While typical accounting is the practice of collecting, organizing and analyzing data that illustrates the financial health of a company, construction accounting is the type of project-based accounting. This means that professionals in this area tend to concentrate on concrete projects that may vary in terms of budget, assets, and time required for completion, rather than on the whole company’s financial data. Building accounting specifically focuses on issues such as equipment, contracts and budgets that can increase or decrease over time.
A professional in this area is often responsible for determining direct costs and indirect costs associated with a project. Direct costs relate to work, materials and other factors that directly affect development and the total cost of a project. Indirect costs, on the other hand, may include factors such as insurance and the cost of the equipment.
An important component of design reporting is the valuation of vehicles and equipment that can be used to complete a project. An accountant in this profession usually values equipment and vehicles used as non-current assets. This means that they have a value that cannot easily be changed into cash. A building auditor may be responsible for determining the value of these assets by considering the efficiency and costs of each part of the equipment, as well as considering whether the equipment is owned by the construction company or rented from another company.
Many construction projects involve several different contracts. A professional within building accounting is often responsible for keeping track of these contracts and making note of the dates and invoices contained in each contract. Methods for calculating income for work are also affected by contracts. For example, some contractual agreements may require auditors to calculate revenue at different stages of completion of a project, while other agreements cannot require calculations until a job is complete or very close to completion.
Budget tend to change often during construction projects. Unforeseen circumstances can often affect the time it takes to complete a job, which, in fact, can cause work to cost more, which requires a larger budget. For this reason, professionals who practice building accounting are usually required to keep up with the development and make constant calculations that determine the financial position of a construction project.
A number of variables that go into building accounting, such as changed budgets, potential damage to equipment, and bad weather, require a professional in this area to make a number of assessments. For this reason, there is a risk associated with building accounting that is not associated with other forms of accounting. Even financial and administrative auditors work with statements based on assets and cash flow, building auditors work with estimates and forecasts that will often change.