Assume that the position on three contracts at a year end is as follows:
|
(1) |
(2) |
(3) |
|
|
£ |
£ |
£ |
|
|
Cumulative turnover |
520 |
520 |
520 |
|
Cumulative actual cost |
510 |
510 |
510 |
|
Cumulative related cost |
450 |
450 |
450 |
|
Cumulative payments on account |
440 |
555 |
630 |
The cumulative attributable profit for each of the contracts is £70, i.e. £520 – £450.
The relevant balance sheet items are shown below. Note that each contract will be considered on an individual basis, balances arising on one contract are not set off against balances on other contracts and hence the figures that will appear in the balance sheet are shown in the total column.
|
Contract |
Total |
|||
|
(1) |
(2) |
(3) |
||
|
£ |
£ |
£ |
£ |
|
|
Stock – long term contract balances |
60 (a) |
25 (b) |
NIL |
85 |
|
Debtors – amount recoverable on contracts |
80 (a) |
NIL |
NIL |
80 |
|
Creditors – payments on account |
NIL |
NIL |
50 (c) |
50 |
Notes
|
(a) Actual costs less related costs; £510 – £450 = £60. |
|
|
Cumulative turnover less cumulative payments on account; £520 – £440 = £80. |
|
|
(b) Long term contract balance as (a), |
£60 |
|
less Excess of payments on account |
|
|
over turnover, £555 – £520 |
£35 |
|
£25 |
|
|
(c) Long term contract balance, as (a) |
£60 |
|
less Excess of payments on account |
|
|
over turnover, £630 – £520 |
£110 |
|
(£50) |