D ltd took a contract for 5lakhs on 01/07/2006. on 30th june when a/cs were closed the following details about the contract were gathered.material:Rs 1,00,000 wages:Rs50,000 gen expences: Rs10,000 materials on hand 30/6/2007 :Rs 25,000 work certified:Rs 2,00,000 cash received :Rs1,50,000 work certified:Rs15,000 depreciation:Rs 5000 and the contract has escalation clause "inthe event of prices of materials and rates of wages increase by morethan 5% the contract price will be inreased accordingly by 25% of the rise in the cost of materials and wages beyond 5%in each case. It was found that since the date of signing the agreement the prices of materials and wage rates increased by 25% the value of the work certified doesnot take into a/c the affect of he above clause. is this is the problem plese explain me about the escalation clause thanking u praveena
05 April 2009
Praveena, Your problem is not clear. 1. "the information as on 31/6/2007" - What is this information? - Is it estimated Cost given at the time of submitting quotation?
2. When the Co "took a contract for 5lakhs on 01/07/2006". - was it relevant to declare "materials on hand 30/6/2007"? Sorry I am unable to give you any reply. pl clarify the same if I misunderstood. Welcome. S. Banerjee
CAclubindia
