Answer 1

Dr.

Books of Nirmala Construction, Chennai Contract Alc (For the Year Ended 31-3-2018)

Cr.

Particulars	(Rs.)	Particulars	(Rs.)
To Material	3,41,200	By Work Uncertified	24,000
To Labour Charges	2,97,500	By Work Certified	7,80,000
To Engineer's Fees	12,660	By Material Returned to Store	3,200
To Outstanding Wages	10,760	By Material at Site	7,400
To Overheads	16,480	By Plant and Machinery at Site	44,000
To Plant and Machinery	60,000
To Notional Profit c/d	1,20,000
	8,58,600		8,58,600
To Profit and Loss A/c (Profit)	72,000	By Notional Profit b/d	1,20,000
To Stock Reserve	48,000
	1,20,000		1,20,000

Extracts of Balance Sheet
(For the Year Ended 31-3-2018)

Liabilities	(Rs.)	Assets		(Rs.)
Profit and Loss Alc	72,000	Plant and Machinery	60,000
Outstanding Wages	10,760	(-) Depreciation	16,000	44,000
		Material at Site		7,400
		Work-in-Progress :
		Work Certified	7,80,000
		(+) Work Uncertified	24,000
			8,04,000
		(-)Cash Received	7,02,000
			1,02,000
		(-) Stock Reserve	48,000	54,000

Working Notes : Contract Price = Rs. 12,00,000
Work Certified = Rs. 7,80,000
i.e. More that 50%, but less than 90%

`therefore 2/3xx"Notional Profit"xx"Cash Received"/"Work Certified"`

`therefore 2/3xxRs. 1,20,000xx (Rs.7,02,000)/(Rs.7,80,000`

∴ Rs. 80,000 x 0.9 = 72,000
∴ Profit and Loss (Profit) - Rs. 72,000
∴ Reserve = Notional Profit (-) Profit
∴ Reserve = Rs.1,20,000 (-)  Rs. 72,000
∴ Reserve = Rs. 48,000