notinal profit

Contract Costing- Method of costing used to collect and identify  all expenses related to a specific contract.  it is one form of application of the principles of job costing.

Notional profit- Notional means estimate. As completion of contracts take several years, wide fluctuations may be noted in the profit figures of contractors from year to year. To avoid this notional profit for the year in which the activity is undertaken  is calculated and transferred to the  P&L account of the  respective accounting year.

Notional Profit=value of work certified-cost of work certified.

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