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On the Challenges Faced by Construction Accountants in a Project

by: jamieshellman on Date: Tue, 10 Jan 2012 Time: 3:31 PM

Depending on the field of study it is used in, the complexity of accounting differs. The best instance of a exclusive and sophisticated accounting system is the one employed in construction. There are specific issues a construction accountant encounters each day. Since a construction project typically involves many contracts, it needs an accounting system that can interrelate, interpret, contrast, and compute values from several categories.

Construction accounting is differentiated from other accounting methods by some exclusive terms employed in computation and reporting. Terms like "draw" and "estimates" often appear in reports that relate to certain variables or activities distinct to a construction project. Draw means the drawing or drafts on which the project is based. It illustrates the details and makes a far more detailed presentation of possible construction expenditures. The drawings are included in virtually all compiled paperwork for submission to the owner, monetary institutions, and subcontractors.

The construction of a building involves a variety of aspects and features normally not single-handedly served by one contractor. This is the reason why accounting professionals take care of several contracts, from the general contractor to the subcontractors for labor and supplies. Therefore, such a sophisticated deal needs an automated accounting system to have reliable outcomes. Construction accounting software applications, including the SAGE timberline software facilitates this task. The software program handles different functions, such as a database for essential data.

The SAGE timberline software is capable of accounting for fixed and non-fixed assets of the company, which is an astronomical task for an accountant when manually done or with normal computing techniques. In contrast to other project-based firms that only deal with fixed assets, a construction project may also handle non-fixed assets, including vehicles and equipment neither owned by the project owner and the construction firm. Car and gear costing commonly follows a distinct accounting methodology.

The three categories of costing in a construction project likewise produce a specific difficulty for construction accountants. Direct expenses that comprise material, labor, and subcontracting are handled differently from indirect expenditures which consist of insurance, support, and supplies. With software programs like SAGE timberline estimating, even the general and administrative costs that belong to the third costing kind are accounted for correctly.

Another problem is the adoption of unique revenue recognition guidelines. Most accounting approaches recognize income using the Percentage of Completion Method. The values used in the computation are all approximated and run the risk of getting inaccurate outcomes. Products like the SAGE timberline office minimize or even remove said danger. Without making use of alternative methods, like Completed Contract Method to determine reasonable estimates, the software program manages the risk.

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