Lesson Notes By Weeks and Term - Senior Secondary 3

Contract account I

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Term: 2nd Term

Week: 1

Class: Senior Secondary School 3

Age: 17 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Financial accounting

Topic:-       Contract account I

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. Define contract account
  2. Mention and explain some terminologies in contract account

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on branch account

Students pay attention

STEP 2

EXPLANATION

She defines contract account

Students pay attention and participates

STEP 3

DEMONSTRATION

She mentions and explains the meaning of some terminologies in contract account

Students pay attention and participate

 

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

CONTRACT ACCOUNT

This is a system of cost accounting used by contractors engaged in construction and building works where it is common for a firm to be engaged in execution of many separate contracts at the same time an which can continue over a long period of time (many years).

Features of contract

  1. the cost that is direct and is large
  2. it is site based

iii. it is undertaken to customer’s special requirement

  1. it is of relatively of long duration
  2. there is low indirect cost

 

Reasons for contract account

  1. To find the profit on each contract
  2. To ascertain the level of contract execution
  3. To take care of such businesses whose nature of work does not conform to a financial year’s calculation of profit.

 

Construction contract

Construction contract can be defined as the execution of building and civil engineering projects, mechanical and electrical engineering installations and other fabrications usually evidenced by an agreement between two or more parties (i.e. contractor and customer).

Types of construction contract

  1. Short term construction contract
  2. Long term construction contract

 

Short term construction contract: This refers to a contract which is expected to be started and completed within an accounting period.

Long term contract: it is a contract entered into for manufacture or building of a single substantial entity or the provision of a service where the time taken to manufacture, build or provide is such that a substantial proportion of all such contract work will extend for a period exceeding one year.

 

Terminologies:

  1. Revenue recognition: This is the process for accounting for revenue in the financial statements when it has been earned.
  2. Contract work in progress: This is the accumulated certifiable cost relating to contract that is yet to be completed.
  3. Mobilization fees: This is the amount advanced by employer to a contractor to enable construction work to start.
  4. Contract certification: This is a process by which the project’s architect or engineer issues a certificate to evidence the value of work done on a construction contract as at a particular date.
  5. Retention monies: There is frequently a contract clause that entitles the customer to withhold payment of a proportion of the contract value (10%) for a specified period after the end of the contract.

 

EVALUATION:    1. Define contract account

  1. Mention and explain some terminologies in contract account

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively