Take CA Coaching from the Best Tutors

  • Affordable fees
  • 1-1 or Group class
  • Flexible Timings
  • Verified Tutors

Escalation Clause in contract costing.

CA Prashanth Reddy
31/03/2017 0 1


  • In Fixed Price Contracts, the contract price is fixed and pre-determined. If there is an increase in prices of materials, rates of labour etc. during the period of execution of a contract, the total contract costs may rise and the Contractor's profit may be
  • This increase in prices may induce the Contractor to use materials of lower quality and price in order to maintain his profit margin on the
  • To overcome such a situation, the agreement generally contains a stipulation that the Contract Price will be increased by an agreed amount or percentage, if the prices of materials, wages etc. rise beyond a particular limit. Such a stipulation is called Escalation

Accounting Treatment:

  • The amount of reimbursement due should be determined by reference to the Escalation Clause.
  • The amount due from the Contractee should be recorded by means of the following Journal Entry 

                                Contractee's Account   Dr.

                                       To Contract Account


0 Dislike
Follow 4

Please Enter a comment



VIJAY | 09/04/2017

Thank you very much Sir

0 0

Other Lessons for You

A short concept of Fiscal Deficit in Economics :--
A fiscal deficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits. A...

Solution to a trigonometric problem requested by one student
Prob: if tan (x)= a/b then find { a sin (2X) + b cos (2X) } Sol: when tan (x) = a/b ( opp side is 'a' units and adj side is 'b' units ) then sin x = a/√a²+b² and cos x= b/√a²+b²...

FLuid Viscosity
Fluid is anything which can flow.They are not capable of resisting the shear deformation cause to it because of the shear forces. Both Gases And Liquids studied under fluid. Now come viscosity: Viscosity...

Bank Reconciliation to be or not to be
Bank Reconciliation Statement plays an important role for every budding or wanna be accountant. Hence it's important to understand not only the concept but also implement it whenever we get a chance. Its...

Principles Of Marketing:
Three Groups Of Industrial Products: I) Materials and parts: These include products which are used in the production process as inputs. The best examples are raw materials and purchased inputs. II) Capital...

Looking for CA Coaching Classes?

The best tutors for CA Coaching Classes are on UrbanPro

  • Select the best Tutor
  • Book & Attend a Free Demo
  • Pay and start Learning

Take CA Coaching with the Best Tutors

The best Tutors for CA Coaching Classes are on UrbanPro

Book a Free Demo

This website uses cookies

We use cookies to improve user experience. Choose what cookies you allow us to use. You can read more about our Cookie Policy in our Privacy Policy

Accept All
Decline All

UrbanPro.com is India's largest network of most trusted tutors and institutes. Over 55 lakh students rely on UrbanPro.com, to fulfill their learning requirements across 1,000+ categories. Using UrbanPro.com, parents, and students can compare multiple Tutors and Institutes and choose the one that best suits their requirements. More than 7.5 lakh verified Tutors and Institutes are helping millions of students every day and growing their tutoring business on UrbanPro.com. Whether you are looking for a tutor to learn mathematics, a German language trainer to brush up your German language skills or an institute to upgrade your IT skills, we have got the best selection of Tutors and Training Institutes for you. Read more