Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
Construction accounting exists to provide two key financial points of information to contractors and the management team of a construction company. The first and most important financial point is field production profit. This particular profit measurement is commonly referred to as job profits. It is essential contract revenue less direct (hard) costs of construction. The secondary and almost as important as the primary key financial point is the company’s net profit after taxes. This particular key financial point is the customary financial profit of the company. The first financial point is tied to job costing and therefore, construction accounting is comprised of two different accounting systems. The two systems are job costing and traditional financial GAAP (Generally Accepted Accounting Principles) reporting.
Job costing has its own set of guidelines and may at times interfere with traditional financial accounting. However, proper set-up of construction accounting software easily achieves both forms of accounting for the owner(s) and the construction management team. The following sections introduce and elaborate further for both essential forms of accounting related to construction. They explain how they work independently of each other and work together to produce valuable field production results and overall company wide financial performance. This is an introduction to construction accounting. Additional articles
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