BMS College | COSTING METHODS & TECHNIQUES

UNIT 1 – CONTRACT COSTING

1. From the following information prepare the account for each contract and show how the entries relating
to contract would appear in P/L account and Balance Sheet of the company as on 31 st March 2016.
Depreciate plant at 20% p.a.
Contract Y Contract Z
Plant installed at site at cost 1,00,000 90,000
Materials sent to sites 30,000 27,000
Materials purchased 1,06,000 1,02,000
Labour employed at site 1,04,250 1,03,500
Direct expenses 4,700 3,500
Establishment charges 4,000 4,500
Materials returned to stores 1,500 1,000
Architect’s certificate for work done 2,70,000 2,10,000
Cost of work done but not yet certified 10,000 50,000
Stock of materials at close 3,000 3,200
Direct expenses accrued 1,000 1,200
Contract price 3,90,000 3,00,000
Cash received from contractee 2,40,000 1,65,000

2. The following information relates to two contracts of Maruthi Construction Ltd. for the year ended 31st
March 2021
Particulars Contract A Contract B
Materials sent to site 1,70,698 1,46,534
Labour 1,48,750 1,37,046
Plant installed 30,000 25,000
Direct expenses 6,334 5,718
Establishment expenses 8,252 7,704
Materials returned to stores 1,098 1,264
Work certified 3,90,000 2,90,000
Work uncertified 9,000 6,000
Materials on site on 31/3/2021 3,766 3,472
Wages accrued on 31/3/2021 4,800 4,200
Direct expenses accrued on 31/3/2021 480 360
Value of plant on 31/3/2021 22,000 19,000
Contract price 5,00,000 4,00,000
Assume cash received being 80% of work certified
You are required to prepare (a) Contract accounts and (b) Contractee’s account

3. The following information related to contract No.300 prepare contract account and contractee’s account
assuming that amount was duly received.
Direct materials 40,500
Stores issued 21,000
Other direct charge 5,300
Direct wages 31,000
Tractor expenses
Running materials 4,600
Driver’s wages 6,000
Loose tools 4,800
BMS College | COSTING METHODS & TECHNIQUES
Contract price was Rs.1,80,000 and contract took 13 weeks for completion. The value of loose tools and
stores returned were Rs.400 and Rs.6,000 respectively. Value of plant returned Rs.16,000 after charging
depreciation at 20%. Value of tractor was Rs.40,000 and depreciation charged to contract at 15% p.a.,
administration and office expenses at 10% on works cost.

4. The following information relates to contract No.58 prepare contract account and contractee’s account
assuming that amount was duly received
Direct materials 45,600
Special plant 18,400
Stores issued 6,040
Direct wages 24,400
Tractor expenses
Running materials 3,500
Driver’s wages 4,540
Loose tools 3,560
Other direct charges 2,560
The contract was completed in 26 weeks, at the end, plant was retuned subject to depreciation at 15% p.a.
on original cost. Value of loose tools and stores retuned were Rs.2,260 and Rs.840 respectively. Value
of tractor was Rs.40,000 and depreciation was to be charged to this contract at 20% p.a. Administration
expenses at 10% on total works cost. The contract price was Rs.1,25,000.

5. The following information relates to a building contract for Rs.10,00,000 for which 80% of value of work-
in-progress as certified by the architect is being paid by the contractee.
Particulars 2013-14 2014-15 2015-16
Materials issued 1,20,000 1,45,000 84,000
Direct wages 1,10,000 1,55,000 1,10,000
Direct expenses 5,000 17,000 6,000
Indirect expenses 2,000 2,600 5,000
Work certified 2,35,000 7,50,000 10,00,000
Work uncertified 3,000 8,000
Plant issued 14,000
Materials on site at the end 2,000 5,000
Value of plant at the end 11,200 7,000 3,000
Prepare contract account for three years taking such profit as you think proper on incomplete contract and
also prepare contractee’s account for three years

6. The following information relates to a building contract for Rs.10,00,000

Particulars 2021 2022
Material issued 3,00,000 84,000
Direct wages 2,30,000 1,05,000
Direct expenses 22,000 10,000
Indirect expenses 6,000 1,400
Work certified 7,50,000 10,00,000
Work uncertified 8,000 -
Materials at site 5,000 7,000
Plant issued 14,000 2,000
Cash received from contractee 6,00,000 10,00,000

