Goods in Transit

Goods in Transit: Definition Goods in transit are purchased goods that have not yet been received by the purchaser. These goods are easily overlooked when counting the ending inventory because they are not physically located at either the seller’s or the purchaser’s warehouse. Accounting Treatment of Goods in Transit When accounting for goods in transit, … Read more

Periodic Inventory System

What Is a Periodic Inventory System? A periodic inventory system does not keep continuous track of ending inventories and the cost of goods sold. Instead, these items are determined at the end of each quarter, year, or accounting period.  Although this method offers ease of use for record-keeping, it hinders the managerial decision-making process. However, … Read more

How to Calculate Profit and Loss on Contracts

The procedures available for determining the profit or loss on contracts under different circumstances are summarized in this article. 1. Profit on Completed Contracts For contracts completed during the accounting year, the full contract price, whether payable in a lump sum on the completion of the contract or payable in installments, is debited to the … Read more

Cost Plus Contract

What Is Cost Plus Contract? – Definition Sometimes contractors may accept a contract on the condition that the contractee would bear all costs incurred in executing a contract plus a fixed rate or percentage of profit calculated with reference to the total cost. Such contract is known as Cost Plus Contract and is generally adopted … Read more

Contract Costing

Contract Costing: Definition Contract costing is the method of costing applied in a business where separate contracts of a non-repetitive nature are undertaken. According to Sharie, “contract or terminal cost accounts are applicable to a concern which makes specific contracts and requires to know the cost of each.” A contract is a job of a … Read more

Contract Account

What Is a Contract Account? When a contractor has accepted a contract, a separate account is opened for each contract, bringing together all the costs relating to a particular contract. A serial number is assigned to each contract, which is known as a contract account. Explanation of Contract Account All expenses incurred in fulfilling a … Read more

Cost Price Method

Explanation of Cost Price Method Under cost price method, materials issued to production, are charged out on the basis of actual cost i.e., the cost at which these have been purchased. As we already know, the actual cost of materials consists of purchase price or invoice price (less trade discount and quantity discount), import duty, … Read more

Pricing of Materials Returned to Vendors

Materials returned to vendors may be recorded at invoice price or in accordance with the method adopted for pricing out material issues. Recording of materials returned at invoice price is not realistic as the price per unit granted by vendor on return of materials cannot be the same as the original invoice cost. Necessary adjustments … Read more

Pricing Methods of Material Issued

Different methods can be used for the purpose of valuing or pricing of materials issued for production in a manufacturing concern. The actual method to be adopted in a manufacturing concern shall depend upon the nature of materials and the nature of the business itself. It is important to note that whichever method of pricing … Read more