The chart of accounts, for a construction company, helps organize financial transactions in order to build financial statements. How the Chart of Accounts Supports Your Construction Business This list of accounts provides the structure for your company’s financial statements and is designed to provide the information needed for financial reports. Here is a standard list of account numbers setup: Depending on the organizational structure of your construction business, an account number can be three or four digits long. The chart is formed by a list of numbered accounts with the account names and their brief descriptions.Īccounts are numbered in a commonly accepted structure so that every account appears in the same order. Accounts are grouped into categories that correspond to the structure of a company’s financial statements. Luckily, modern accounting software makes life easier for accountants by automatically labeling and categorizing the entries, which makes them easier to track and locate.Ī chart of accounts, or COA, is a listing of all the financial accounts in a construction company’s general ledger (GL). Originally, this type of processing financial transactions involved separately labeled drawers for each type of accounts. You can accurately account for income, better track expenses, and use your chart of accounts to build reports and easily assess your company’s financial health. When it comes to accounting and finances in general, a chart of accounts is your blueprint. First things first, let’s take one step back… What Exactly Is a Chart of Accounts?īeing in the construction industry, you know that having a blueprint is essential before you start doing any work at the construction site. Now that we are familiar with the benefits of charts of accounts, we can start to apply this knowledge to create our construction chart of accounts. We do want to note – since we are a software company, our opinion is that it’s in your best interest to use a software tool, specifically one designed for construction business accounting, in order to help track your transactions once you’ve built your COA.īut that said, we’re here to help, and hope that this article does that for you! Creating a chart of accounts for a construction company has its challenges, but this article provides you with the foundations to get started. COA is an organized way to record financial transactions.Īll financial transactions need to be documented, and you need a reliable structure in place to organize your records.COA provides the structure to organize different types of transactions and make them easier to find.COA is an essential product of a company’s financial recording and reporting system.As you read through the article, keep the following in mind: In this article, we will break down everything you need to know about a chart of accounts and how your construction or service company can successfully use one.Ī chart of accounts (COA) is a fundamental tool to help organize financial record-keeping and is foundational in setting up all accounting systems. Whether you operate a construction or service business, you need a chart of accounts (COA). Everything from a new bank loan to an invoice from a supplier is recorded in an appropriate category, making it easy for you to locate any bit of financial data. This way, you can see exactly where your business is making and spending money. What if you had to report on all accounts payable within the two months that followed – but suddenly realized that some documents are missing? That would be a nightmare….Unless you used a chart of accounts.Ī chart of accounts allows you to track every transaction by category and subcategory. What if you had to quickly find out the dollar amount on an invoice that was issued a year ago? You might have to rummage through a pile of paperwork, going through orders one by one for hours. Keeping track of all the money moving in and out of your construction business can be challenging. How to Build the Perfect Chart of Accounts for a Construction Company
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