AB Ltd. has signed at 31st December, 2017 the Balance Sheet date, a contract where the Total Revenue is estimated at ` 15 Crores and Total Cost is estimated at ` 20 Crores. No work began on the contract. Is the Contractor required to give any accounting effect for the year ended 31st December, 2017?

Question

Quizplus · Accepted Answer

According to accounting principles, when a contract is expected to incur a loss, the entire expected loss should be recognized immediately. Therefore, the contractor should recognize the expected loss of `5 Crores.

AB Ltd Has Signed at 31st December, 2017 the Balance Sheet