Journal Entries for Contract Accounts

[Sajjad R1]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Shunmas</i>
<br />Asalam-o-Alaikum !

I am doing contract accounts from Sir M.A.Ghani's Advanced Accounting book.

Sir Ghani says that a contact account is basically a profit & loss account (from a contarctor's point of view). All expenses are debited and income credited.

That is fine, I understand this concept.

BUT the entry for purchasing raw material is

DR. CONTRACT A/C
CR. RAW MATERIALS A/C

Now why would we credit the raw materials?

Is it same like in general business that when we buy goods (perpetual inventory system), we debit inventory and then using transferring entries, we transfer the inventory to P & L ?

Is this concept is being followed in the above the Journal entry?

Thanks


Dear so simple

when u made a contract with a contractors

when we purchase the material pass this enrty

Purchase (M arterial Stock) Dr
Bank/Cash/Party CR

when we issue the material then just pass this entry

Asset/Expnses dr
Raw Matetrial

we can not dr the contractor account coz material is owned by company.
we are not sales the material to contractor, Just the dr the a/c of contractor only on this case when we make the payment to cont by cr the bank,cash

Regards


Sajjad Rehman
+923334054651



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