|
|
Mesh Top Contract Round Bistro Table Finish: Twilight, Size: 36 280135 Finish: 93 Finish: Twilight, Size: 36″ The beauty and character of hand-formed metal, blended with intricate details, allows the Classics Wrought Iron Collection to fit any style or taste. The Mesh Top Contract Collection tables comes pre-assembled, combining the durability and beauty of Woodard’s authentic designs. These tables include a pedestal base. Features: -No Assembly Required -Stan… |
|
|
Husky PA3242HD 42-Gallon Contractor Clean-Up Bags, 32-Count $20.00 0… |
|
|
AAS-VG599 Cellular GSM Home Security Alarm System (R) $399.99 For those wanting the protection of a Complete Home Security Alarm System but lacking a land line telephone. The AAS Cellular Alarm System consists of a Wireless Home Security Alarm System matched a with Cellular GSM Terminal operationing on all major world band frequencies. This GSM Alarm System is perfect for vacant and weekend homes, construction sites anywhere with power but no phone line. Sel… |
|
|
Wallmonkeys Peel and Stick Wall Decals – Working in the River – Removable Graphic WallMonkeys wall graphics are printed on the highest quality re-positionable, self-adhesive fabric paper. Each order is printed in-house and on-demand. WallMonkeys uses premium materials & state-of-the-art production technologies. Our white fabric material is superior to vinyl decals. You can literally see and feel the difference. Our wall graphics apply in minutes and won’t damage your paint or l… |
|
|
Alaska Highway … |
|
|
Alaska Highway … |
|
|
Casio Gzone Cell Phone Verizon $299.99 Casio Gzone Cell Phone for Verizon… |
|
|
TheLapDesk $79.95 I always got so frustrated with the heat that would come off my notebook and how awkward it was to prop it up or position it just right. I would use a large book to set it on just to keep it from getting to hot. I purchased one of those wooden trays seen out there, after assembling it, I found it was not sturdy and it kept getting caught on my blanket and tipping over cause of its design with shor… |
|
|
QuickBooks Premier Contractor 2012 $249.99 Financial Management – Standard Retail – CD-ROM – PC… |
|
|
Motorola V750 Adventure PTT Rugged Grey Phone Verizon $109.95 This CDMA phone with PTT has a thin, rugged clamshell body similar to the V950, with similar features as well. Key features include EVDO Rev A data, 2 megapixel camera, memory card slot, large QVGA main display, large external display, stereo Bluetooth, and GPS navigation…. |
Financial Accounting for Construction Contracts
A contract is a big job requiring considerable length of time to complete and comprising activities to be done outside the factory promises, viz. construction of a dam or school building, laying down railway lines, etc. Special financial and management accounting is required to maintain the records of construction contracts. Since each contract involves considerable resources both in terms of men and materials, it is necessary to devise an appropriate accounting system to ascertain the cost and profit made on each contract separately.
Profit on incomplete contracts: At the end of an accounting period it may be found that certain contract have been completed while others are still in process and will be completed in the coming years. The total profits made on completed contract say be safely taken to the credit of the profit and loss account. But the same cannot be done in case of incomplete contracts. These contracts are still in process, and there are possibilities of profits being turned into to losses on account of heavy rise in prices of materials and labor and losses on account of other unforeseen contingencies. At the same time it does not also seem desire able to consider the profits only on completed contracts and ignore completely incomplete ones because this may result in heavy fluctuations in the figure of profit from year to year. A year in which a large number of contracts have been completed will show an abnormal high figure for profit while reserve may be the case in the year in which a large number of contracts remain incomplete. Therefore, profits on incomplete contracts should be considered, of course, after providing adequate sums for meeting unknown contingencies.
There are no hard and fast rules for the calculation of the figures for profit to be taken to the credit of profit and loss account. However, the following rules may be followed:
(a) Profit should be considered in respect of work certified only, work uncertified should always be valued at cost.
