What Is Construction Accounting

Construction accounting is a process that is used by the accountant to keep track of any type of financial information that is related to a construction job. During this process reports will be created for every aspect of a commercial or residential product. There are many areas that this deals with. Learn what they each are and how construction accounting software will help to organize it all.

Job Costing

In this area every item used during the construction will be labeled and will be given a set budgeted amount. This amount will then be compared to the overall expenses as the project continues throughout the coming months. Any job cost budgets must be approved through the bank or any investors before the project is started. That is why it is important to keep a close look on the expenses and where they are being spent.


It is not uncommon for businesses to seek out investors in order to provide them with the funds needed to complete the project. First they will prepare a proposal for the bank or investor and on this they will write down the job cost estimates, when they project will be finished, and any operating budget that will be accrued two years or more after the project is finished. This will show the investor has stable the idea is.

When the loan has been approved the accountant on the project will submit the invoices to the bank when they are received. The bank will then approve these and hand out the necessary amount to have them paid.


The majority of projects will require it to be subcontracted. This means that a lead contractor will be in charge of who is hired and what type of specialized workers will be brought in. When these subcontractors give the invoice to be paid to the accountant they must also give them a release of lien. This will state that the contractor will not set a lien against the project for the work finished.