Contracts do not pay the full value of the work certified as performed, but retain a certain percentage according to the contractual conditions. When it comes to calculating orders, the complexity of accounting is less. But when calculating the contract, the complexity of accounting is high. The method of calculating orders is mainly used by project owners, contractors, shipbuilders, construction and mechanical engineering companies. As a rule, the contract is concluded at the place of the contract, that is, with the customer, and according to the customer`s instructions. In addition, the period required for the conclusion of a contract is quite long or usually longer than one year. Assuming ABC Construction Corp. has a contract for the construction of an office building worth $20 million, and the agreement stipulates that the costs must not exceed $22 million. ABC`s profit is agreed at 15% of the total contract price of $3 million.
In addition, ABC Construction is entitled to an incentive fee if the project is completed within nine months. It is clear from the definition below that contract calculation is a specific form or type of market calculation, which consists of linking costs to individual contracts. In some sectors, such as for example. B public procurement and commercial construction, the calculation of orders is the main task of the accounting department, or can even be organized as a totally separate department. A good contract calculation can contribute to a substantial profit and is therefore usually occupied by more experienced contract managers and accountants. A Cost-Plus contract is an agreement to reimburse expenses incurred by a company, plus a certain amount of profit normally indicated as a percentage of the total contract price. This type of contract is mainly used in the construction sector, where the buyer bears part of the risk, but also offers the contractor a certain degree of flexibility. In this case, the contracting party expects the Contractor to be able to keep its promises of delivery and undertakes to make additional payments to enable the Contractor to make additional profits once concluded. 18. The escalation clause may be included in the Treaty Agreement. In this way, the contractor is protected against rising prices of materials, labour and other inputs.
Contract Costing is a special type of order calculation, in which the cost unit is a single contract. The contract itself is a cost center and is executed according to the customer`s requirements. The calculation of orders is a variant of the order calculation system applicable especially in the case of construction work of the organization. It is also called the cost of the terminal. Every contract, short or long term, is treated as a job. (14) The calculation of orders relates to the calculation of construction or repair work and not to the calculation of goods. Order calculation is a variant of order calculation. Like the calculation of orders, the calculation of orders is a form of specific calculation of orders.
The calculation of orders and the calculation of orders are therefore based on the same calculation principles. In fact, a large order is called a contract and a small order is called an order. The calculation of the contract is also called terminal fee invoice, since the establishment of the contractual account is closed or closed after the conclusion of the contract. Contract calculation is a specific form of order calculation. It applies to contracts for which the contract takes a considerable amount of time for the completion of the contract and applies to different billing periods. However, a duration of more than one year is not an essential feature of a long-term contract. Certain contracts with a duration of less than one year should be counted as long-term contracts if they are sufficiently large for the activity of the period. .