Page 31 - Cost Accounting - Ready Reckoner
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Degree of Completion of Contract =
Degree of Completion Profit transferred to P&L Account
Less than 25% NIL
Above 25% to 50% 1 x Notional Profit x ℎ
3
Above 50% to 90% 2 x Notional Profit x ℎ
3
If completion of Contract is beyond 90%, (i.e) nearing stage of completion, profit
transferred to P&L A/c, will be based on estimated profit.
Estimated Profit is arrive as
= Contract Price – Estimated total cost
Profit transferred to P&L A/c shall be based on any of the following four formulae.
i) Estimated Profit x
ℎ
ii) Estimated Profit x x
iii) Estimated Profit x
ℎ
iv) Estimated Profit x x
When the contract is completed, the contract is handed over to the contractee.
