Sections of the Balance Sheet

A description of the different classifications in the balance sheet are described. Understand what current assets and liabilities are and the associated long term sections of fixed assets and long term debt. Gain an understanding of the equity section of the balance sheet.  This site has multiple articles written with the small business entrepreneur in mind.

Construction Accounting – Balance Sheet Construction in Process Accounts

Construction in Process Accounts

Construction accounting consists of three major groups of accounts.  The first and most understood set are the accounts found on the profit and loss statement.  Customarily referred to as Cost of Goods Sold or Costs of Construction, these accounts convey the total costs of construction against the revenue earned for those contracts.  The second major group is located on the balance sheet in the current assets section.  This group is called the ‘Construction in Process’ (CIP) accounts.  The third major group is also located on the balance sheet down in the current liabilities section and is called ‘Construction Billings’ or ‘Construction Deposits and Draws’.  

This article explains the balance sheet accounts related to Construction in Process.  I will explain how they are designed, formatted and presented.  In addition, I’ll explain the impact either the completed contract or percentage of completion method has on the corresponding project’s account balance.  Finally, I’m going to explain to you how to interpret the information presented. 

In another article I will go into detail related to Construction Billings and the corresponding deposits and draws.  This article will focus on the Construction in Process/Progress or what is commonly shortened to CIP. 

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Long Term Debt – Financial Statement Presentation

Long-Term Debt

Long Term Debt is one of the multiple forms of capitalizing a business.  It includes bonds, secured notes and mortgage notes.  In the world of small business, the most common form of long term debt is secured notes, most likely with recourse.  As an owner of a business you need to understand how this information is presented in your financial statements.

Chart of Accounts – Layout

Chart of Accounts

The goal of accounting is to record the economic activity of the business.  This is achieved by entering each economic transaction into a set of books.  The books are formatted to reflect the balance sheet and income statement items.  The chart of accounts is designed to present the information in the prescribed format. 

The Different Types of Bank Loans

Types of Bank Loans

There are many different types of bank loans, each having their own respective purpose.  All bank loans are categorized into two distinct groupings; secured and unsecured loans.  Within in each category of loans there are several different sub-types of bank notes used to make a loan.  Both categories require the owner of the small business to provide a personal guarantee to ensure the loan is paid back. 

This article is restricted to members only. This site has over 470 articles to help guide small business entrepreneurs. The site is designed to answer normal business questions and assist in solving problems. Subscribe for only 99 cents and get a one week all access pass to all the articles. Click on the register button above in the menu bar. ACT ON KNOWLEDGE!

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