Job Costing Reports – Introduction (Part 1)

Job Cost Reports

Job costing reports are management tools used to evaluate project or production performance against a known or estimated standard.   They are used in many business sectors and their respective industries.   The primary purpose of job costing reports is to identify discrepancies or beneficial results, usually in the form of financial values.   They can be used to report both financial and numerical production outcomes.

Contractor’s Audit Guide – Introduction to IRS Audits

Construction Tax Audit

In 2009, the Internal Revenue Service issued the Construction Industry Audit Technique Guide (ATG) for use by IRS agents and for contractors.   The contractor’s audit guide explains the processes and methods the IRS uses to examine a contractor.   The end goal is to verify actual taxable income over an assigned tax year for a contractor.   The IRS recognizes that this industry is complex and utilizes multiple methods to establish revenue and net profits.   It is so complex, the guide is 257 pages long.

This article introduces the guide and its major sections and how to understand what areas are applicable to your construction company.

Business Principles – A Pyramid of Levels

Business Principles

There is no universal finite set of business principles.   In the aggregate, there are over several hundred of them.   Many of them are not applicable to every industry, on the contrary, many are specific to a unique business or industry.   The best approach to understanding business principles is to look at this in a holistic manner, i.e. overall doctrine down to a few rules specifically designed for that one business.

Liquidity Ratios

Liquidity Ratios

Liquidity ratios are a group of ratios used to measure the ability of a business operation to meets its current obligations.   Liquidity ratios are similar to the initial medical tests a patient receives at a doctor’s visit.   Doctors take blood pressure, temperature, and pulse rate.   The doctor wants assurance that the primary indicators of health are good.  Liquidity ratios are exactly the same.  The user wants to know that the basic measurements of a business indicate good health today.

Contractor’s Chart of Accounts – Completed Contract or Percentage of Completion Method

Contractor's Chart of Accounts

The  contractor’s chart of accounts is significantly different than the traditional chart of accounts.  First off, the layout is more dependent on the balance sheet than the income statement (profit and loss) accounts.   Furthermore, the income statement accounts are laid out to present a resource based costing presentation than a job costing format.   To add another layer of complexity, the chart of accounts is somewhat oriented to the method of accounting selected by the contractor.

Class Accounting With QuickBooks

Class Accounting

Class accounting is one of the options available with QuickBooks software.   Most accountants and bookkeepers misunderstand its purpose and how to properly implement this wonder tool of accounting.   If you are considering using class accounting and want to have a full comprehensive understanding, this is the article for you. 

Insolvency – Detection

Insolvency

Insolvency refers to the ability to pay bills in a timely manner.  It does not mean bankruptcy but long-term insolvency is a underlying factor of bankruptcy.  Many owners and/or managers of small business have no idea of how to determine if the company is insolvent or headed towards the inability to meet their day to day obligations.

Subcontractor Documentation

Subcontractor Documentation

Similar to documentation required for hiring an employee, companies must acquire certain documentation from their subcontractors.   Without this documentation, most likely the hiring business entity will face stiff penalties and expose their company to unnecessary risk.

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