Question

The following information is relating to a building contract of Rs. 50,00,000. The contractee has a reed to a 90% of the work certified in cash.

Particulars	2017(Rs.)	2018(Rs.)	2019(Rs.)
Materials	7,00,000	8,00,000	4,00,000
Wages	3,20,000	4,80,000	5,00,000
Direct expenses	20,000	30,000	10,000
Indirect expenses	10,000	7,000	3,000
Work certified	10,00,000	30,00,000	50,00,000
Work uncertified	-	40,000	-
Plant issued	2,00,000	-	-
Value of lant on 31st Dec.	1,80,000	1,60,000	1,30,000

Prepare Contract A/c for the year 201 7, 2018, and 2019.

Answer 1

Working Notes :
i) 2016-17:
The entire amount of loss suffered during the year 2016-17 is to be transferred to Profit and Loss Account
ii) 2017-18:
As the value of Work Certified Rs. 30,00,000) is more than `1/2` of Contract Price Rs. 50,00,000), the following formula is to be applied to find out the amount of notional profits to be credited to Profit and Loss Account.
`=2/3xx"Notional Profits"xx"Cash Received"/"Work Certified"`
`=2/3xx"Rs." 7,03,000xx(27 ,00,000)/(30,00,000)=`Rs. 4,21,800
iii) 2018-19 :
As entire contract is completed during the year 2018-19, the total amount of profit is to be transferred to Profit and Loss Account

In the books of Niwara Builders, Nanded

Dr.

Contract Account for the year ended 31st March, 2017

Cr.

Particulars	(Rs.)	Particulars	(Rs.)
To Materials	7,00,000	By Work-in-Progress:
To Labour	3,20,000	i) Work Certified	10,00,000
To Expenses - Direct	20,000	ii) Work Uncertified	-
To Expenses - Indirect	10,000	iii) Plant in hand(Closing Balance C/D.)	1,80,000
To Plant issued	2,00,000	By Profit and Loss *(Balancing figure i.e. Actual loss)	70,000
	12,50.000		12,50.000

Dr.

Contract Account for the year ended 31st March, 2018

Cr.

Particulars	(Rs.)	Particulars	(Rs.)
To Work-in-Progress :		By Work-in-Progress:
i) Work Certified	10,00,000	i) Work Certified	30,00,000
ii) Work Uncertified	-	ii) Work Uncertified	40,000
iii) Plant in hand	1,80,000	iii) Plant in hand (Closing Balance C/D.)	1,60,000
To Materials	8,00,000
To Labour	4,80,000
To Expenses- Direct	30,000
To Expenses - Indirect	7,000
To Notional Profits C/D *(Balancing Figure i.e. Notional Profits)	7,03 ,000
	32.00.000		32.00.000
To Profit and Loss	4,21 ,800
To Work-in-Progress(Reserve C/D)	2,81 ,200	By Notional Profits B/D	7,03,000
	7,03.000		7,03.000

Dr.

Contract Account for the year ended 31st March, 2019

Cr.

Particulars	(Rs.)	Particulars	(Rs.)
To Work-in-Progress :		By Work-in-Progress : (Reserve B/D)	2,81,200
i) Work Certified	30,00,000	By Contractee's Alc (Work Certified)	50,00,000
ii) Work Uncertified	40,000	By Plant in hand (Closing Balance C/D)	1,30,000
iii) Plant in hand (Opening Balance B/D.)	1,60,000
To Materials	4,00,000
To Labour	5,00,000
To Expenses - Direct	10,000
To Expenses - Indirect	3,000
To Profit and Loss (Balancing Figure i.e. Actual Profit)	12,98,200
	54,11,200		54,11,200

Working Notes:

Particulars	2016-17(Rs.)	2016-18(Rs.)	2016-119(Rs.)
Contract Price	50,00,000	50,00,000	50,00,000
Work Certified	10,00,000	30,00,000	50,00,000
Work Uncertified	-	40,000	-
Cash Received	9,00,000	27,00,000	-
Retention Money	1,00,000	3,00,000	-
Actual Loss/Notional Profits/ Actual Profit	70,000	7,03,000	12,98,200
	(AL)	(NP)	(AP)