Accounting System for Construction Business

For every type of business, accounting system is needed. It is needed to record all the transactions, credits, debits as well as income and expenses. One such type of business is building construction industry. Technology improvements have brought accounting software to the door of nearly every kind of business, at a very reasonable cost. Unfortunately, software is not capable of doing all the necessary entries to keep an accounting system complete and accurate. This is especially true in the construction industry where accounting is not just a series of debits and credits, but rather a system designed to record all the necessary information related to businessaccounting services.

Cash basis is simplest accounting method used in construction management business. It records revenue when received and expenses when paid. It is helpful in small construction business where there are not many complexities. In large companies, there are a few cautions when dealing with this method. Revenue is recognized, or recorded, when constructively received, and you must allocate expenses evenly over the entire period of benefit, when they apply to a multi-year period. Similarly Construction businesses cannot use cash basis accounting on their tax returns if job materials constitute more than 15 percent of the total cost to the customer.

There is another accounting system for construction companies called completed contract method. Construction contracts estimated to last two years or less commonly use this method of accounting.  Under this method, Australian building subcontractors capitalize all job expenses. Capitalization of expenses means nothing more than moving the expenses to the balance sheet as an asset. Revenues received move to the balance sheet as well and become liabilities. Upon completion of the contract, recognition of revenues and expenses occurs by moving them from the balance sheet to the appropriate income and expense accounts.

Construction contracts vary in length and size making it difficult to match expenses to their respective source of revenue. Because of the nature of transactions incurred by construction businesses, job costing is a standard practice in all methods of construction business accounting. Either import your budgets from Estimator Xpress or input them against as simple or detailed costing structure as you require. All transactions will then immediately show against those budgets allowing you to identify any potential overspends.

In all over the world and in constructionmanagement Australia, companies hire business 

advisers for consultation. These are professional Australian chartered accountants that helped companies in all aspects. They understand about retentions, variations, contracts and building insurance. They have taken the time to understand your industry. Whether you are a plumber, electrician, builder, draftsman, carpenter or any other building trade they would love the opportunity to talk to you about your business.