The Vitec Group plc (2010) Notes to the Consolidated Accounts [extract] 2 Accounting Policies [extract] Long term contracts [extract] Contract revenue and expenses are recognised in the Income Statement in proportion to the stage of completion of the contract, to the extent that the contract outcome can be estimated reliably. The stage of completion is assessed by reference to surveys of work performed. When the […]

The following information has been gathered for a company doing jobbing work only for 2009 Materials consumed 1,00,000 Direct labour 75,000 Factory overheads 60,000 Office and administrative expenses 23,500 Sales The company has to quote for a job to be undertaken in March 2010. It is estimated that the job will require materials costing Rs. 40,000 and direct wages for it will be Rs. 50,000. […]

Cumulative example – the determination of contract revenue and expenses The following example illustrates the determination of the stage of completion of a contract and the timing of the recognition of contract revenue and expenses, measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. A construction contractor has a fixed price contract to build […]

The works cost of a certain article is Rs. 500 and the selling price is Rs. 1,000. The following selling and distribution (direct) expenses were incurred: Freight and carriage 50 Insurance 15 Commission 45 Packing cases 15 The estimated fixed selling and distribution expenses for the year were Rs. 50,000, and the estimated value of sales for the year were Rs. 2,00,000. You are required […]

Segmented construction contract On 1 January 2013, entity A entered into a contract to construct a building on a piece of land it has acquired and, when construction is complete, to deliver the entire property to a customer. A applies the percentage of completion method to account for contract revenues and expenses. The relative percentage of cost incurred is considered a reliable method for measuring […]

VRV Co. Ltd, a manufacturing company, having an extensive marketing net work across the country, sells its products through four zones, viz. East, West, South and North. The budgeted expenditure for the year is given below: Sales manager’s salary 60,000 Expenses relating to sales manager’s office 40,000 Travelling salesmen’s salaries 1,60,000 Travelling expenses 18,000 Advertisement 15,000 Godown Rent: East Zone: 7,500 West Zone: 12,600 South […]

An arrangement that contains a lease A production company (the purchaser) enters into an arrangement with a third party (the supplier) to supply a minimum quantity of gas needed in its production process for a specified period of time. The supplier designs and builds a facility near to the purchaser’s plant to produce the gas and maintains ownership and control over all significant aspects of […]

A manufacturer has shown an amount of Rs. 16,190 in his books as “Establishment” which really includes the following expenses: (1) Agent’s commission, Rs. 5,750, (2) Warehouse wages, Rs. 1,800, (3) Warehouse repairs, Rs. 510, (4) Lighting of office, Rs. 70, (5) Office salaries, Rs. 1,130, (6) Director’s remuneration, Rs. 1,400, (7) Travelling expenses of a salesman, Rs. 760, (8) Rent rates and insurance of […]

Arrangements that do not contain leases (a) Take-or-pay contract that does not depend on a specific asset A purchaser enters into a take-or-pay contract to buy industrial gases from a supplier. The supplier is a large company operating similar plants at various locations. The amount of gas that the purchaser is committed to buy is roughly equivalent to the total output of one of the […]

A company is making a study of the relative profit-ability of the two products A and B in addition to direct costs, indirect selling and distribution costs to be allocated between the two products, which are provided as follows: Insurance coverage for inventory (finished) 78,000 Storage costs 1,40,000 Packing and forwarding charges 7,20,000 Salesman salaries 8,50,000 Invoicing costs 4,50,000 Other details are given here: Product […]