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CA Inter Construction Contracts (AS 7) — practice questions

Explore 27 free Construction Contracts (AS 7) questions in CA Inter Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Construction Contracts (AS 7) questions and exercises with answers

Showing questions 1–27 of 27.

Which contract fixes one sum for all the work, with no cost breakdown?Read the answer and worked solution →In a cost plus fixed fee contract, what is paid above documented cost?Read the answer and worked solution →In a cost plus percentage contract, the contractor gets actual cost plus:Read the answer and worked solution →What is a retention in a construction contract?Read the answer and worked solution →Which event starts the defects rectification period in a construction contract?Read the answer and worked solution →Sectional completion allows a construction contract to have what?Read the answer and worked solution →A unit cost contract is priced on what basis?Read the answer and worked solution →In a re-measurement contract, how is the price fixed?Read the answer and worked solution →Which is not a main contract type by payment mechanism?Read the answer and worked solution →Which contract type guarantees the contractor a profit?Read the answer and worked solution →Cost plus percentage contracts suit which kind of work?Read the answer and worked solution →Under the completed-contract method, when are revenues recognised?Read the answer and worked solution →How is an expected loss on a long-term contract treated?Read the answer and worked solution →Price Rs 12 lakh, total cost Rs 10 lakh, spent Rs 3 lakh. PoC revenue?Read the answer and worked solution →Cost to date is 5,500 and revised total cost is 11,000. Percent complete?Read the answer and worked solution →Price 12,000, 50% complete, 3,600 already recognised. Revenue this year?Read the answer and worked solution →Price 12,000 and revised total cost 15,000. Expected total loss?Read the answer and worked solution →Building 25% complete; expected total profit Rs 8 lakh. Profit to recognise?Read the answer and worked solution →On the balance sheet, excess of costs over billings is shown as what?Read the answer and worked solution →Excess of billings over costs on uncompleted contracts appears where?Read the answer and worked solution →IAS 11 shows gross amount due from customers for contract work as:Read the answer and worked solution →Costs incurred plus recognised profits are reduced by which items?Read the answer and worked solution →Completion of production basis recognises revenue before sale for:Read the answer and worked solution →Percentage of completion is an exception to which basic principle?Read the answer and worked solution →A lump sum and scheduled contract suits when what is true?Read the answer and worked solution →Unit cost contracts are often used for which type of construction?Read the answer and worked solution →What does a guaranteed maximum price provide in a cost-plus contract?Read the answer and worked solution →

Worked practice questions

Which contract fixes one sum for all the work, with no cost breakdown?

  1. Unit cost contract
  2. Lump sum contract
  3. Remeasurement contract
  4. Cost plus contract
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Correct answer: B. Lump sum contract

A lump sum contract promises a specified total for completed work, so the owner sees no breakdown of cost.

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In a cost plus fixed fee contract, what is paid above documented cost?

  1. An agreed negotiated fee
  2. Nothing beyond the cost
  3. A share of final savings
  4. A percentage of cost
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Correct answer: A. An agreed negotiated fee

The owner reimburses documented cost and adds a negotiated fee that covers overhead and profit.

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In a cost plus percentage contract, the contractor gets actual cost plus:

  1. A unit rate per item
  2. A percentage as profit
  3. A fixed lump sum
  4. A retention release
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Correct answer: B. A percentage as profit

The profit element is a set percentage added on top of the actual cost incurred.

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More Accounting topics

AS 3 Cash Flow StatementSchedule III Division I Financial StatementsAS 19 LeasesValuation of Inventories (AS 2)AS 22 Taxes on IncomeAS 28 Impairment of AssetsProperty, Plant and EquipmentAS 17 Segment Reporting