A Company has undertaken a contract to construct Railway Over Bridge (ROB), which is expected to be completed in three years. A summary of the…

CA Intermediate · Advanced Accounting · RTP · September 2026
A Company has undertaken a contract to construct Railway Over Bridge (ROB), which is expected to be completed in three years. A summary of the financial data during construction period is as follows: (in lakhs) Year -I Year -II Year-III Initial amount of revenue agreed in contract 750 750 750 Variation - 50 50 Contract cost incurred upto the reporting date 240 520 700 Contract cost to complete 460 180 - Material at site to be used in subsequent year included in contract cost above 65 100 - Ascertain the amount of revenue, expenses and profit recognised in the Statement of Profit and Loss in each of the three years.

Suggested Answer and Working Notes:

Calculation of the amount of Revenue, Expenses and Profit recognized in the Statement of Profit and Loss in each of the three years: (in lakh) Up to the reporting date Recognized in previous years Recognized in current year Year 1 Revenue (750 x 25%) 187.50 - 187.50 Expenses (700 x 25%) (175) - (175) Profit 12.50 - 12.50 Year 2 Revenue (800 x 60%) 480 187.50 292.50 Expenses (700 x 60%) (420) (175) (245) Profit 60 12.50 47.50 Year 3 Revenue (800 x 100%) 800 480 320 Expenses (700 X 100%) (700) (420) (280) Profit 100 60 40 Working Note: Computation of percentage of completion Year 1 Year 2 Year 3 Revenue before variations 750 750 750 Add: Variations Cost incurred till date — 50 50 750 800 800 Total Estimated cost : Actual cost incurred upto the reporting date 240 520 700 Further cost to be incurred 460 180 - 700 700 700 Actual cost incurred up to the reporting date (excluding material to be used later year) 175 (240-65) 420 (520-100) 700 Percentage of completion 175/700 ×100 420/700 ×100 700/700 ×100 25% 60% 100%

Topics: AS 7

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