The value of plant at the end of 2021 and 2022 was Rs.7,000 and Rs.5,000 respectively
Prepare: a) Contract account b) Contractee account for two years
BMS College | COSTING METHODS & TECHNIQUES
7. The following information related to a building contract for Rs.40,00,000 and for which 80% of the value
of work-in-progress is certified by the architect is being paid by the contractee
Particulars 2019 2020 2021
Materials issued 4,80,000 5,80,000 3,36,000
Direct wages 4,40,000 6,20,000 4,40,000
Site expenses 20,000 68,000 24,000
Indirect expenses 8,000 10,400 2,000
Work certified 31st march 9,40,000 30,00,000 40,00,000
Work uncertified 11,200 32,000 -
Material at site 8,000 20,000 -
Value of plant 56,000 - -

The value of the plant at the end of 2019, 2020 and 2021 was Rs/44,800, Rs.28,000 and Rs.12,000
respectively. Prepare contract account for the three years and contractee account.

8. The following information is obtained from the books of a contractor. The contract price is Rs.50,00,000
and the contractee has agreed to pay 80% of the certified works.
Particulars 2020 2021 2022
Materials 6,50,000 8,50,000 5,00,000
Wages 5,50,000 7,50,000 4,50,000
Direct expenses 25,000 75,000 30,000
Indirect expenses 15,000 11,000 8,000
Work certified 15,00,000 35,00,000 50,00,000
Work-in-progress not certified - 50,000 -
Plant issued 80,000 - -

The value of the plant at the end of 2020, 2021 and 2022 is Rs.60,000, Rs.30,000 and Rs.10,000
respectively.
Prepare a contract account for each year and also show the profit transferable to the profit and loss account
of each year.

9. M/s Contractors and engineers under took a contract for construction of a college building for
Rs.25,00,000. The following is the information concerning the contract for the year ended 31 march
2021.
Materials 8,53,480
Labour engaged on site 7,43,750
Plant installed at site 1,50,000
Direct expenses 31,670
Establishment charges 41,260
Materials return to stores 5,490
Work certified 19,50,000
Cost of work not yet certified 45,000
Value of plant on 31/3/2021 1,10,000
Materials at site on 31/3/2021 18,830
Wages accrued on 31/3/2021 24,000
Direct expenses accrued on 31/3/2021 2,400
Cash received 18,00,000

prepare (a) contract account (b) Contractees account (c) Work-in-progress account and (d) Show how the
work-in-progress will appear in the balance sheet of M/s Contractors and Engineers as at 31/3/2021
BMS College | COSTING METHODS & TECHNIQUES
10. Shankar construction ltd has undertaken construction of a bridge, the contract price being Rs.65,00,000.
The details relating to contract are as follows.
Materials bought 16,50,000
Materials sent from stores 4,00,000
Labour cost 20,00,000
Direct expenses 1,25,000
Hire and use of plant 60,000
General overheads allocated 1,75,000
Materials on hand at the end of the period 31,500
Wages accrued at the end of the profit 37,500
Direct expenses accrued at the end of the period 7,500
Cost of work certified by architect 55,00,000
Cost of work uncertified 1,00,000
Cash received from contractee 44,00,000
you are required to show (a) Contract account (b) contractees account (c) work-in-progress account and
(d) Show how the work-in-progress will appear in the balance sheet.

11. A firm of building contractor began a contract on 1st April 2020. The following was expenses on contract
for the Rs.6,00,000
Materials issued from stores 1,50,000
Materials purchased for contract 40,000
Plant installed at cost 70,000
Wages paid 2,40,000
Direct expenses 22,000
Establishment expenses 10,000
Direct expenses accrued on 31/3/2021 3,000
Direct wages accrued on 31/3/2021 4,000
Of the plant and material charged to the contract, plant costing Rs.5,000 and materials costing Rs.4,000
were lost. Some part of materials costing Rs.2,500 were sold at a profit of Rs.500. On 31 st March 2021,
plant which cost 2,000 was returned to stores and plant cost 3,000 was transferred to some other contract.
Work certified Rs.4,80,000 and 80% of the same was received in cash. The cost of work done but
uncertified Rs.3,000. Charge depreciation on plant at 10% p.a.
You are required to prepare (a) Contract account (b) Contractees account (c) Work-in-progress account
and (d) Show how the work in progress will appear in the Balance Sheet

