Shobhit Jain (2nd Year Article) (94 Points)
27 February 2012Help!!!!!!.....Contract Costing Chapter (IPCC)
In Ashish Kalra's book Plant and Materials issued to site that are lost has been credited to Contract Account and no treatment is given in his background material for the same......
Also where should i take the opening WIP in the Contract Account??
Thanks in advance
Sumit
(NA)
(35 Points)
Replied 28 February 2012
That has rightly been done. Any loss is transferred to P&L account. If 100 materials are issued to site, 80 gets sold and 20 lost, then the loss will get debited to contract acc.
Opening WIP gets credited to contract account.
Shobhit Jain
(2nd Year Article)
(94 Points)
Replied 28 February 2012
thanks for replying Sumit
But y credit??? I mean contract account is nothing but a P&L account and all the losses are booked on the debit side of the P&L so can you pls tell me the reason for y this shud be taken to the credit side
Sumit
(NA)
(35 Points)
Replied 29 February 2012
You are right. You could do that if you are willing to bring P&L account in play numerous times rather than just once. Practically speaking, it is logical to balance the figures to get a profit/loss figure and then transferring that ONE figure to the P&L account. Hope this helped.
Archit Chhabra
(student)
(27 Points)
Replied 29 February 2012
@ Shobhit Jain-the entry for the loss will be as follows -
(i) Contract a/c Dr.
To material loss
(ii) Material loss a/c Dr.
To P&L a/c
NET RESULT:
Contract a/c Dr.
To P&L a/c
This is due to the fact that if the material is lost it has to be charged to the P&L a/c and not to be charged in the contract a/c
CAclubindia
