DIFFERENCE BETWEEN JOB COSTING AND CONTRACT COSTING

JOB COSTING VS CONTRACT COSTING

The difference between Job Costing VS Contract Costing is as follows:

BASIS OF DIFFERENCE	JOB COSTING	CONTRACT COSTING
MEANING	Job costing is a system used for completion of specific customer orders where each unit produced is considered a job.	Contract costing is a costing system where work is undertaken according to special requirements of customers in a location specified by the customer.
AREA OF WORK	Job costing generally calculate the cost for a single or a few products.	Contract costing is used to calculate the cost for significant scale projects.
TIME PERIOD	A job usually spans over a small period of time, thus job costing can be completed within a short period of time.	The work of a contract progresses for a long period time, thus contract costing is conducted within an extended time period.
PLACE OF WORK	The product is completed within the premises of the company in a job.	Production or construction takes place in construction site selected by the customer.
TRANSFER OF PROFIT	When a job is done and finished goods are sold to the customer, the entire profit will be transferred to profit and loss account.	In contract costing, costs and revenues are recorded in proportion to the degree of completion and the resulting profit is transferred to profit and loss account.
SIZE OF JOB	Generally jobs are smaller in size.	Jobs are big and complex.
COST/ EXPENDITURE	Less expenditure required.	It requires huge expenditure.
PAYMENTS	Payments are made immediately after the completion of  work.	Payments are made in installment.
TRANSFER OF JOB	Job cannot be transferred to other parties.	Some part of contract can be given to other parties or other sub-contractors.
SUITABILITY	Job costing is suitable for the manufacture of products under the customer’s specifications.	Contract costing is suitable for construction works.
VALUE OF WORK	The value of work is less.	The value of work is more.
ACCOUNT	In job costing, we make job account for every job. In this account, we show different expenses which are paid for completing that job.	In contract costing, we open contract account for every contract. In this account, we show all expenses relating to contract and it also show work in progress in the form of work certified and work uncertified. Difference of credit and debit side of this account will show notional profit or loss.

JOB COSTING

Job costing or job order costing also called specific order costing is a method of costing which is used when work is undertaken as per the customer’s special requirement (tailor-made).

ACCORDING TO INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS, LONDON

“Job costing is that form of specific order costing which applies where work is undertaken to customer’s specific requirements and each order is of comparatively of short duration.”

Under this method of costing, each job is considered to be a distinct cost unit. As such, each job is separately identifiable. In the case of a job, work is usually carried out within the factory or workshop. Sometimes, a job is accomplished even in the customer’s premises.

Job costing is employed in the following cases:

• Where the production is against the order of the customer or jobs are executed for different customers according to their specifications.
• Where each job needs special treatment and no two orders are necessarily alike.
• Where there is no uniformity in the flow of production from one department to another.
• Where the work-in-progress differs from period to period on the basis of the number of jobs in hand.

Job costing is applicable to printing, furniture, hardware, ship-building, heavy machinery, foundry general engineering works, machine tools, interior decoration, repairs and other similar work.

CONTRACT COSTING

Contract costing is also known as Terminal Costing. It is one form of application of the principles of job order costing. Contract Costing is a type of costing used in constructional activities such as construction of buildings, roads, bridges etc. The person who takes contract for a price is called the Contractor and the person from whom it is taken is called the Contractee.

ACCORDING TO CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS, LONDON

“Contract costing is a form of specific order costing in which costs are attributed to individual contracts.”

In contract costing each contract is treated as a cost unit and costs are ascertained separately for each contract. Usually, there is a separate account for each contract.

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Cost Accounting	Scope of cost accounting	Elements of cost	Types of cost
Material control	Perpetual inventory system	Pricing of materials	Bin Card
Stores Ledger	Incentive plans	Overheads	Idle time
System of wage payment in cost accounting	Time rate vs piece rate wage system	Cost Center	Labour Turnover
Difference between management accounting and cost accounting	Allocation and apportionment of overheads	Allocation vs Apportionment of overheads	Absorption of overheads
Over absorption and under absorption of overheads	Activity based costing	Traditional costing vs ABC system	Reconciliation of accounts
Unit costing	Cost sheet format	Cost sheet vs production sheet	Job costing
Batch Costing	job costing vs batch costing	Contract costing	Job Costing vs Contract costing
Process Costing	Process costing vs job costing	Joint products	By Product
Equivalent production	Marginal costing	Application of marginal costing	Cost volume profit analysis
Tools and techniques of marginal costing	Budget	Break even point	Process of budgetary control
Advantages and limitations of budgetary control	Budgetary Control	Zero base budgeting	Standard Costing
Variance Analysis	Standard costing vs budgetary control	Management accounting vs cost accounting	Cost accounting vs financial accounting