if the work certified of a 200000 and retention money is 300000 compute the cash ratio
Answers
Explanation:
1. Since contract is 80% complete, Profit transferred to P & L A/c = 2
3
× Notional Profit ×
Cash Received
Work Certified
So, Rs. 60,000 = 2
3
× Notional Profit × 75% (i.e. Percentage of Cash Received to Work
Certified is 75% given)
On solving the above, we get Notional Profit = Rs. 1,20,000.
2. Notional Profit = Work Certified + Work Uncertified less Cost of work done till date
Rs. 1,20,000 = Work Certified + Rs. 8,000 - Rs. 88,000
On solving the above, we get Work Certified = Rs. 2,00,000.
3. Percentage of Completion = Work Certified
Contract Price =
Rs.2,00,000
Contract Price = 80%. So, Contract Price =
Rs.2,00,000
80%
= Rs. 2,50,000.
2. Contract Costing - Contract A/c, and Contractee’s A/c M 08, N 14
Z Limited obtained a Contract No. 999 for Rs. 50 Lakhs. Details of this contract for the year
ended 31st March are -
Particulars Rs. Particulars Rs.
Materials Purchased 1,60,000Electricity Charges 25,000
Materials issued from
Stores
5,00,000Plant Hire Expenses 60,000
Wages and Salaries
Paid
7,00,000Sub-Contract Cost 20,000
Drawing and Maps 60,000Materials returned to Stores 30,000
Sundry Expenses 15,000Materials returned to Suppliers 20,000
The following balances relating to the Contract No.999 for the year are available:
Particulars As at Beginning of the Year As at End of the Year
Work Certified Rs. 12,00,000 Rs. 35,00,000
Work Uncertified Rs. 20,000 Rs. 40,000
Materials at Site Rs. 15,000 Rs. 30,000
Wages Outstanding Rs. 10,000 Rs. 20,000
The Contractor receives 75% of Work Certified in cash. Prepare Contract Account and
Contractee’s Account.
Solution: 1. Contract No.999 Account for the year ended 31st March
Particulars Rs. Particulars Rs.
To balance b/d - Work Certified 12,00,000By Work in Progress - Work Certified 35,00,000
- Work Uncertified 20,000- Work Uncertified 40,000
To Material at Site b/d 15,000By Materials Returns - Stores 30,000
To Material issued
To Materials directly purchased
5,00,000
1,60,000
- Supplier 20,000
To Wages (7,00,000 + 20,000 -
10,000)
7,10,000Note: It is assumed that Materials are
returned
To Drawings and Maps 60,000to Supplier, directly from the Site
itself.
To Sundry Expenses 15,000By balance c/d - Material at site 30,000
To Electricity Charges 25,000
To Plant Hire Charges 60,000
To Sub-Contract Cost 20,000
To Notional Profit - balancing
figure
8,35,000
Total 36,20,000 Total 36,20,000
To Profit & Loss A/c - transfer 4,17,500 By Notional Profit b/d 8,35,000
Reserve Profit c/d - balancing
figure
4,17,500
Total 8,35,000 Total 8,35,000
To WIP b/d 35,40,000 By Reserve Profit b/d 4,17,500
To Material at Site b/d 30,000
Note:
(a) Percentage of Completion = Work Certified
Contract Price =
35.00.000
50.00.000
= 70%
(b) So, Profit transferred to P&L A/c= 2
3
× Notional Profit × Cash Received
Work Certified =
2
3
× Rs. 8,35,000
Answer:85%
Explanation: