Question

profit on an incomplete contract is called notional profit because ​

Answer 1

Explanation:

When there is loss on an incomplete contract, it is fully transferred to the profit and loss account. When the contract account of an incomplete contract shows profit, it should not be treated as profit earned but only as 'Notional profit. Uncertainty exists relating to material prices and wage rates..

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Answer 2

Loss on completed contracts is fully transferred to the profit and loss account as it occurs. When a contract account for an unfulfilled contract displays profit, it should only be regarded as "Notional profit" rather than actual profit.

Incomplete contract:

• A contract that is imperfect or ambiguous in a significant way is referred to be incomplete in the field of contract law.
• According to economic theory, a comprehensive contract is one that outlines the parties' rights, responsibilities, and remedies in any scenario that could arise.

Notional payment:

A variety of payments made to employees that are not made in cash but must be recognised as such for the purposes of pay as you earn (PAYE) and National Insurance contributions are referred to as "notional payments" (NICs).

For clarity, the Bond Notional Amount on any date on or before the Issue Date shall be deemed to be an amount equal to the Initial Reference Amount. Bond Notional Amount is defined as an amount equal to the Outstanding Reference Amount less the total principal amount of the Bond Charged Assets.

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