Contract Accounts
This query is : Resolved
21 May 2011
Is any treatment required to be made in the contract account related to escalation clause?
Also,
What treatment is made if the total estimated contract cost is more than the contract price???
Please Help.
Also,
What treatment is made if the total estimated contract cost is more than the contract price???
Please Help.
21 May 2011
1. provision need to provide for extra claims as per escalation clause terms during the particular reporting period
2. In case estimated contract cost exceeding the contract price , the provision for future loss need to be provided in the contract starting period itself as per AS-7
2. In case estimated contract cost exceeding the contract price , the provision for future loss need to be provided in the contract starting period itself as per AS-7
21 May 2011
thank you sir, but, the provision that has to be made for escalation clause would be made from the Profit & Loss A/c...i guess???? Would that be shown in the Contract Account???
Thank You!!!
Thank You!!!
21 May 2011
As per my opinion Escalation related to the particular contract need to be shown in contract account
21 May 2011
Thank You Sir! And what about the provision for future estimated loss? Would that be made from Profit & Loss? Would that be shown in the Contract Account???
21 May 2011
yes, provision for future loss also need to be adjusted in contract account only
Dr: Provision for future loss a/c
Cr: Contract a/c
Dr: Provision for future loss a/c
Cr: Contract a/c
21 May 2011
Thank You Sir!
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