hard copy of contract costing

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[Type the company name]

[2011-12]

Cost Accounting

Contract costingN.JASMINE

[ T y p e t h e c o m p a n y a d d r e s s ]


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N.E.S RATNAM

COLLEGE OF

ARTS, SCIENCE

& COMMERCE

BHANDUP (W)

Topic name:

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CONTRACT COSTING

Subject name:COST ACCOUNTING

class:

SYBBI

under the guidance

of :

PROF. MRS. RIYA

RUPANI

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ACKNOWLEDGEMENT

I would express my sincere thanks to

Prof.Mrs.Riya Rupani for giving me this

opportunity or platform to interact with

widespread. I would like to thank my friends

who have supported me throughout incompleting this project.

I am equally grateful to those who gave me

moral support & guided me in different

matters regarding the topic. My professor had

been very kind & patient while suggesting me

the outline of the project & clearing my

doubts. I thank everyone for their support.

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CERTIFICATE

This is to certify that Miss NADAR JASMINE

EBAN roll no: 23 of SYBBI OF N.E.S RATNAM

COLLEGE has completed the project

successfully on CONTRACT COSTING in COSTACCOUNTING subject. Under the guidance of

Prof. MRS RIYA RUPANI for IVth semester in the

academic year 2011-2012

Date: Signature of Co-

ordinator

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Place: Signature of professor

Index

Sr.No Contents Page No

01 Introduction 07-08

02 Features 09

03 Terms 10

04 Conclusion 11

05 Reference 12

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INTRODUCTION

Contract costing is also known as terminalcosting as it discharges the contract when the work

is done. It is a form of job costing and for this

reason both contract and job costing methods are

based on the same costing principles. The

difference between these two is that in job costingthe cost unit is relatively small, whereas in contract

costing cost unit is big. It has been well said that

a job is a small contract and a contract is a big

job. As the cost unit in contract is relatively high,

it takes a considerable time to complete. Contract

costing is employed in business undertakings

engaged in building construction, road

construction, bridge construction and other civil

engineering works.

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A firm engaged in the construction worksrequires to know the total cost of the construction

work done. The total costs of the work help to find

out the profit earned from these works. The cost

information about construction works helps to

monitor and evaluate the performance of contract

work and to determine the total contract cost.

Such information is provided by a costing method

known as contract costing.

Contract costing is the costing method appliedto determine the cost of construction work

performed as per a customer's specification. The

construction work is undertaken at the site allotted

by the client. The contract sites vary and are

always outside the premises belonging to theclients. A separate code number is allotted to each

site where a number of contract works are

undertaken. A contract account is maintained for

each contract work to record the contract costs

under contract costing. Maintaining a contract

account helps to find out the amount of profitearned during a particular period since financial

books do not report it separately. Normally, a

contract account is prepared at every year-end to

determine the profit for the specified period.

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FEATURES

1.As the contracts are of large size, a contractor

usually carries out a small number of contracts

in the course of year.

2.Contracts are carried out away from the

contractors premises.

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3.Contracts may continue over more than one

accounting period.

4.A separate account is prepared for each

contract to ascertain profit or loss in each

contract.

5.Specialist sub contractors may be employed

for say, electrical fittings, welding work, glass

work etc.

6.Plant and equipment may be purchased orhired for the duration of the contract

7. Payments by the customer (contractee) are

made at various stages of the contract.

BASIC TERMS IN CONTRACT COSTING

1. Escalator clause : It is also termed as escalation

clause. In this case contractor is required to

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increase the contract price if there is increase

in the elements of cost beyond a percentage

over the prices prevailing at the time of

tendering quotation.

2. Contract : A contract is a task or an assignment

undertaken to complete a construction work

within a specified time.

3. Contractor : It is the construction company or

an individual who undertakes the construction

work.

4. Contractee : It is the party or the person who

has assigned the contract to the contractor.

5. Contract price : It is the consideration for which

the contract is undertaken. On completion of

the project the contractee pays the full amountto the contractor of the contract price.

6. Work certified : It is that portion of the

completed work which is certified by the

architect or the surveyor,

7. Work uncertified : It is that portion of the work

completed by the contractor, but not yet

certified by an architect or the surveyor.

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8. Retention money : Some percentage of the

work certified is retained by the contractee till

the completion of the work.

9. Notional profit : It is an estimated profit in

respect of work certified. And balancing

amount on the debit side.

CONCLUSION

With this I conclude that contract costing is fully

based on constructions, to keep a record for theexpenditure and the income, contract costing is

prepared. It is very help full for the contractors and

very easy to maintain. Normally contract costing

are done for a particular period of time till the

completion of the project and the contract costing

is terminated hence it is also said as terminalcosting.

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REFERENCE

Webliography:

Carocks.files.wordpress.com

Jkshahclasses.com

Bibliography:

Cost accounting (S.Y BBI)

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