CMA Intermediate · Cost Accounting · Contract Costing
In contract costing, the cost of materials returned to the store from a contract site is treated in the Contract Account as:
Materials returned to stores from the site are credited to the Contract Account, because the earlier debit for materials sent to the site is being reversed. The contract should bear only the cost of materials actually consumed there.
- AA debit to the Contract Account
- BA credit to the Contract AccountCorrect
- CAn addition to the work certified
- DA deduction from the contractee's account only
Explanation
Materials sent to site are debited to the Contract Account. When surplus materials go back to stores, the cost is reversed by crediting the Contract Account. Debiting it would double count the cost.
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