A contract account obviously maintains utility to report the total work cost to date. The unique nature of contract account is that it reports costs taking individual contracts as cost centers or units and costs are determined similarly. This type of unique nature provides an opportunity to ascertain the total work cost and to evaluate performance in terms of the profit earned on contract. The credit difference in a contract account after the entire expenses are reported properly represents the total contract cost to date.
Work Cost/Contract Cost= Expenses incurred for the contract work- Value of unused material.
Work Cost/Contract Cost= Expenses incurred for the contract work- Value of unused material.