12. Construction Ltd. is engaged on two contracts A and B during the year. The following particulars are
obtained at the year ended 31st March 2020
Contract A Contract B
Date of commencement 1/4/2019 1/9/2019
Contract price 6,00,000 5,00,000
Materials issued 1,60,000 60,000
Materials returned 4,000 2,000
st
Materials on site on 31 March 2020 22,000 8,000
Direct labour 1,50,000 42,000
Direct expenses 66,000 35,000
Establishment expenses 25,000 7,000
Plant installed at cost 80,000 70,000
Value of plant on 31st March 2020 65,000 64,000
Cost of contract not certified 23,000 10,000
Value of contract certified 4,20,000 1,35,000
Cash received form contractee 3,78,000 1,25,000
Architect fees 2,000 1,000
BMS College | COSTING METHODS & TECHNIQUES
During the year material amounting to Rs.9,000 have been transferred from Contract A to Contract B.
You are required to prepare (a) Contract Accounts (b) Contractees account and (c) Extract from Balance
sheets showing clearly calculation of work-in-progress.

13. Ranka construction limited commence a contract on 1st April 2019. The contract price was Rs.5,00,000.
On 31st March 2020 plant costing Rs.5,000 (5000-500) Cr was returned to stores. Material costing
Rs.4,000 were in hand on site. Cost of work uncertified but finished was Rs.2,000. Of the plant and
material charged, the contract plant costing Rs.5,000 and material costing Rs.4,000 were lost in an
accident. Charge depreciation on plant at 10%p.a. from the following trial balance and information given
above prepare contract account and balance sheet as on 31st march 2020.
Particulars Dr. Cr.
Share capital 1,20,000
Cash received from contractee (80% of work certified) 2,00,000
Sundry creditors 10,000
Land and building 43,000
Cash at bank 25,000
Charged to contract
Materials 90,000
Plant 25,000
Wages 1,40,000
Expenses 7,000
Total 3,30,000 3,30,000

14. PQR Ltd was engaged on one contract during the year 2018-19. Contract price was Rs.2,00,000. The
trial balance extracted from the books on 31st march 2019 was as follows
Particulars Dr. Cr.
Share capital 40,000
Sundry creditors 4,000
Building 17,000
Cash at bank 4,500
Contract account
Materials 37,500
Plant 10,000
Wages 52,500
Cash received from contractee (80% of work certified) 80,000
Expenses 2,500
Total 1,24,000 1,24,000
Of the plant and material charged to the contract, plant costing Rs.1,500 and material costing Rs.1,200
were destroyed in an accident. On 31st March 2019 plant costing Rs.2,000 was returned to stores and
material at site valued at Rs.1,500. Cost of work uncertified was Rs.1,000. Charge depreciation 10% p.a.
on plant. Prepare contract account and balance sheet as at 31st March 2019.

15. The following is the trial balance of Prakash construction ltd engaged in construction of a building for the
year ending 31st march 2016
BMS College | COSTING METHODS & TECHNIQUES
Particulars Dr. Cr.
Contractee’s account (cash received) 3,00,000
Building 1,60,000
Creditors 72,000
Bank balance 35,000
Capital account 5,00,000
Materials 2,00,000
Wages 1,80,000
Expenses 47,000
Plant 2,50,000

Total 8,72,000 8,72,000

st
The work on contract for construction of building was commence on 1 April 2015. Material costing
Rs.1,70,000 was sent to site but those costing Rs.6,000 were destroyed in an accident. Wages amounting
to Rs.1,80,000 were paid during the year. Plant costing Rs.50,000 was used on contract all through the
year. Plant with a cost of Rs.2,00,000 was used from 1st April 2015 to 31st December 2015 and then
returned to stores. Materials on site on 31st march 2016 were Rs.4,000. The contract was Rs.6,00,000
and contractee pays 75% of work certified. Work certified was 80% of contract at the end of 31st March
2016. Expenses are charged to contract at 25% of wages. Plant to be depreciated at 10% for entire year.
Work uncertified was estimated at Rs.15,000 on 31 st march 2016.
Prepare contract account, P/L account and balance sheet as on 31st March 2016.

Previous year questions

1. (March/April 2022, 5 marks) The following particulars relate to a contract work carried out during
the year ended 31 Dec 2021
Work certified 1,43,000
Cash received from contractee 1,30,000
Materials sent to site 64,500
Labour 56,600
Plant installed at site 11,300
Value of the plant at the end 8,200
Cost of work not yet certified 3,400
Establishment charges 3,250
Direct expenditure 2,600
Materials on hand at the end 1,400
Materials returned to stores 400
Contract price 2,00,000
Prepare the contract account for the year ended 31 Dec 2021.
2. (March/April 2022, 15 marks) The following information relates to a building contract for
Rs.10,00,000

