Construction in Process

Construction in process, sometimes referred to as ‘CIP’, reflects the total direct costs of construction for various projects in an ongoing state. Construction in process is customarily found in the current assets section of the balance sheet and is used as a tool for management to evaluate their respective financial position.

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.

Open Job Cost Status Report

Open Job Cost Status Report

The Open Job Cost Status Report identifies a project’s actual costs of construction, amounts borrowed or financed, and any customer payments made to date. The net result is the contractor’s net investment into the respective project.

Project Reports – Introduction

Project Reports

There are basically three groups of financial based project reports.  Each set has its own priorities and purposes.  Project reports are a function of production reporting with the exception of the balance sheet set (commonly used for cash flow purposes). 

Phase Codes and Cost Codes with QuickBooks and Construction Accounting

Phase Codes

The whole goal of financial reports is to gain an understanding of financial performance and identify the key issues for changes to make improvements.  In accounting we referred to this as a continuous feedback loop method of financial improvement.  Insert data, report the data, discover opportunities for improvement; make changes and insert data and begin the whole process all over again.  If you are even mildly alert to what is going on, you should easily identify opportunities and make financial improvements and ultimately maximize profitability for your business.  It is not going to happen overnight but it will dramatically improve your bottom line within 2 years.

But all of this starts with the estimate for the project.

Construction Accounting Terminology

Construction Accounting Terminology

In construction accounting accountants and bookkeepers use certain terms and there are distinct meanings associated with these terms.  This article is designed to introduce beginner accountants and contractors to these terms from the perspective of financial reporting.

Progress Billings in Construction

Progress Billings

Just like a tip of an iceberg, a progress billing for a construction project is an invoice for a small part of the overall contract value.  It needs to be recorded correctly and presented to management in a way that is understandable and beneficial for making decisions.  This article will introduce the concept and cover how progress billings are presented on the balance sheet.

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