CA Inter P1 · Chapter 6 · Question 3 of 8
Under AS 7, which of the following costs is included in contract costs?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Depreciation of plant and equipment used on the contract
Explanation
Contract costs comprise costs directly related to the contract (including depreciation of plant used on the contract), costs attributable to contract activity in general that can be allocated, and costs specifically chargeable to the customer. AS 7 excludes selling costs, non-reimbursable general administration costs, and depreciation of idle plant not used on a particular contract.
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