The Ins and Outs of Construction Accounting

A construction accountant plays a major role in maintaining cash flow, producing accurate income statements, finalizing balance sheets, and determining the construction firm’s equity. The job of an accountant begins the moment a company enters into a contract. The accounting department may consist of several workers managed by a head accountant or just one person using accounting software for operation.

 

It is important for a project to give out accurate, complete, and industry-standard financial statements to determine revenue and losses at the end of the project and within every cycle. An accountant using construction accounting software will obtain accurate results from gathered financial data. The software allows him or her to record, analyze, and interpret assets, liabilities, revenues, and expenses.

 

A company’s assets include currently owned materials, machineries and equipment, cash, and other objects vital to the accomplishment of the project. This area is debited from the current balance in the account.

 

An accountant can use advanced construction accounting software such as DELTEK vision to properly track transactions in the periodic and final balance sheets. Liability, for example, is an important element that the software includes in the profit rundown. The total amount of liabilities must be reflected in the balance sheet so the company knows how much it will pay to its suppliers at the end of the project.

 

Another figure that must be determined by the DELTEK vision program or another software is the contract revenue or the company’s earnings from the project. This is direct profit since it does not account for labor and professional costs. This is a client’s payment for the services rendered by the firm. Contract revenue is the difference between the total expenses and the total project fund.

 

From the total fund, a huge part is allocated for services, materials, salaries, and documents. These comprise the contract expenses of the project. They accumulate through operating activities within the duration of the construction. The DELTEK software, for example, credits this to decrease the account balance. At the end of the project, the system is set to finalize the report to determine how much the company earned.

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