Contract Costing
It is a form of exact order costing, which is applied to relatively large cost units that normally get a considerable length of time to complete as an example of construction or building works. Contract jobs are undertaken in accordance along with particular requirements of contractee/Customer. Contracts may be distinguished from job orders ia the given features:
The money value of a contract is much larger than such of a job order.
- A contract consumes considerably larger amounts of resources than a job order.
- For a contract, special progress reports are generally made whereas in job costing, reports are made after the completion of the job.
- As a contract, indirect costs are relatively smaller in relation to direct costs though the vice versa is time for job order.
To second the progress of contract works, a particular account identified as a contract account is maintained.