Contract costing terminology, Cost Accounting

Contract Costing Terminology

Principles of profit income recognition in contracts

The Notional Profit

This is a component of two items as:

a) Profit taken  = Notional profit x 2/3 x cash received/work certified

This formula of calculating the part of national profit taken in the year is employed while substantial costs have been incurred upon the contract although the contract is not near completion. However when the contract is near completion the profit considered is calculated like:

"Profit taken = Estimated profit x cash received/contract price". 

Where Estimated profit = Contract price - Estimated total cost and

Estimated total cost = Costs incurred to date and estimated future costs.

b) Profit not taken = refers to the part of the national profit such is not recognized in the recent period. It is profit carried forward to be acknowledged in the years such follow.

c) Retention Money

It is a portion of the value of work certified such retained via the contractor to protect himself from faulty work which might be evident at the time of progress payments or at the completion of the contract.  This amount is released after satisfactory performance beneath the contract.

Posted Date: 2/7/2013 2:27:13 AM | Location : United States







Related Discussions:- Contract costing terminology, Assignment Help, Ask Question on Contract costing terminology, Get Answer, Expert's Help, Contract costing terminology Discussions

Write discussion on Contract costing terminology
Your posts are moderated
Related Questions
Specific Order Costing This is a broad costing system that is applicable where work jobs consist of separate jobs, batches or contracts.  Every job or contract or batch is a c


McDaniel Company manufactures 100-pound bags of fertilizer that have the following unit standard costs for direct materials and direct labor: Direct Materials (100 lbs. @ $1.00

Definitions of manufacturing concepts  Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:  Materials and supplies used

Expenses are usually recorded only while they are paid. The failure to record unpaid expenses in the accounts outcomes in an understatement of which expense and also an understatem

is sale of salvage from capital project recorded as gain/loss or applied back to project costs

Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used an average of 6.5 direct labor hours and an average of 1.5 sheet

A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues $240,000 240,000 Variable costs 120,000 140,000 Fixed costs 70,000 70,000 Which of the fol

Factors affect Decision Making These decisions need consideration of factors as like A. The level of market possible to be available in future B. The strategy that compe

If a company trades in a building towards a new building and does not recognize a gain or loss (because of code section 1031), will this transaction affect the cash flows statement