Contract accounting - contractee

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Can anyone please tell me the entries in the books of the contractee in contract accounts

I know that AS-7 is not applicable in this case (but still i want to know the journal entries)

Suppose i hired a contractor to make a building for a contract price of 5 lacs

Payment is to be made as follows

Year 0 (Down Payment) - 100000

Year 1-4 - 100000 each

 

It will be of great help

Replies (1)

In normal case cash paid is percentage of work cetified

As you pay cash will debited to assets a/c ie.

fixed assest a/c..................................Dr.

       To cash a/c

[note:-cash decreasing and assests increasing so effect will NIL in balance sheet and it will tally]

it should shaw in balance sheet as fixed assest wip and add to that type of asses

in your eg:

there is down payment i.e. before constructing assest

. ' .  I  hope so it should trated as payment in advance and debited to contractor's a/c and afterword it should adjusted from contractor's a/c.

now I thing so you can give ans of your Q but my ans is as follow

yr1  contractor's a/c...................Dr          100000

            To cash                                                          100000

[down payment]

yr1 Bulding a/c..........................Dr.           200000

            To cash a/c                                                  100000

            To contractor's                                             100000

[adjust contactor's a/c as will paid cash]

yr2 Bulding a/c .........................Dr.           100000

            To cash a/c                                                   100000

 

yr3 Bulding a/c .........................Dr.           100000

            To cash a/c                                                   100000

yr4 Bulding a/c .........................Dr.           100000

            To cash a/c                                                   100000

 
I don't have practical knowledge but I thing so
payment is made as per work completed % not pre-defind installment
bcz of uncertainty wether work will done at time time or without default  or as per-plan etc.

 


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