Problem:
Model: Contract A/c & Contractee's A/c for 2 years
RBS Ltd took up a construction work of a building at a contract price of 30,00,000. During the first year, the following amounts were spent as against a sum of Rs. 11,25,000 which represented 90% of the work certified and received by the contractor.
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Materials
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5,25,000
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Wages paid to workers
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3,00,000
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Overhead expenses
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75,000
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During the second year, the firm spent the following amounts:
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Materials
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7,50,000
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Labour cost
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6,00,000
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Overhead expenses
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1,50,000
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In the second year, the contract was completed and a sum of Rs.17,50,000 was received by the contractor. Prepare the contractor and contractee's account for both the years and calculate the profit.
NOTE:Consider only 2/5th of the notional profit that is to be taken to the credit of the profit and loss in the first year, as the work done is less than 50%.