Question
KLP Infra Ltd. is executing a bridge construction
contract with a total contract price of ₹8 crore. At the end of the first year, the following information is available: · Work certified by architect: ₹2.4 crore · Cash received from contractee: 80% of work certified · Cost of work not yet certified: ₹20 lakh · Total cost incurred to date: ₹2 crore · Plant depreciation charged to contract: ₹10 lakh (already included in total cost) For the purpose of preparing contract accounts, the notional profit for the year is:Solution
Notional Profit = Work Certified + Work Uncertified (at cost) − Cost Incurred = 2.4 crore + 0.2 crore – 2 crore = 0.6 crore or 60 lakh
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