plant is to be depreciated
@ 10%. Prepare the Contract. Account for 2008, showing the profit to be credited to Profit
and Loss Account. (2010 DU )
Q 8 Modern Construction Ltd. has taken two contracts on 1st October, 2007. The position
of contracts on 30th September, 2008 is as follows :
Contract I Contract II
Rs. Rs.
Contract Price 27,00,000 60,00,000
Materials 5,80,00 10,80,000
Wages paid 11,24,000 16,50,000
Other expenses 28,000 60,000
Plant at site 1,60,000 3,00,000
Unused materials at site 40,000 60,000
Wages payable 36,000 54,000
Other expenses due 4,000 9,000
Work Certified 16,00,000 30,00,000
Cash Received 12,00,000 22,50,000
Work completed but not yet certified 80,000 90,000
The Plant at site is to be depreciated at 10%.
Prepare the contract accounts in respect of each contract showing the notional profit and
also the profit to be transferred to Profit and Loss A/c. (2010 SOL)
 ANUJ KUMAR SINGH +919899600701

Q 9 (b) The following expenditure was incurred for the contract on construction of the
building Rs. 12,00,000 for the year ending 31-12-2011:
Rs.
Materials 2,40,000
Plant 3,28,000
Plant 40,000
Overheads 17,200
Cash received on account of the contract to 31stDec. 2011 was Rs. 4,80,000, being 80%
of the work certified. The value of materials in hand was Rs. 20,000. The plant had
undergone 20% depreciation. Prepare Contract Account. (2012 DU) (7)
Q 10 The ABC Ltd. has undertaken the construction of a bridge over the river Yamuna
for a Municipal Corporation. The value of the contract is Rs. 12,50,000, subject to a
retention of 20% until one year after the certified completion of the contract and final
approval of the corporation's engineer. The following are the details as shown in the books
on 30th June, 2011:
Rs.
Labour on site 4,05,000
Materials direct on site less returns 4,20,000
Materials from store 81,200
Hire and use of plant: plant upkeep account 12,100
Direct Expenses 23,000
General overhead allocated to the Contract 37,100
Material in hand on June 30,2011 6,300
Wages accrued on June 30,2011 7,800
Direct expenses accrued on June 30, 2011 1,600
Work not yet certified at cost 16,500
Amount certified by the Corporation Engineer 11,00,000
Cash received on account 8,80,000
Prepare:
(a) Contract Account
(b) Contractee's Account and
(c) How the relevant items would appear in the Balance Sheet ? (9)
Q 11 Surya Construction Ltd. started business with a paid up capital of Rs. 50 lakhs. On
1st April, 2009, it undertook a contract to construct a building for Rs. 60 lakhs. Cash
received on account of the Contract upto 31st March, 2010 was Rs. 18 lakhs (being 90%
of work certified). Work uncertified as on 31st March, 2010 was estimated at Rs. 1,00,000.
As oil 31st March, 2010, the cost of materials at site was Rs. 30,000 and outstanding
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wages were Rs. 5,000. Of the plant and machinery charged to the contract, machinery
costing Rs. 2,00,000 Was returned to stores on 31st March, 2010. Plant and machinery
charged to the contract is to be depreciated at 5%. The following were the ledger balances
(Dr.) as per the trial balance as on 31st March, 2010.
Rs.
Land and building 23,00,000
Plant and machinery (60% at site) 25,00,000
Furniture 60,000
Materials 14,00,000
Fuel and Power 1,25,000
Site expenses 5,000
Office expenses 12,000
Rates and taxes 15,000
Cash at bank 1,33,000
Wages 2,50,000
Prepare Contract Account and Balance Sheet for the year ending 31st March, 2010.
(2014 SOL)
Q12 Richa Ltd. undertook a contract for Rs. 50,00,000 on 1st January, 2013. The
company furnishes the following details for the year ended 31st Dec. 2013:
Rs.
Materials sent to site 19,50,000
Direct expenses 50,000
Wages 3,00,000
Materials returned to stores 50,000
Materials stolen from site 1,00,000
Insurance claim admitted 60,000
Other works overheads are 20% on wages
Office expenses 2,10,000
Materials in hand on 31st Dec. 2013 1,50,000
Cash received being 90% of work certified 27,00,000
Cost of work uncertified 1,10,000
Plant sent to site cost Rs. 6,00,000 with a scrap value of Rs. 1,00,000 and a useful life of
5 years. The plant is still at the site. Prepare contract account showing the amount of profit
to be transferred to Profit & Loss Account. (2015 DU) 15
Q 13 (a) The following are the particulars relating to a Contact which has begun on
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January 1, 2011 :
Particulars Rs.
Contract price 5,00,000
Machinery sent to site 30,000
Materials sent 1,70,000
Wages paid 1,48,750
Direct expenses 6,300
Outstanding wages 5,380
Uncertified work 9,000
Overheads 8,240
Materials returned to stores 1,600
Materials on hand December 31, 2011 4,000
Machinery at site on December 31, 2011 22,000
Value of work certified 3,90,000
Cash received 3,51,000
Prepare the Contract Account for the year 2011 showing clearly the amount of profit that
may be taken to the credit of Profit & Loss Account of the year. (2015 SOL) (8)

Q14 The following information relate to the Contract Account number 100:

(Rs.)

Contract price 6,00,000

Wages 1,64,000

General expenses 8,600

Material 1,20,000

Cash received (80% of certified work) 2,40,000

Material at site 10,000

Plant 20,000

Included in the above information are wages Rs. 3,500, material Rs. 4,000 and other
expenses Rs. 2,500 which were incurred since certification. Depreciate plant at 10%.
Prepare contract account number 100, Contractee's Account and show relevant items in
the balance sheet. (2019 DU) (15)
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