Construction Accounting Terms: A Comprehensive Guide

Katie Mosher

Thursday, June 15, 2023

Hi, Katie here.
Construction Accounting Terms: A Comprehensive Guide
Construction accounting involves unique terminologies that are essential for understanding and managing the financial aspects of construction projects. This article provides a brief overview of some important construction accounting terms.

  1. Cost Codes: These are unique identifiers assigned to different project activities, enabling accurate tracking of costs and expenses.
  2. Job Costing: A method used to assign costs to specific construction projects, tracking expenses such as labor, materials, and equipment.
  3. Progress Billing: The process of invoicing clients for completed project milestones or a percentage of work completed.
  4. Retainage: A portion of payment withheld by the client until the project is completed or certain conditions are met.
  5. Change Order: A written document that modifies the original contract, detailing any changes to the scope of work, cost, or timeline.
  6. Overhead Costs: Indirect costs associated with running a construction business, such as office rent, utilities, and administrative salaries.
  7. Work-in-Progress (WIP): The value of unfinished construction projects, representing the costs incurred to date.
  8. Percentage of Completion: A method of recognizing revenue and expenses based on the completion percentage of a project.

Understanding these construction accounting terms is crucial for accurate financial reporting, budgeting, and decision-making in the construction industry. Construction professionals and stakeholders should familiarize themselves with these terms to effectively manage project finances and ensure profitability. And feel free to reach out if you need more clarification, we’re here to help!
Katie Mosher
970-833-5442 office

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