AS 7

Hamna KSMB

Same doubt I mix matched the numbers although it doesn't make sense This is a case of prudence concept la So total expense - 120 Contract value - 112 Recognize loss of 8 immediately. If we add revenue 28? We get 36 But why should we add revenue?

DHIVYAA DAMODARAN

Qn 2 : we don't add revenue. We add only cost incurred and expected losses. Expected losses is considered as an expense as per AS 7.

Hamna KSMB

If we add that we get 38.

DHIVYAA DAMODARAN

Yes. It should be either 30lakhs or 38lakhs not 36 lakhs .

DHIVYAA DAMODARAN

I got the answer. Since they have asked for Year 1 expense only, 30lakhs + 8lakhs - 2lakhs = 36lakhs . Cost incurred+ expected losses - current year losses.

Jashvanth.K

4, 5 question is silent about further information like the amount to be shown on profit and loss a/c & presentation of accounts, So, we should consider the certified work completed as a REVENUE & cost incurred till date as EXPENSE. In question 6 the total price i.e income is Rs. 200 lakhs The cost incurred is shown below Material purchased 80 lakhs Less : unused materials( not considered as part of cost). 30 lakhs Add : Labour charges ( part of the work) 60 lakhs. The depreciation is attributable so 100/15 × 3 years = 20 lakhs The future cost is 80 Lakhs Therefore total cost = 80+20+60+(80-30) -> 210 Lakhs Therefore the loss is = 10Lakhs

Hamna KSMB

Thank you so much 🤗 All the best

Thread Starter

Thanks a lot Jashvanth. Can we frame it like this too for Qn 5: Rs. 360lakhs + 40 lakhs - 40 lakhs = Rs. 360 lakhs Cost incurred+ expected losses - current losses

Jashvanth.K

Amazing!! I got it now, Thank you so much!