The amount paid to sub-contractor is ________.

A. subtracted from the contract price

B. debited to contract a/c

C. credited to contract a/c

D. added with the contract price

Answer: Option B

Solution(By Examveda Team)

The amount paid to sub-contractor is debited to contract a/c. Contract means a big job in which work is done at site and not in factory premises. The cost of each contract is ascertained. Thus in this method of costing, each contract is a cost unit and an account is opened for each contract in the books of contractor to ascertain profit/loss thereon.