Construct Formula Contract For Free

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Under a lump sum agreement, project owners must provide contractors with finalized plans and thorough documentation, resulting in specific, linear project tasks. Lump sum contracts also require less paperwork, management and accounting, decreasing administrative costs.

Format of Contract Account Contract AccountTo Direct Expenses(iii) SoldTo Cost of Sub-contracts(iv) In HandTo Cost of Extra WorkBy Profit and Loss AccountTo indirect Expenses(i) Materials Lost, Stolen or Destroyed21 more rows

Contract Price = {Actual quantity of the Goods accepted by the Government} x {Rate/Unit Price quoted in paragraph 1(a) above}.

A contract account is debited with all direct and indirect expenditure incurred in relation to the contract. It is credited with the amount of contract price on completion of the contract. The balance represents profit or loss made on the contract and is transferred to Profit and Loss Account.

A lump sum refers to the single aggregate price a contractor offers to undertake the work and cover all risks accepted by the contractor under the contract. However, don't assume that a lump sum price is a fixed price or that it will be the final price.

Fixed Price Contracts. This is the best contract type when someone knows exactly what the scope of work is. Also known as a lump sum contract, this contract is the best way to keep costs low when you can predict the scope.