CMA Intermediate · Cost Accounting · Contract Costing
Sharma Builders is constructing a bridge. Work certified is ₹40,00,000 and the contractee retains 10% of it as retention money. Cash received so far is ₹30,00,000. How much remains due from the contractee on account of certified work, excluding the retention money?
The balance due is ₹6,00,000. Retention money is 10% of ₹40,00,000, which is ₹4,00,000, so cash receivable on certified work is ₹36,00,000. Deducting ₹30,00,000 already received leaves ₹6,00,000 still to be collected, excluding the retention.
- A₹6,00,000Correct
- B₹10,00,000
- C₹4,00,000
- D₹3,60,000
Explanation
Retention = 10% of 40,00,000 = 4,00,000. Cash receivable on certified work = 40,00,000 − 4,00,000 = 36,00,000. Cash already received 30,00,000, so balance due = 6,00,000. The option ₹10,00,000 ignores retention money (40,00,000 − 30,00,000).
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