Contract Account - Terminologies Used - SS3 Accounting Lesson Note
It is important to have a clear understanding of these terms to effectively manage a contract account and ensure that all parties involved are meeting their financial obligations. Some common terminologies used in contract accounts include:
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Contract: A formal agreement between two or more parties outlining theterms and conditions of their relationship.
Contractor: The party responsible for providing goods or services as outlined in the contract.
Client: The party that contracts with the contractor to receive goods or services.
Payment Terms: The terms and conditions agreed upon by the parties regarding the timing, amount, and method of payment.
Invoice: A document issued by the contractor requesting payment from the client for goods or services rendered.
Purchase Order: A document issued by the client authorizing the contractor to provide goods or services and outlining the terms of the agreement.
Retention: A percentage of the contract value that is withheld by the client as security for the contractor's performance.
Change Order: A document issued by the client requesting a change to the original terms of the agreement.
Variations: Changes made to the contract or scope of work that affect the agreed-upon price and timeline.
Progress Payment: Payments made to the contractor during the course of the project based on the completion of specific milestones.