Construction Accounting Procedures

The construction business has many facets to it. There are a number of tasks that must be taken care of to ensure that the project will run smoothly and that everything will be done in time. One of the most important parts of the project is the accounting end of it all. It is up to the accountant to analyze every piece of fiscal information that comes onto their desk.

This job requires that the person combine a level of management and financial accounting to ensure that everything is paid on time and that vendors are not receiving too much money or too less. They must also understand the profit that can be made from each project and how much must be paid to ensure that it is finished on time.

Methods

There are different methods used to help the accountant keep track of everything. The most common is the percentage accounting method. The is used to know the amount that will be spent and made during a single project. It will use a qualitative analysis to determine each stage of the project and how it is being completed.

The cost allocation method will require information from the company to attribute a defined dollar amount of construction resources that are used for each project. The management accountants will distinguish the construction resources based on the written proposal for each project. The resources will include material, labor, overhead, insurance, and more. This will prevent projects from going over budget unnecessarily.

Both of these methods provide a stable foundation for the accountant to determine the type of revenue to be made during the process. With all of this information they will be able to put together an estimate that will help them to remain on budget and to pay the right amount to each vendor.