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CA Intermediate · Advanced Accounting · AS 7 Construction Contracts

At the year end, Kaveri Engineering Ltd has one contract in progress. Contract costs incurred to date are ₹900 lakh, recognised profits are ₹150 lakh and recognised losses are ₹30 lakh. Progress billings to date are ₹800 lakh. Applying AS 7 disclosure requirements, what is the gross amount due from customers for contract work?

The gross amount due from customers is ₹220 lakh. It equals costs incurred of ₹900 lakh plus recognised profits of ₹150 lakh, less recognised losses of ₹30 lakh, less progress billings of ₹800 lakh. The positive balance means work done exceeds amounts billed.

  1. A₹250 lakh
  2. B₹220 lakhCorrect
  3. C₹1,020 lakh
  4. D₹20 lakh

Explanation

Gross amount due from customers = costs incurred + recognised profits − recognised losses − progress billings. This is 900 + 150 − 30 − 800 = ₹220 lakh. Ignoring the recognised losses gives ₹250 lakh, and omitting progress billings gives ₹1,020 lakh.

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