Contract costing query

Hardeep Singh (CHARTERED ACCOUNTANT) (205 Points)

06 October 2011  

debit balances of the trial balance of a contractor for a particular contarct at the year end shows:

wages 180000

expenses 47000

and expenses are charged @ 25% of wages.

now what figures of wages and expenses will be debited in the contract account, whether-

1) wages for the year 47000/25%                    = 188000

    expenses for the year                                     =   47000

OR

2) wages for the year                                           = 180000

    expenses for the year 180000*25%             =   45000