(b) No profit should be taken into consideration if the amount of work certified is less than 1/4 of the contract price because in such cases it is not possible to foresee the future clearly.
(c) If the amount of work certified is 1/4 or more but less than1/2 of the contract price, 1/3 of the profit disclosed, as reduced but the percentage of cash received from the contractee, should be taken to the profit and loss account. The balance should be allowed to remain as a reserve.
(d) If the amount of work certified is very much near completion, if possible the total cost of completing the contract should be estimated The estimated total profit on the contract then can be calculated by deducting the total estimated cost from the contract price. The profit and loss should be credited with that proportion of total estimated profit on cash basis, which the work certified bears to the total contract price.
(f) The whole of loss, if any, should be transferred to the profit and loss account.
Cost Plus Contracts: In certain contracts the contractee agrees to pay to the contractor the cost price (usually prime cost) of the work done on the contract plus an agreed percentage thereof by way of overhead expenses and profit. Such contracts are known as cost-plus contracts. The system of cost plus contract costing is employed in cases where it is very difficult for the contractor to quote the contract price because there has been no precedent which he may take as basis. It is also employed where the work to be done is not fixed at the time of placing order for the contract. The method is generally used where government happens to be the contractee. The method suffers from the following disadvantages:
There is no incentive to the contractor to eliminate waste and economies the cost of completing the contract. On the other hand, he is tempted to increase the cost because greater the cost, the greater will be his share of profit. In case of this system the amount of overheads recovered and profit made depends upon the value of materials used, which is subject to considerable price fluctuations. The agreed fixed percentage may, therefore, prove to be either too excessive or too low for covering overheads and profit.
Escalation Clause: Escalation clause is usually provided in the contract as a safeguard against any likely changes in the prices of utilization of material and labor. The clause provides that in case prices of items of raw materials, labor, etc. specified in the contract, change during the execution of the contract, beyond a specified limit over the price prevailing at the time of signing the agreement, the contract price will be suitably adjusted. The term of the contract specify the procedure for calculating such adjustment in order to avoid all future disputes. Thus, such a clause safeguards the interests of both the contractor and contractee in case of fluctuations in the price of materials and labor, etc.
Work in Progress: At the end of the accounting period a contract may still be in progress. The term work in progress refers to the work done so for in respect of the contract, which is still incomplete. It consists of the following:
(1) Working Certified: It refers to the work approved by the contractee. In case of contracts it is the useful practice for the contractor to get the work approved from time to time from the contractee. This is helpful to the contractor in two ways; first in case the contractee finds the work not up to specifications, he may ask the contractor to take corrective actions in time. Second, in contract accounts it is useful practice to have a system of progress payments, i.e., the contractee agrees to pay a certain percentage of the work certified (say, 80 or 90 percent). This is advantageous to the contractor since he gets immediate liquid funds.
(2) Work Uncertified: It refers to the work which has been done by the contractor but not so far approved by the contractee.
Work certified generally includes some profit element also while work uncertified is always valued at cost to the contractor.
Sub Contracts: The contractor may entrust some portion of the work to be done under the contract to a sub-contractor. Usually work of a specialized nature, i.e., steel work, special flooring, etc., is done by sub-contractors, who are responsible to the main contractor. The cost of such sub-contracts is a direct charge against the contract for which the work has been done.
About the Author
Rashid Javed is an Asian author. He writes about
financial and managerial
accounting articles,
contribution margin, and
Operating Leverage.
What is the maximum number of contracts that a project engineer can handle properly in a construction site?
I am a project manager for high rise buildings. In my current project, my project engineers are having difficulty in monitoring and doing all other transactions because of too many contractors and subcontractors at the site.
It really depends on the complexity of the contracts and the experience and ability of the project engineer and their knowledge of the project details.
When I was acting as a project engineer, I could handle 6 to 8 contracts at once but I was always involved in all aspects of the project from day one.
