Category: 

What Is Construction Accounting?

Construction accounting includes determing direct costs, such as labor.
Article Details
  • Written By: D. Nelson
  • Edited By: M. C. Hughes
  • Last Modified Date: 06 July 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
In the US, workers under 25 have unemployment rates that are twice the national average.  more...

July 28 ,  1945 :  14 people were killed when a US Army bomber crashed into the Empire State building.  more...

Whereas typical accounting is the practice of gathering, organizing, and analyzing data illustrating the financial health of a business, construction accounting is type of project-based accounting. This means that professionals in this field tend to concentrate on specific projects which may vary in terms of budget, assets, and length of time required for completion, rather than on company-wide financial data. Construction accounting in particular focuses on issues such as equipment, contracts, and budgets that may increase or decrease over time.

A professional in this field is often responsible for determining direct costs and indirect costs associated with a project. Direct costs refer to the labor, materials, and other factors that directly impact the progress and overall cost of a project. Indirect costs, on the other hand, may include factors such as insurance and the cost of equipment.

An important component of construction accounting is the valuing of vehicles and equipment that might be used to complete a project. An accountant in this profession normally values the equipment and vehicles being used as fixed assets. This means that they have a value that cannot be easily changed into cash. A construction accountant may be responsible for determining the value of these assets by considering the effectiveness and cost of each piece of equipment, as well as considering if the equipment is owned by the construction company or if it is leased from another company.

Ad

Many construction projects involve a number of different contracts. A professional in construction accounting is often responsible for keeping track of these contracts and making note of dates and billing that are in each contract. Methods of calculating revenue for work are also impacted by contracts. For example, some construction contracts may require that accountants calculate revenue at different stages of completion of a project, whereas other contracts may not require calculations until a job is complete or very near completion.

Budgets tend to change often during construction projects. Unforeseen circumstances can often affect the time it takes to complete a job, which may in effect cause the job to cost more, requiring a greater budget. For this reason, professionals who practice construction accounting are normally required to keep up with developments and make continual calculations that determine the financial status of a construction project.

A number of variables that go into construction accounting, such as changing budgets, potential damage to equipment, and bad weather, require a professional in this field to make a number of estimates. For this reason, there is risk that is associated with construction accounting that is not associated with other forms of accounting. While financial and managerial accountants work with statements based on assets and cash flow, construction accountants work with estimates and projections that are often likely to change.

Ad

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email