cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Not applicable

Need help setting up chart of accounts for new construction

Hello! I'm building multiple spec homes and need help setting up chart of accounts for: build money spent. It's spent 2 different ways - charged on one of my own accounts and then reimbursed through a title company, or simply paid directly by a title company, at my direction. When that happens, my new construction loan is then increased by the same amount. I understand how to process the loan, but am hung up on managing the draws and unreimbursed expenses and when they are reimbursed. Thank you so much for any help!

Solved
Best answer 10-15-2018

Accepted Solutions
Established Community Backer ***

each spec home should be a current asset account named fo...

each spec home should be a current asset account named for the lot number or address, a work in progress account, wip

then you post all expenses to that account, a CC charge is entered and the wip account is the expense for that entry, same thing for cash or checks.  When there is a draw on the construction loan account open the loan register from the chart of accounts and make a new entry as an increase and use the wip account in the account block of the register

As an option you can also set up the construction loan account as a credit card type account, some find it much easier to use that way since you do not have to use the register and you just enter CC charges on the loan account when there is a draw - I prefer this method myself

15 Comments
Established Community Backer ***

each spec home should be a current asset account named fo...

each spec home should be a current asset account named for the lot number or address, a work in progress account, wip

then you post all expenses to that account, a CC charge is entered and the wip account is the expense for that entry, same thing for cash or checks.  When there is a draw on the construction loan account open the loan register from the chart of accounts and make a new entry as an increase and use the wip account in the account block of the register

As an option you can also set up the construction loan account as a credit card type account, some find it much easier to use that way since you do not have to use the register and you just enter CC charges on the loan account when there is a draw - I prefer this method myself

Not applicable

I should've put this disclaimer in place - still in train...

I should've put this disclaimer in place - still in training wheels in qb.
I'll try and better illustrate where I'm hung up, I'm sorry for not being more clear about my challenge.
I'm trying to make sure my transactions flow properly.


I pay $700 in permits by check.

I can turn in a reimbursement draw for that amount and get the money back.

So, I have:
Check for $700.      Decreases ck account asset       Increases Current Asset by $700  
then, on the reimbursement:
Note payable liability increase  $700     ck account asset increase $700

----------------------------------------------------------------------------------------------------------
If I could pre draw on permits:
I'd simply draw $700 and have the title co pay it directly.

Note payable liability increases               New Construction Expense increases? or Current asset increases?
Am I missing a step?

Thanks for any help and replies. I'm inbetween accountants, so unfortunately, I don't have one to consult with on this aside of the kind people here.
Established Community Backer ***

You should set up Products and Services and link them to...

You should set up Products and Services and link them to WIP = Other Asset. This would be Billable, and instead of Income, the charge for this payment to you is Liability = construction loan draws. Example:

You pay for Permit = Asset value "investment in the project." They reimburse you = you are more in debt.

Use them as Billable to a customer name, and the project is the customer name. List that as the Purchase details, such as Permit, Doors, Painting Labor, etc.

For drawing from the construction loan, create an Invoice for the Billable charges. Remember, this is all on the Balance Sheet. Not expense and not income.

Now, you spent $15,000 on various costs, and you are "submitting for reimbursement."

That will be the Funds you get, and that Received Payment applies to close the open invoice and is money to the bank.

For anything paid by the title company or bank directly from the loan, this changes nothing except Banking. None of it went through your bank. So, create or treat this as Cash On Hand bank and use it to enter payments made to the suppliers, with the same Products and Services. This "account" runs negative, so you need to Make a Deposit, from the Liability Construction Loan account. That amount that was spent on your behalf is the amount they just drew from your Loan.

And now you have provided for the two different ways the loan gets increased: by you submitting for draws, and by them, just using your funds.

Services are for Labor.

Noninventory Products are for Stuff.


Established Community Backer ***

I just thought this through. One more detail: Either the...

I just thought this through. One more detail:

Either the entries paid by the title company or bank, from your loan, are Not Billable. Or, they are billable and you treat that as an invoice or sales receipt the same as your loan draw request. The trick is to "deposit" that "payment from the sale" to the same Cash on hand account that you used to enter the "payments to suppliers" that are part of this same activity. In other words, this Cash On Hand really is a Clearing account and should end at $0.

You don't want them billable and accidentally select them for the real draw submission. Watch for that difference.

