What is a Financial Market
A market is a place where two parties are involved in transaction of goods and services in exchange of money. The two parties involved are: Buyer Seller In a market the buyer and seller comes on a common platform, where buyer purchases goods and services from the seller in exchange of money. What is a […]
Cryptocurrency Wallets – Meaning and Different Types of Wallets
The ownership and storage of cryptocurrencies are quite different as compared to regular currencies. It is for this reason that people who are new to the crypto universe find it challenging to understand how the storage and transfer of cryptocurrency works. Cryptocurrency wallets are one of the most popular ways which are used to store […]
Getting Creative with Capital Budgeting
From the past few articles, it may seem like capital budgeting has a pre-determined procedure. All the possible scenarios that can occur have been thought of and appropriate solutions for all of them have already been developed. While this makes “capital budgeting” a good subject, it also removes the creativity from it. There is a […]
Alternative Assets in Pension Funds
Pension funds across the world generally invest in traditional asset classes such as debt and equity. However, over the past few years, many experts have suggested that pension funds should branch out and invest in alternative asset classes. Theoretically, investing in alternate asset classes has many benefits. However, when the pension fund actually starts making […]
What is Cost of Equity? – Meaning, Concept and Formula
Theoretical Concept The cost of equity concept is very important when it comes to valuing shares on the stock market. Equity, like all other investment classes expects a compensation to be paid to its investors. The problem however is that unlike debt and other classes the cost of equity is never really straightforward. You can […]
The job begins with a quotation given to a client. For the client, all that matters in the quotation are the costs involved. However, for the contractor, quotation is almost a research document. Giving out quotations requires estimation. Contractors usually have fixed methodologies for estimating these costs. A study of past quotations can tell if the contractor has been making the estimations correctly or have they over or under priced certain jobs.
Sales order is document which signifies that the client has accepted the quotation. Work on a job can only be started only after the sales order has been received by the concerned department. Without the sales order, resources will not be allocated to this job.
A job cost sheet tracks the costs as and when they are incurred throughout the job. The costs are updated regularly as and when they are incurred. Out of these, labor and material costs are actual costs whereas overheads are estimates. The company may have to correct its estimates of overhead allocation later.
Material requisition forms help track where the material is being used. Since the material requisition form specifies the exact job for which material is being used, material costs can be accurately recorded. In the absence of material requisition form there will be immense confusion over which material was used for which job and what was the cost of that material.
Companies also keep a track of the freight charges that they have incurred for a specific job. Each freight ticket needs to be authorized with a job code and the costs must be added to the job cost sheet. In the absence of these tickets allocation of these costs will be a problem.
Labor tickets track the time that different laborers with different skill level have spent on the job. Based on this information, the labor cost can easily be allocated to different jobs.
Invoice is the document which signifies the completion of a job as requested by the client. When the invoice is accepted by the client, the contractor can consider the job complete. It is here that the contractors are legally allowed to recognize the revenues as well as the costs that were incurred in the job. Based on when the customer is paying, the cash account or the accounts receivable amount needs to be debited.
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