Distinction between Job Cost and Contract Cost:
Job costing and contract costing both are the methods of costing and used when we receive specific order for performing any work. But after this, there are many differences between job costing and contract costing which we are explaining in four points.
Following are four points which shows as basis of difference between job costing and contract costing:-
→ Contract costing is used for calculating the cost in very big work like making of 10 floors building or making of bridge.
2nd Point : Period
→ In job costing, we take that job which can finish within short period.
→ In contract costing, we include that contracts which can finish within one year or more than one year.
3rd Point : Account
→ In job costing, we make job account for every job. In this account, we show different expenses which are paid for completing that job.
→ In contract costing, we open contract account for every contract. In this account, we show all expenses relating to contract and it also show work in progress in the form of work certified and work uncertified. Difference of credit and debit side of this account will show notional profit or loss.
4th Point : Transfer of Profit
→ If specific job is done and finished goods of this job are sold to customers, its all profit will transfer to profit and loss account.
→ In contract costing, we check, how much work is done and on the basis of work certified, we calculate the proportion of notional profit which is transferred to profit and loss account.