🏗️ Bookkeeping Project for a USA-Based Construction Company – A Complete Guide
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| Construction bookkeeping project for new bookkeepers and Students |
Introduction
Construction companies in the USA operate in a unique environment where projects are long-term, involve multiple contracts, and require careful tracking of materials, labor, equipment, and subcontractors. Bookkeeping in this sector is not just about recording transactions; it’s about managing project costs, client advances, and progress billings to ensure compliance with US GAAP (Generally Accepted Accounting Principles). In this blog, we’ll walk through a detailed bookkeeping project for a construction company, showing how transactions are recorded, how journal entries are prepared, and how financial statements like the trial balance and balance sheet are created. We’ll use an example company, Skyline Builders LLC, to illustrate the bookkeeping process step by step.
Small Retail Store Project for New Bookkeepers
Company Profile – Skyline Builders LLC
- Industry: Construction
- Location: Florida, USA
- Accounting Basis: Accrual (GAAP compliant)
- Owner’s Capital Contribution:
- $200,000 in Cash
- $200,000 in Bank
- Period Covered: April 2025
Step 1: Owner’s Investment
Transaction:The owner invests $200,000 cash and $200,000 in the bank.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 1 | Cash A/c Dr. Bank A/c Dr. To Capital A/c |
200,000 200,000 |
400,000 |
👉 This records the owner’s contribution of $400,000 total, split between cash and bank.
Step 2: Purchase of Construction Materials
Transaction:Purchased construction materials (cement, steel, bricks) worth $120,000, paid $70,000 in cash, and $50,000 on credit (Supplier – ABC Supply Co.).
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 3 | Materials Inventory A/c Dr. To Cash A/c To Accounts Payable (ABC Supply Co.) 50,000 |
120,000 | 70,000 50,000 |
👉 Materials are treated as inventory until used for projects.
Step 3: Purchase of Construction Equipment
Transaction:Bought excavator and machinery worth $150,000 through bank transfer.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 5 | Equipment A/c Dr. To Bank A/c |
150,000 | 150,000 |
👉 Equipment is a long-term asset, not an expense.
Step 4: Client Advance Received
Transaction:Received $100,000 advance from a client for an office construction project.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 6 | Bank A/c Dr. To Client Advance (Unearned Revenue) A/c |
100,000 | 100,000 |
👉 Under GAAP, advances are liabilities until work is completed.
Step 5: Wages Paid to Workers
Transaction:Paid $40,000 wages to construction workers in cash.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 10 | Wages Expense A/c Dr. To Cash A/c |
40,000 | 40,000 |
👉 Direct wages are a project expense.
Step 6: Subcontractor Payment
Transaction:Paid $60,000 to subcontractors via bank transfer.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 12 | Subcontractor Expense A/c Dr. To Bank A/c. |
60,000 | 60,000 |
👉 Subcontractor fees are recorded as expenses.
Step 7: Office Rent
Transaction:Paid office rent $12,000 in cash.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 15 | Office Rent Expense A/c Dr. To Cash A/c. |
12,000 | 12,000 |
👉 Office Rent is recorded as expenses.
Step 8: Additional Material Purchase on Credit
Transaction:Purchased more materials worth $80,000 on credit from XYZ Supplies.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 20 | Materials Inventory A/c Dr. To Accounts Payable (XYZ Supplies) |
80,000 | 80,000 |
Step 9: Revenue Recognition (Completed Work)
Transaction:Completed part of a project and billed client $150,000, received $90,000 in bank, $60,000 pending.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 25 | Bank A/c Dr. Accounts Receivable A/c Dr. To Construction Revenue A/c |
90000 60000 |
150,000 |
👉 Revenue is recognized when earned, not just when cash is received.
Step 10: Owner’s Withdrawal
Transaction:Owner withdrew $10,000 for personal use.
Journal Entry:| Date | Particulars | Debit ($) | Credit ($) |
|---|---|---|---|
| Apr 30 | Owner’s Draw A/c Dr. To Cash A/c. |
10,000 | 10,000 |
Trial Balance – April 30, 2025
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Cash A/c | 68,000 | - |
| Bank A/c | 180,000 | - |
| Materials Inventory A/c | 200,000 | - |
| Equipment A/c | 150,000 | - |
| Accounts Receivable A/c | 60,000 | - |
| Wages Expense A/c | 40,000 | - |
| Subcontractor Expense A/c | 60,000 | - |
| Office Rent Expense A/c | 12,000 | - |
| Owner’s Draw A/c | 10,000 | - |
| Accounts Payable (ABC + XYZ) | - | 130,000 |
| Client Advance A/c | - | 100,000 |
| Construction Revenue A/c | - | 150,000 |
| Capital A/c | - | 400,000 |
| Total | 780,000 | 780,000 |
Balance Sheet – April 30, 2025
Assets
- Cash: $68,000
- Bank Balance: $180,000
- Materials Inventory: $200,000
- Equipment: $150,000
- Accounts Receivable: $60,000
- Total Assets = $658,000
Liabilities
- Accounts Payable: $130,000
- Client Advance (Unearned Revenue): $100,000
- Total Liabilities = $230,000
Equity
- Capital: $400,000
- Less: Owner’s Drawings: $10,000
- Add: Net Profit (Revenue – Expenses = 150,000 – (40,000 + 60,000 + 12,000) = $38,000)
- Adjusted Equity = $428,000
Total Liabilities + Equity = $658,000 ✅ (Balances with Assets)
Key Takeaways for US Construction Bookkeeping
- Owner’s Equity Setup: Initial capital split between bank and cash.
- Material Purchases: Track both cash and credit purchases carefully.
- Revenue Recognition: Recognize revenue only when work is completed (GAAP rule).
- Client Advances: Record as liabilities until earned.
- Work-in-Progress (WIP): Essential for long projects in construction.
- Financial Health: Trial balance and balance sheet confirm accurate recording.
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