A building contractor having undertaken construction work at a contract price of Rs 5,00,000 began the execution of the work on 1st January 1981. The following are the particulars of the contract up to 31st December 1981.
|
Rs |
|
|
Machinery installed at site |
30,000 |
|
Materials sent to site |
1,70,698 |
|
Labour at site |
1,48,750 |
|
Direct expenses |
6,334 |
|
Overhead charges allocated |
8,252 |
|
Materials returned from site |
1,098 |
|
Work certified by architect |
3,90,000 |
|
Cash received |
3,60,000 |
|
Cost of work not certified |
9,000 |
|
Materials on hand as on 31 12 1981 |
3,766 |
|
Wages accrued due on 31 12 1981 |
5,380 |
|
Value of machinery as on 31 12 1981 |
22,000 |
It was decided that profit made on the contract in the year should be arrived at by deducting the cost of work certified from the total value of the architect’s certificates, that 1/3rd of the profit so arrived as should be regarded as provision against contingencies and that such provision should be increased by taking to the credit of profit and loss account only such portion of the 2/3rd profit as the cash received before the amount is taken to the credit of the profit and loss account. Prepare contract account.