Question

Vaishali undertook a contract for the construction of house on 1.1.2017. The contract price was Rs. 22,50,000 The following details are available for 2017 :

Particulars	(Rs.)
Materials purchased and issued	3,60,000
Materials issued from stores	45,000
Labour	1,35,000
Plant installed at site	1,80,000
Direct expenses	90,000
Establishment Charges	22,500
Materials returned to stores	22,500
Materials on hand at the end of the year	9,000
Plant in hand at the end of the year	1,35,000
Wages outstanding	27,000
Direct expenses outstanding	36,000
Work uncertified	95,400
Cash received (80% of work certified)	9,00,000

Prepare the Contract Alc and show the relevant items in Balance Sheet.

Answer 1

Books of Vaishali

Dr.

Contract A/c (For the Year 2017)

Cr.

Particulars	(Rs.)	Particulars	(Rs.)
To Material Purchased and Issued	3,60,000	By Materials returned to Stores	22,500
To Materials Issued from Stores	45,000	By Material on Hand	9,000
To Labour	1,35,000	By Plant in Hand	1,35,000
To Establishment Charges	22,500	By Work in Progress:
To Wages (Outstanding)	27,000	Work Certified       11,25,000
To Direct Expenses (Outstanding)	36,000	Work Uncertified         95,400	12,20,400
To Direct Expenses	90,000
To Plant Installed at Site	1,80,000
To Notional Profit c/d	4,91,400
	13,86,900		13,86,900
To Profit and Loss Alc*	2,62,080
To Stock Reserve	2,29,320	By Notional Profit b/d	4,91,400
	4,91,400		4,91,400

Working Note:
(1) * Profit and Loss Alc : Contract Price = Rs. 22,50,000
Amount of work certified= Rs. 11,25,000
That means amount of work certified is `1/2` ( 50%) of contract price.
∴The following formula should be used =`2/3 xx "Notional Profit "xx "Cash Received"/"Work certified"`

∴ `2/3xx Rs. 4,91,400 xx (Rs.9,00,000)/(Rs.11,25,000)` = Rs. 2,62,080 (Profit and Loss Alc)

∴ Rs. 2,29,320 (Reserve)(Rs. 4,91,400 - Rs. 2,62,080)

Balance Sheet (Extracts Only)

Liabilities	(Rs.)	Assets	(Rs.)	(Rs.)
Profit and Loss Alc	2,62,080	Work-in-Progress :
Outstanding Wages	27,000	Work Certified	11,25,000
Outstanding Direct Expenses	36,000	(+)Work Uncertified	(+) 95,400
			12,20,400
		(-)Reserve	2,29,320
		(-)Cash received	9,00,000	91,080
		Plant on Site at year End		1,35,000
		Materials on Site at Year End		9,000