ECONOMICS

Detailed explanation-1: -When work-in-progress certified is less than 1/4 of the contract price, no profit is transferred to Profit and Loss Account. This is based on the principle that no profit should be taken into account unless the contract has reasonably advanced.

Detailed explanation-2: -Transfer of profit on contract account is depends on the stage of completion of the contract. If the contract completion is less than 25% of the contract price, not profit is to be transferred to profit & loss account.

Detailed explanation-3: -NOTIONAL PROFIT It represents the difference between the value of work certified and cost of work certified. It is always calculated for each and every year of the contract and the amount of profit or loss of every contract is transferred to the company’s Costing Profit & Loss A/c.

Detailed explanation-4: -Notional Profit: This is the actual profit earned by the contractor on completion of a project. It is calculated by deducting the cost of work certified from the value of work certified.