yngenta AG (2011) Notes to the Syngenta Group Consolidated Financial Statements [extract] 2. Accounting policies [extract] Inventories Purchased products are recorded at acquisition cost while own-manufactured products are recorded at manufacturing cost including a share of production overheads based on normal capacity. Cost is determined on a first-in-first-out basis. Allowances are made for inventories with a net realizable value less than cost, or which are […]

Determination of revenue A company is engaged in a construction contract with an expected sales value of £10,000. It is the end of the accounting period during which the company commenced work on this contract and it needs to compute the amount of revenue to be reflected in the profit and loss account for this contract. Scenario (i) Stage of completion is measured by the […]

EADS N.V. (2010) Notes to the Consolidated Financial Statements [extract] 2. Summary of significant accounting policies Revenue recognition [extract] For construction contracts, when the outcome can be estimated reliably, revenues are recognised by reference to the percentage of completion (“PoC”) of the contract activity by applying the estimate at completion method. The stage of completion of a contract may be determined by a variety of […]

Royal BAM Group nv (2010) 3. Summary of significant accounting policies [extract] 3.10 Construction contracts [extract] The Group uses the ‘percentage of completion method’ to determine the appropriate amount to be recognised in a given period. The stage of completion is measured by reference to the contract cost incurred as percentage of total actual or estimated project cost. Revenues and result are recognised in the […]

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 […]

XYZ company uses historical cost system and applies overheads on the basis of predetermined rates. The following data are available from the records of the company for the year that ended on 31 March 2010. Manufacturing overhead 8,50,000 Manufacturing overhead absorbed 7,50,000 WIP 2,40,000 Finished goods stock 4,80,000 Cost of goods sold 16,80,000 Apply the methods of disposal of under-absorbed overheads and show how they […]