So, it is nice to have one consistent method, in that everything is entered as Billable, and everything is selected as a Chargeback to the customer name, but keep your own draw requests separate from those that paid your suppliers on your behalf.

Established Member

Re: each spec home should be a current asset account named fo...

I don't understand this method and how it can effectively help manage projects. There is no job costing. So halfway through a project I open up QB, see a big number in WIP but have no way of knowing if I am on, over, or under budget. I think this way works well if all one cares about is getting the final number and doing taxes. Is there another way to do this where I can track actual expenses for my projects?

Established Community Backer ***

Re: each spec home should be a current asset account named fo...

You run the Job Reports to see it by Project Name; all you need is one WIP account for that reason. You can even run a Custom Transaction detail report on the WIP account, just set it to Total by Name.

 

And this allows your Items to all be linked to WIP, so that you can use them on everyone's estimates. And that's why Est vs Actual report shows is you are on track, over budget, etc. The Asset accounting doesn't tell you what you projected for Windows vs Roofing or which appliances, or how many Sq Ft of Flooring or what was the engineering contract amount. Using the Items is what makes all of that possible, including Quantity, and including PO vs Actual for subs and materials.

 

This is how I track all WIP projects, and always have, and it works fine. I have attached a Handout for your reference.

Established Member

Re: each spec home should be a current asset account named fo...

Ok. I am starting to understand this. To confirm. I setup a WIP - Current Asset Acct. Then when I start a new project, I create a new "customer" which is that job (I do spec, no true customer jobs). Then I create a list of "non-inventory" items in "products and services" (QBO). When I enter an expense for a project, I'd click "expense", then add it under "item details" (instead of account details). Right?

 

If I enter as "item details" I don't understand how it gets attached to WIP. So I should also the transaction in WIP I guess as well? Will this breakdown by account and sub accounts? 

i.e. Holinding Costs with subaccounts of utilities, insurance, loan interest, etc. 

 

I like detailed and nicely organized reports and am willing to put in the little extra bookkeeping time to do so. 

Established Community Backer ***

Re: each spec home should be a current asset account named fo...

I should point out that QB Online is an Inadequate tracking tool in this type of business. For one major oversight, it does not report on Payroll by Job, and if you are working construction with your own crew, this could be 80% of your labor costs.

Established Member

Re: each spec home should be a current asset account named fo...

This what I have read but I don't know why it is inadequate. 

 

I don't have in-house crews, everything is subbed out. 

Established Community Backer ***

Re: each spec home should be a current asset account named fo...

It simply depends on what you want to accomplish. The QB programs are tools. You can use one hammer for everything, or the Right Hammer for the specific task. Tools are just tools.

 

For instance, if you really manage your projects closely and do project monitoring, estimates vs actuals, cost to complete, need to watch for Overbilling from Engineers or subs, etc, then again, QB Online doesn't have these tools. QB Premier Contractor, for instance, allows you to use an Estimate for your initial Scope, PO for partial draw requests until the project is complete for Subs' labor and for materials, and even run Cost to Complete compare to Estimate Vs Actuals, to manage close margins and profit. I will give you one report as an example, that isn't in QB Online.

Established Member

Re: each spec home should be a current asset account named fo...

I do like that report. I will look into this further. I appreciate your assistance on the matter. You have helped clear some things up. 

Active Member

Re: each spec home should be a current asset account named fo...

Hi, I am not seeing Name in the Total by drop down. Am I missing something?

QuickBooks Team

Re: each spec home should be a current asset account named fo...

I'd like to know more about this, 1040andMore.

 

Are you referring to the Total only drop-down arrow in the Job Estimates vs Actual Detail report?

 

If yes, you're unable to choose the name in the drop-down since when you pull up the report, it'll let you choose the specific customer.

 

Please check the screenshot as your reference.

 

Feel free to get back on this thread if you need more help. Have a nice day! 

Experienced Member

Re: I should've put this disclaimer in place - still in train...

I enjoyed your post... I am also in train wheels and am very confused about how to classify this.  Have you figured yours out yet?  If so may I ask how?

 

Another situation I have is that we build new construction for customers and they get the bank loan so how do I classify expenses to go towards that project when their bank is paying most of the bills?

 

It would not be an asset or a liability on my part......???

Experienced Member

Re: each spec home should be a current asset account named fo...

Using this method what would be the best way to track a Loan/Construction Draw account for multiple draws from the bank throughout the process of each house?