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AS-7 - Construction Contracts

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  • Mahesh S

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This is a very significant topic on the valuation of construction contracts. Through my notes in the attachments students get a proper knowledge on the subject Construction Contracts. You can earn marks quickly with my effective notes inputted.

  • 1
    Applicable to which construction flats:- Action Taken Applicablility AS-7 Construction Contracts Construction Flats 10 F Sale in Opn Mkt x Sale to Pvt Com. Yes AS 7 (Contractee dominates the Constn taken place as per requisition of Ex:- Constn of metros, roads, bridges. Objective:- To recognise the revenue from constn for each year. AS applicable for Contractors. Should be contract between 2 parties where one party know Constn can be of single asset or multiple assets.AS 7 deals specifically on revenue recogniti( As a period of constn straddles, many years the recognition of revenue per year is importar Contracts R ue Variation in Scol Video 2 Addi.rev recog only when accepted by contractee and it is reliably measured. In case of incentive the work should reach at advance stage. Reduce penalty. Costs-Directly Incurred Site material Site labour Depn on assets owned Hire charges on lease
  • 2
    soc 0/0 W.C method Cost to Cost method Video 2 (begins) Qn-3 Page no:-61 Western Ans:- Est. Costs T.Costs Prfessional fees Cost of transport Estd cost of warranty % completion certified by Architecture C.I/T.C*IOO Draw P & L a/c YR 1 130 270 400 YR 2 200 205 405
  • 3
    soco/o T.Rev Cum. Rev (-) Rev. Rec Rev.Recog for the year (-)Costs Yr Net Rev for the year Profit/loss for the year As per Sir YR 1 Costs 32.5 500 162.5 O 162.5 130 32.5 Contract a/c 130 Rev 32.5 49.38272 510 (500+10)Claim accepted by 251.85 162.5 89.35 70 (200-130) 19.35 162.5 Pblm 14 Ans:- Add:- TC>TR Less:- Particulars CTD (WC+WUC) Estd Costs TC soco/o Loss reco. As per para 35 (Charged to P & L a/c ) Reve. For the year Cost for the year Loss charged to P & L a/c for the year Grosss Amt due from customers Cost incurred till date Loss Rec for whole year Progress billings Received (1000+300)lnclusive of Stag Payments received Amt(Rs.) 1500 1750 3250 46.15385 2400 Add:- Less:- 850 (For whole period of contra 1107.692 1,500.00 392.31 1500 -850 -1400 457.69 -750 Amt due to customers(Negative) Amt due from customers(Positive) Pblm (3) (b) Ans:- RTP-Page no:-ll Add:- Less:- CTD=WC+WUC EFCC TC TC>TR Loss Rec. 425 480 905 800 Add:- as per- 105 (for Whole Contract pe Less:-
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    Less:- Less:- Less:- Para 35 soco/o Rev. for the year CTD=WC+WUC Loss for Current year 46.96133 (0/0) 376 425 49
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    Employees x AS 7 Contractor) contractee, he is the owner from the right from inception, n as Contractee/ Owner of the asset is reqd to pay progress payments to the contractors. per year in the books of Contractor. lt. pe of Work Costs Costs-lnDirectly Incurred Insurance Common indirect charges Supervisor salary Claim (Allocated) Incentives (Given only The work rc
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    T.Rev(Given) Cost Inc Est.Cost T.Cost soco/o (Cl/Est.Cost) T.Rev. Cum.Rev (-) Rev Recog. Rev. for the year Cost Inc (net) (B) Cum.Cost Less:-Cost Recog. TC>TR Exp. Loss on the project Cost Prov(40-10) for estd loss (Contract P & I a/cO Surplus 150 1 st year 40 60 100 40% 150 60 60 40 20 40 40 2nd year 160 80 40 120 66.67% 160 107 -60 47 40 7 80 -40 40 Then difference immediately charged to P & L a/c 30 Rev 30 Draw Contract a/c YRI To Cont. Exp (Cur.yr) 20 130 32.5 162.5 160 3 rd Year 100 100 100% 160 160 -107 53 20 33 100 -80 20 YR 2 70 19.34 89.34
  • 7
    contractee To Exp. To N/P a/c 0.666666667 Gen L a/c YRI Net Debtors Progress Billings Made Adv.Adjusted Cash Received Progress billings received YR 2 2 30.5 32.5 Less:- 19.34 19.34 xxx xxx xxx xxx -1400 Gross amount due from Customers Cost incurred till date Pft/Loss Rec for whole year Progress billings Received ct) Provision to be made (Disclosure as per AS-07) Gross amount due to Customers Cost incurred till date Pft Rec. for whole contract period Loss Rec. for whole contract period xxx xxx xxx xxx Represents to be paid to Customers-Excess Recovered 425 0 -105
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    Progress billings Received Progress billings to be Received Advance received from Customers -380 -120 -180 (Amt due to Customers)
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    Penalty when one completed the works with specific condition & std rules and regulations applicable) ├Žached when its completion is at advanced stages. (Video 1)
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    Cost Incu Est Costs TC soco/o Rev. Costs Net Rev/Loss. For Balance (Para 35 of AS 7) YRI By cont.Rev TC>TR (in%) 120>80 40 (P&L a/c) Entire Loss 25.00 162.5 162.5 (Realise ss for current year) (Provision to be made) (Video 1) Ends YR2 89.34 89.34
  • 11
    YRI By Contract P & L a/c 300 -1100 (Stage-wise billing received) -1400 32.5 32.5 19.34 19.34
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