We are an LLC that is building our first spec home. We have a private loan for the land and construction. We take draws from the loans to cover subs and materials, and to also pay ourselves a specific amount every month. Essentially we are living off of the loan until we sell.
I have all costs for building under the CIP asset account and the loans under a liability account, as everything is capitalized during the course of construction.
In the past when we have built custom homes, we didn't capitalize anything. We would bill clients as income and then when we transferred our monthly "pay" out of the business account and into our personal account, I always put this in the "owner pay and personal expenses" account.
Since we are capitalizing all costs during the course of construction on the spec home, I am wondering what account to put the transfers to our personal account under. Should I have a "contractor/labor fee" account under the CIP asset account? Or should I continue using the "Owner Pay and Personal expenses" account?
Thank you!
