Question:
After completion of the contract, with which price is the contractee's account debited and contractor's account credited?
After completion of the contract, with which price is the contractee's account debited and contractor's account credited?
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The personal account of the Contractee is always billed and closed at the Contract Price, never at cost or estimated value.
Updated On: Jun 17, 2026
- Cost price
- Selling price
- Contract price
- Overheads
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The Correct Option is C
Solution and Explanation
Step 1: Understanding Closing Entries in Contract Accounting:
When a construction contract is completed, the final billing must be recorded to recognize the total revenue earned and close out the specific contract ledger account.
Step 2: Reviewing the Double-Entry Journal Entry:
To record the completion of a contract, the contractor makes the following entry: Contractee's Personal Account (Debited) & Dr. [with the Contract Price]
To Contract Account (Credited) &[with the Contract Price] This entry records the total amount owed by the client and brings the full contract price into the Contract Account, allowing the contractor to calculate the final profit or loss on the project.
Step 3: Selecting the Correct Option:
The account is billed at the agreed-upon contract value, known as the Contract price. This corresponds directly to option (C).
When a construction contract is completed, the final billing must be recorded to recognize the total revenue earned and close out the specific contract ledger account.
Step 2: Reviewing the Double-Entry Journal Entry:
To record the completion of a contract, the contractor makes the following entry: Contractee's Personal Account (Debited) & Dr. [with the Contract Price]
To Contract Account (Credited) &[with the Contract Price] This entry records the total amount owed by the client and brings the full contract price into the Contract Account, allowing the contractor to calculate the final profit or loss on the project.
Step 3: Selecting the Correct Option:
The account is billed at the agreed-upon contract value, known as the Contract price. This corresponds directly to option (C).
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