Throughout the construction business, there are certain accounting practices that are used in order to keep accurate financial records in this complex industry. Generally Accepted Accounting Principles (GAAP) for construction accounting is a framework for understanding the financial management of construction businesses, as well as ensuring that records are effectively organized and consistent. 

With long-term projects, various contracts, outsourced materials, and multiple crews, the construction industry has unique characteristics that can make accounting bookkeeping difficult to maintain. The GAAP construction accounting services offered at Cooper Norman allow your construction firm to be up-to-date with compliance regulations while receiving exceptional bookkeeping services and financial record updates. 

Following the Principles of GAAP

When construction companies follow the principles of GAAP, they are able to have complete financial records that provide a full financial picture to stakeholders, lenders, or investors that will aid in your strategic planning and informed decision-making moving toward the future. Transforming your financial management starts with following the principles of GAAP. The four principles of GAAP that construction companies should follow include:

Revenue Recognition

With so many construction projects going on at different times that last different lengths, it is important to outline how and when your revenue is going to be recognized. This outline will help to track each project and accurately recognize the revenue over the entire duration of each of your construction projects.

Historical Cost

When recording assets and services, this principle says they should be recorded at their purchase cost. This transparency allows for clarity in what was exchanged in order to get any assets or services required for a specific construction project. These clear objectives make it easier when it comes to financial recording to ensure that all costs are accounted for and transparent throughout all projects.

Matching

Expenses and revenue are expected to match up when the accounting for a construction business is taking place. When these aspects match on financial records, it will accurately reflect all the costs associated with the construction projects when the revenue is recognized. 

Full Disclosure

Your firm’s financial health needs to be accurately represented on your financial documents. When some of your construction projects last over multiple reporting periods, it is vital to provide all of the necessary information for full disclosure. Your financial records should have all the necessary information that reflects your financial condition to continue to stay organized, accurate, and complete.

Outsource to Cooper Norman

From project delays to dealing with fluctuating costs – your construction company will face unique challenges in its time. When your business is in adherence with the GAAP, you are able to maintain transparency and establish a level of compliance and trust with lenders and investors. Careful accounting practices are crucial in creating a regulatory-compliant and financially successful construction business. Cooper Norman can be your strategic partner in supporting your financial journey through the framework of GAAP and meticulous accounting practices. Be sure to contact us today with any questions you have regarding the GAAP and any of your accounting needs for your construction business!