The Complete Guide to Accounting for Construction Companies

Well-managed accounting is an essential component of any successful business, and construction companies are no exception. Proper accounting helps construction business owners to manage their finances effectively and make informed business decisions. 

In the sections below, we’ll cover the basic accounting concepts that every construction business owner should be familiar with, including types of accounting, accounting methods, financial statements, and more. 

Types of Accounting for Construction Companies

The accounting field is often described as consisting of 12 different branches. Of those, the four types of accounting described below are most relevant for construction companies. 

Financial Accounting

Financial accounting is a broad category that involves the preparation of financial statements and reports. These documents are prepared to be presented to external users, such as investors or lenders. 

Managerial Accounting

While financial accounting is externally focused, managerial accounting is internal. This type of accounting involves analyzing and sharing financial information among a company’s managers and decision-makers. 

Tax Accounting

The most commonly-used accounting service is tax accounting. This type of accounting is concerned with helping companies and individuals comply with Internal Revenue Service (IRS) requirements. Tax accountants help clients prepare and file tax returns and related forms. Tax accountants help construction firms to maximize their deductions, file taxes on time, and avoid IRS complications. 

Cost Accounting

Cost accounting consists of identifying, analyzing, and reporting on a business’s costs. These include overhead costs, labor costs, and materials costs. 

Setting Up an Accounting System for a Construction Company

Ready to set up an accounting system for your construction company? To get started, your accountant can help you navigate the following steps. 

Select an Accounting Method

The two most common methods for tracking expenses and revenue are cash-basis accounting and accrual-basis accounting. 

The cash-basis method recognizes revenue and expenses when cash is received or paid out. Conversely, the accrual basis method recognizes revenue at the moment it’s earned and recognizes expenses at the moment they’re incurred. 

Accrual-basis accounting is generally considered the most useful option for construction companies. This method provides a more accurate and up-to-date picture of a company’s financial performance. 

Choose an Accounting Software System

Small business owners use accounting software to keep track of financial transactions. Accounting software ranges from simple spreadsheet tools to sophisticated programs that can prepare reports and analyses. Your accountant can help you choose a system based on your budget and needs. 

Set Up a Chart of Accounts

One of the most important organizational tools for accounting is a chart of accounts. This is a list of all the accounts that your business uses for recording transactions. A chart of accounts typically includes these five groupings:

  • Assets
  • Revenue
  • Equity
  • Expenses
  • Liabilities 

Develop an Accounting Manual

Another essential accounting tool is an accounting manual that outlines your company’s procedures for recording transactions and preparing financial reports. The manual should designate responsibilities for accounting tasks and include instructions for generating financial reports and recording transactions into your accounting software system. 

Understanding Financial Statements

As a business owner, there are four main types of financial statements that you should be familiar with. These are: 

  • Balance Sheet – includes information about assets, liabilities, and equity; what your company owns and owes 
  • Income Statement – describes revenues and expenses
  • Cash Flow Statement – measures your company’s inflow and outflow of cash
  • Retained Earnings Statement – shows how much funding the company has reinvested in the business

These four categories are closely related, but distinct. Each one presents a different set of data, with the full set of statements painting a complete picture of a company’s financial health. 

Accounting Considerations for Construction Companies

Finally, there are a few additional accounting concepts that construction company owners should understand. These include: 

  • Job Costing – tracking and allocating costs to specific construction projects. This process helps to show how profitable a project is. 
  • Percentage of Completion Method – this method analyzes how much revenue has been earned on a period-by-period basis, based on a project’s percentage of completion. This is a useful method for making sure that long-term projects are consistently profitable for a company. 
  • Revenue Recognition – the principle that revenues should be acknowledged in financial statements when they’re earned, not necessarily when the payment is processed. 
  • Change Orders – a procedure for formally recognizing changes to a project’s scope, price, or completion date. 
  • Equipment Depreciation – recognizing the value of a piece of equipment based on its acquisition costs, lifespan, and maintenance expenses. 

Get Better Accounting for Your Construction Business

Is your construction or trade business ready for professional accounting? Stratlign can help. 

We’re a full-service accounting firm for small and medium-sized companies in the trade and construction industries. We work with general contractors, plumbers, landscape contractors, and many more talented and hardworking business owners. 
To learn more, book a 15-minute call with Stratlign today.


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Justice Bragg

Business Development Specialist, Florida

At work, Justice is passionate about helping the team make decisions and connections that propel the business forward. He prioritizes client satisfaction by serving as a medium to facilitate communication to the proper channels making sure every issue is properly addressed.

Outside of work, Justice enjoys exercising by going to the gym and playing pickleball with his friends. He is a self-proclaimed foodie who can’t say no to trying a new restaurant, sometimes even immediately regretting it.

Zachary Williams

Staff Accountant, Florida

At Level Accounting, Zach is responsible for bookkeeping & payroll. He is dedicated to ensuring financial success for our clients.

Beyond the office walls, Zach’s weekends are filled with adventure, whether he’s exploring Florida’s hidden gems with his wife or battling it out in tournaments. When it’s time to unwind, you’ll find him at the movies or casting his line out for a relaxing fishing session.

Melanie Jerome, MBA


Meet Melanie J, one of our senior staff accountants! Melanie ensures your financial health with precision and expertise. Beyond the office, she’s a true crime enthusiast who loves traveling and outdoor adventures. Whether she’s balancing books or exploring new trails, MJ’s dedication and skill set the standard for excellence in our team.

Seren Lunsford, MBA


Meet Seren, one of our dedicated staff accountants here at level accounting! She is responsible for bookkeeping & payroll. Outside of the office, you can find her on the sidelines of a soccer pitch, karting track, or baseball diamond, cheering on her two active boys. Seren is also a proud owner of two gentle giants, her beloved Great Danes. In her downtime, she channels her creativity into baking and decorating sugar cookies, always eager to experiment with new baked goods ideas and recipes. With her expertise in accounting and her passion for family, pets, and baking, Seren brings a unique blend of professionalism and warmth to our team.

Ivette Rivera


Ivette Rivera is our Executive Assistant at Level Accounting, juggling schedules and keeping things running smooth.

When she’s not crushing it at work, Ivette is an avid participant in her church community. As a mom, she’s all about those quality moments, whether it’s baking up a storm, hitting the water for some kayaking fun, or just chilling with a good book or binge-worthy show. And let’s not forget her partners in crime at home: Harley Quinn, the fridge-raiding pit bull, and Atlas, the cat who rules the roost. Ivette’s all about that balance between work hustle and personal bliss.