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Job And Contract Costing Question Answer

1. What do you mean by Contract?

Answer: Under the contract, a specified work is performed in a stipulated period at a specific rate. 🙂

2. What is a Contract?

Answer: It is a method of cost accounting to ascertain the cost of contract and profit earned or loss suffered thereupon.

3. What is meant by Batch Costing?

Answer: Batch costing is a specific order costing under which each batch is treated as a cost unit and costs are accumulated and calculated separately for each batch.

4. What is meant by Sub-Contract?

Answer: When contractor assigns a portion of the contract to any other person for completion of that portion it is known of a subcontract.

5. What is meant by Subcontract Cost?

Answer: Payment made to sub-contract is considered as direct expenses and shown on the debit side of contract account the amount paid to subcontractor considered as subcontract cost.

6. What do you mean by Cost-plus contract?

Answer: The contract price is determined by adding a certain percentage of profit or a certain amount of profit on actual cost.

7. What is meant by retention money in contract costing?

Answer: In case of the incomplete contractor to contractor rest of the amount is known as retention money.

8. Explain the escalation clause in the context of contract costing?

Answer: It provides a shield to a contractor that contract price will change in proportion to change in the price of material labor and other expenses.

9. How will you value the work in progress with reference to contract?

Answer: Amount of work in progress is ascertained as follows:

Work certified + work uncertified Reserve Amount received.

Bonus: Management: as Art and Science or Both (Step-by-Step).

10. Give two reasons for making a reserve for Unrealized Profit?

Answer: Reasons for making a reserve for unrealized profit are:

To meet any unforeseen future expenses.

11. How work-in-progress is shown on the Balance sheet?

Answer: Work-in-progress has always a debit balance, Hence balance sheet under the head current Assets, loans, and Advances.

12. State the meaning of Job Costing method give 4 Examples?

Answer: Job costing is a method to ascertain the cost of a product or service of required by the customer job costing organization is known of jobbing type industries who manufacture goods against the order of customer ex: the printing press, repairing units, machine tools manufacturing, furniture industries.

13. What are the Salient Features of Contract Costing?

Answer:

The contract is an agreement between contractor and contractee that contractor will complete work specified in the contract in a given period for a certain sum of amount.
Generally, its period exceeds more than one year.
Contractor mat gets the work done by a subcontractor.
In case of huge amount, payment may be made in installments.

14. Why should Profit be taken into Account on Incomplete contract?

Answer: Profit on incomplete contract should be recognized due to the following reasons :

Profit on contracts which last for two to three years does not result in last year so profit should unnecessarily.
Profit on incomplete contracts is determined in a very conservation manner as only 1/3 or 2/3^rd profit is carried. It is further reduced in proportion of cash received to work certified no profit is recognized for work uncertified though work is completed profit is recognized only if at least 25% or more work is completed.

Top 14 Job And Contract Costing Question Answer (Cost Accounting)