BMC Associates says Replied on 5th September,2026 06:09 AM

In contract costing, a material discrepancy means there is a significant difference between the actual material issued/used and the material that should have been used according to the contract records. The treatment depends on the reason for the discrepancy: Normal wastage: It is treated as part of the cost of the contract and is generally included in the Contract Account. Abnormal loss or unusual shortage: It should not be charged to the Contract Account. It is transferred to the Profit & Loss Account as an abnormal loss. Material surplus: If unused material is returned to stores or sold, the corresponding value is credited to the Contract Account. Any profit or loss on sale is appropriately recognized. For example, if material costing ₹1,00,000 is expected to be used but ₹1,20,000 is actually consumed due to abnormal wastage, the abnormal portion should be separately identified and charged to the Profit & Loss Account. For assistance with contract costing, accounting, and audit matters, businesses can consult experienced chartered accountant firms in gurgaon, a qualified chartered accountant gurgaon, a reliable ca firm in gurgaon, or a professional ca in gurgaon.