Services For The Contruction Business

Torres & Associates CPAs, LLC does bookkeeping and accounting services for construction businesses. These services are a bit different than your normal bookkeeping and accounting because construction businesses provide services with the intention of receiving cash over several years until the construction project is complete, as opposed to, providing goods & services with the intention of receiving the cash right away or within a period of one year - which is how most businesses operates, for example, a restaurant.

Based on Generally Accepted Accounting Principles, the accounting used for the Construction Industry is based on two methods which are: The Completed Contract Method, and The Percentage of Completion Method. The former is based on reporting income on the year the contract is completed. The latter is based on reporting income as a percentage of completion for the project, which is based on the costs incurred to date and the total estimated cost at the end of year to complete the project.

Bookkeeping involves recording transactions on the books on a day by day basis and reconciling asset and liability accounts at the end of the month. In this case, cash received by the business ideally should be booked as “Construction in Progress Billing (liability account).” The cash paid by the business ideally should be reported as “Construction in Progress (asset account).” Therefore, during the year, ideally no construction revenues and construction expenses should be reported on the books.

Accounting is based on preparing the financial statements at the end of year and ensuring the numbers reported on the financial statements are correct. Once the year is over, before preparing any financial statements, we will first determine how much gross profit was generated from each construction project during the current year, whether using the completed contract method or percetnage of competion method. Therefore, we need to keep track of the cost incurred during the year and the estimated cost at the end of year for each construction project in order to determine the percentage of completion and then the gross profit for the year. Once we determine the gross profit for the year, we ensure that whatever gross profit reported on the financial statements coincides with the actual calculation we made for gross profit.

As you could see, the bookkeping and accounting is a little different and more complicated than regular bookkeeping and accounting, therefore, if you are in need of these services its best you seek the advice of a professional accountant. Torres & Associates CPAs, LLC is here to help you with all of your bookkeeping and accounting for your construction business - there is no more worries!