MINIMUM QUANTITY CONTRACT ISSUE

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This discussion centres on a contract requiring 300 tons of production per month, where the contractor only produced 200 tons. The contractor must pay for the missing 100 tons. The query seeks guidance on how to term this shortfall and under which account head it should be reflected in the Profit & Loss statement as a form of compensation for unmet contractual obligations.

TARIQUE RIZVI

TARIQUE RIZVI (Querist)

04 May 2021 Respected Sirs,

Please guide me and oblige.

MINIMUM QUANTITY 300 TON PRODUCTIONS PER MONTH
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As per the contract production of 300 Tons should be effected. The contractor produced 200 Tons only but the contractor will have to pay the cost of 100 Ton production. What will be the term for 100 ton production as follows?

Contract balance 100 ton
Balance contract 100 ton
Skipped Quantity 100 ton
Balance Quantity 100 ton
Unfrozen Quantity 100 ton
Unused balance 100 ton
As under what head of accounts the 100 ton quantity shall be reflected in profit & loss account. Actually it is one kind of loss allowable in Profit & Loss Account.