Materials 3,00,000 84,000

Direct wages 2,30,000 1,05,000
Direct expenses 22,000 10,000
Indirect expenses 6,000 1,400
Work certified 7,50,000 10,00,000
Work uncertified 8,000 -
Materials on site 5,000 7,000
Plant issued 14,000 2,000
Cash received from contractee 6,00,000 10,00,000
BMS College | COSTING METHODS & TECHNIQUES
The value of plant at the end of 2020 and 2021 was Rs.7,000 and Rs.5,000 respectively
Prepare:
i) Contract account
ii) Contractee account for two years
3. (Dec 2019, Sec C) The following information relates to two contracts of a company for the year 2018
Particulars A B
Materials sent to site 1,70,698 1,46,534
Labour 1,48,750 1,37,046
Plant 30,000 25,000
Direct expenses 6,334 5,718
Establishment charges 8,252 7,704
Materials returned to stores 1,098 1,264
Work certified 3,90,000 2,90,000
Work uncertified 9,000 6,000
Materials at site (31/12/2018) 3,766 3,472
Wages outstanding (31/12/2018) 4,800 4,200
Direct expenses outstanding (31/12/2018) 480 360
Value of plant (31/12/2018) 22,000 19,000
Contract price 5,00,000 4,00,000
The cash received from the contractee was 80% of the value of the work certified. Prepare contract
account and contractee’s account.
4. (Dec 2019, Sec B) From the information given below prepare contract account:
Particulars Amount
Materials bought from the market 3,000
Materials issued from stores 1,000
Materials returned to stores 480
Wages 4,880
Direct expenses 588
Works on cost 25% of direct wages
Office on cost 10% of prime cost
Contract price of Rs.12,000
5. [Dec 2018, Sec C (7 marks)] How much of profit, if any would you allow to be transferred to profit
and loss account in the following case?
Contract value Rs.10,00,000
Cost of the contract till date Rs.4,50,000
Cash received Rs.4,50,000 (90% of work certified)
Uncertified work Rs.50,000
Retention money is 10%
6. (Dec 2018, Sec C) Royal constructions undertook a contract for Rs.75,00,000 on an agreement that
80% of the value of the work certified should be paid immediately. The amounts expended were:
Particulars 2014 2015 2016
Materials 9,00,000 11,00,000 6,30,000
Wages 8,50,000 11,50,000 9,50,000
Carriage 30,000 1,15,000 -
Cartage 5,000 10,000 30,000
Sundry expenses 15,000 20,000 15,000
th
Work certified 18,75,000 75% of contract price 30 June whole contract was completed
Work - 1,00,000 -
uncertified
Show contract accounts and contractee’s accounts
BMS College | COSTING METHODS & TECHNIQUES
7. (Dec 2017, Sec C) The following information relates to a building contract for Rs.40,00,000 and for
which 80% of the value of work-in-progress is certified by the architect is being paid by the contractee.
Particulars 2014 2015 2016
Materials issued 4,80,000 5,80,000 3,36,000
Direct wages 4,40,000 6,20,000 4,40,000
Site expenses 20,000 68,000 24,000
Indirect expenses 8,000 10,400 2,000
Work certified 31st march 9,40,000 30,00,000 40,00,000
Work uncertified 11,200 32,000 -
Material at site 8,000 20,000 32,000
Value of plant 56,000 - -
The value of the plant at the end of 2014, 2015 and 2016 was Rs.44,800; Rs.28,000 and Rs.12,000
respectively.
Prepare contract account for the three years and contractee account
8. (Dec 2016, Sec B) Following is the information relating to a contract
Contract price 6,00,000
Raw materials 1,20,000
Wages 1,60,000
Sun-contract 5,000
Plant 20,000
Materials transferred to other contract 2,000
General expenses 7,600
At the end of the year, cash received from the contractee was Rs.2,40,000 being 80% of work certified.
Value of materials unused at the end of the year was Rs.18,000. Plant to be depreciated at 20%.
Prepare contract account
9. (Dec 2016, Sec C) The following data relates to a building construction contract for Rs.10,00,000
2005 2006
Materials issued 3,00,000 84,000
Direct wages 2,30,000 1,05,000
Direct expenses 22,000 10,000
Indirect expenses 6,000 1,400
Work certified 7,50,000 10,00,000
Work uncertified 8,000 -
Material at site (31/12) 5,000 7,000
Plant issued 14,000 2,000
Cash received from the contractee 6,00,000 10,00,000
Value of plant at the end of 2005 and 2006 was Rs.7,000 and Rs.5,000 respectively
Show for 2005 and 2006
a) Contract A/c
b) Contractee A/c