The accounting for forward contracts is written as follows −Here, XXXX and XXX refer to the respective amount.RecognizeSince the agreement is for a future date, it should be accounted for now (date of signed, date of which physical exchange).CreditDebitAsset obligationXXXXAsset ReceivableXXXXRecording (seller perspective)Asset obligation credited for spot rate and asset ... Read More

ProblemPrepare a job sheet using the transactions given below −Amount ($)Raw materials750000Work in progress (job A)310000Utility costs50000Direct labour costs125000Advertising expenses310000Indirect labour costs202000Travel expenses40000Raw materials675000Insurance15000Work in progress (Job B)295000Finished goods1089700Direct labour costs98000Cost of goods sold963000Indirect labour costs103000Sales2058000Manufacturing overheads1158009564500Administrative expenses105000Carrying balancesSales commissions195000Raw materials30000Manufacturing overheads220000Work-in-progress88000Depreciation (equipment)45000Cost of goods sold28000146000SolutionThe job sheet for the ... Read More

Job costing is the basic job costing method used to determine the cost of a specific job, performed according to the customer requirement. This is the type where work is done by contracts or separate projects.This type of costing is useful for the firms producing not identical products. Manufacturing firms ... Read More

An offer is a kind of promise between the parties, which depends on a certain act/forbearance given. In other words, an offer is an invitation to enter into a contract with certain terms.According to the Section 2 (a) of Indian Contract Act, “An offer is defined as, when one person ... Read More

Contracts are divided as follows −validity/enforceabilityformationperformanceSub classification of contracts is given below −Based onValidity/enforceability Formation PerformanceValid contractsExpress contractExecute contractVoid contractsImplied contractExecutor contractVoidable contractsQuasi-contracIllegal agreementsUnenforceable contractsE.com. contractsunilateral contractbilateral contractNow, let us understand the types of contracts in detail.Validity/enforceabilityValid contract − It is an agreement, which is binding and enforceable.Void contract − It is ... Read More

Following are the essentials of valid contract −Agreement − For a valid contract, agreement is the most essential element, which consists of offer and acceptance.Two parties − Minimum two parties are required for a contract. One will offer the contract and the other will accept the contract.Free consent − Consent ... Read More

Accounting treatment for costs is explained below −Sr.NoCost treatment1MaterialsCost of material purchased/sent to the site is charged.Cost of material unused/returned to the store is credited to the contract account.Cost of material stored (for future use) is debited to the stock account.2LabourLabour charges and their related costs are charged to the ... Read More

Contract costing is one of the methods of job costing and it is also called terminal costing. In this, each contract is given a number and the records are maintained separately. This method is generally used by builders, construction firms, contractors etc. The main objective of this method is to ... Read More

The job costing procedure consists of the following aspects −Direct materials cost is calculated with the help of requisition form.Employee wages are also calculated by the payroll department with the help of tickets issued.Overhead charges are also considered.Manufacturing overheads are as follows −Direct expensesDirect labourMaterial expensesManufacturing overheads of each department.Job ... Read More

Carryover method of accounting is used when there is a merger of two or more non-profit entities into a new entity. Their assets and liabilities are merged and come into effect on the date of merger transactions.Following adjustments are required in carryover method accounting −Modifications of contracts − Alters terms ... Read More