Question

Modern Contractors have undertaken the following two contracts on 1st January, 2017.

Particulars	Contract A(Rs.)	Contract B(Rs.)
Materials sent to sites	85,349	73,267
Labour engaged on sites	74,375	68,523
Plant installed at sites at cost	15,000	12,500
Direct expenditure	3,167	2,859
Establishment charges	4,126	3,852
Materials returned to stores	549	632
Work certified	1,95,000	1,45,000
Materials in hand on 31st Dec. 2017	1,883	1,736
Cost of work not certified	4,500	3,000
Wages accrued on 31 51 Dec. 2017	2,400	2,100
Direct expenditure accrued on 31 Dec. 2017	240	180
Value of plant on 31st Dec. 2017	11,000	9,500

The contract prices have been agreed at Rs. 2,50,000 for Contract A and Rs. 2 00 000 for Contract B. Cash has been received.from contractors as follows:
Contract A Rs. l,80,000 and Contract B Rs. 1,40,000.
Prepare Contract Accounts, Contractee's Account and show how the Work-in-Progress will appear in the Balance Sheet of the contractor.

Answer 1

Books of Modern Contractors

Dr.

Contract Account

Cr.

Particulars	Contract A(Rs.)	Contract B(Rs.)	Particulars	Contract A(Rs.)	Contract B(Rs.)
To Materials sent to sites	85,349	73,267	By Material returned to stores	549	632
To Labour engaged on Sites	74,375	68,523	By Work Certified	1,95,000	1,45,000
To Plant installed at Sites	15,000	12,500	By Materials on Hand (31-12-2017)	1,883	1,736
To Direct Expenditure	3,167	2,859	ByWork not Certified	4,500	3,000
To Establishment Charges	4,126	3,852	By Value of Plant (31-12-2017)	11,000	9,500
To Accrued Wages	2,400	2,100	By Actual Loss	-	3,413
To Direct Expenditure Accrued	240	180
To Notional Profit c/d	28,275	-
	2,12,932	1,63,281		2,12,932	1,63,281
To Profit and Loss Alc	17,400	-	By Notional Profit b/d	28,275	-
To Stock Reserve	10,875	-
	28,275	-		28,275	-

Dr.

Contractee's Account

Cr.

Particulars	Contract A(Rs.)	Contract B(Rs.)	Particulars	Contract A(Rs.)	Contract B(Rs.)
To Work Certified	1,95,000	1,45,000	By Cash Received	1,80,000	1,40,000
			By Bal. c/d (Balancing Fig)	15,000	5,000
	1,95,000	1,45,000		1,95,000	1,45,000

Balance Sheet (For the year Ended 31-12-2017)
(Extracts Only)

Liabilities		(Rs.)	Assets		(Rs.)
Profit and Loss A/c (Contract - A)		17,400	Work-in-Progress:(Contract A)
Accrued Wages			Work Certified	1,95,000
Contract A:	2,400		(+) Work Uncertified	4,500
Contract B:	2,100	4,500		1,99,500
Accrued Direct Expenditure			(-) Reserve	10,875
Contract A:	240		(-) Cash Received	1,80,000	8,625
Contract B:	180	420	Work-in-Progress: (Contract B)
			Work Certified	1,45,000
			(+) Work Uncertified	3,000
				1,48,000
			(-) Cash Received	1,40,000	8,000

Working Notes :
(i) Calculation of Profit and Loss and Reserve :
Contract - A :
Work Certified = Rs. 1,95,000 .
Contract Price = Rs. 2,50,000 Le; More than 50%, but less than 90%
`therefore "National Profit" xx 2/3xx"Cash Received"/"Work Certified"`

`therefore Rs. 28,275xx2/3xx(Rs.1,80,000)/(Rs. 1,95,000) `

`therefore 18,850xx180/195` = Rs. 17,400 → Profit

And Rs. 10,875 Rs. Reserve (Rs. 28,275 - Rs.17,400)