23 Oct Construction Accounting Part 1: What is the Right Chart of Accounts Structure
Something as complicated as constructing buildings would seemingly make for complicated accounting. All the different contributors, all the different materials and suppliers, and the length of time it takes to produce a product can make keeping the accounting tidy and accurate seem overwhelming. In this blog series, we are going to tackle various portions of the accounting cycle for construction and show you just how easy it can be. Follow the hashtag #QBbuild101 on social media for more articles, shares and related items.
2. Fixed asset tracking is very important in the construction industry. The vehicles, large equipment and expensive specialized tools need careful tracking and monitoring. Instead of lumping all purchases into one vehicles line item we prefer to create separate sub accounts of the “Vehicles” fixed asset account for each truck, car etc. If you have large fleets that you manage in a fixed asset tracking program or fleet management program this isn’t necessary but for small and mid-sized companies with two to twenty trucks it is quite helpful.
3. Smaller equipment and capitalized assets we will generally follow a similar system for. You will need to decide how much detail you want on the balance sheet. Using fixed asset tracking in Quickbooks can help you uses only a few accounts like “Small Tools and Equipment” and “Large Equipment” yet have a detailed list of purchase dates, prices, vendors and even i.d. numbers.
5. We only utilize a few cost of goods sold accounts and mirror the income accounts with their naming. Payroll we create as a standard expense, not at COGS. Subcontractors, materials, disposal fees and other charges are the COGS accounts we utilize. Other charges COGS would be utilized for things like permit fees, copies, etc.
6. In-house labor is generally tracked as an expense but as its own expense grouping. This approach allows you to see your employee related costs all in one place and when you condense reports those items will fold up into one line that is separate from the other various accounts and give you a clean easy to read total. General operating expenses are kept separte by making them sub accounts under “Operations Expenses”.