"Practical Construction Accounting and Financial Management provides instructions, training, exercises, and examples of the fundamentals that successful construction contractors must master: the ability to capture, summarize, analyze, and forecast operation data to be better informed when making project and business decisions. Typically, a project manager is not involved with data entry but is a source of data collection. Often the project manager's lack of understanding of accounting systems creates a situation where the project manager's role in the data retrieval and entry is compromised. This compromise results in poor decisions being made by the project and company managers due to inaccurate and untimely data. This book provides current and future construction professionals with an awareness of fundamental accounting concepts and financial principles to successfully manage the finances of construction companies, including accurately pricing projects based on actual overhead and profit recovery needs, successfully controlling the cost to operate a construction company through the comparison between company budgets and actual financial statements, and proactively forecasting cash needs before falling into a potential cash trap that could force the company into bankruptcy"--
Practical Construction Accounting and Financial Management provides instructions, training, exercises, and examples of the fundamentals that successful construction contractors must master: the ability to capture, summarize, analyze, and forecast operation data to be better informed when making project and business decisions. Typically, a project manager is not involved with data entry but is a source of data collection. Often the project managers lack of understanding of accounting systems creates a situation where the project managers role in the data retrieval and entry is compromised. This compromise results in poor decisions being made by the project and company managers due to inaccurate and untimely data.
This book provides current and future construction professionals with an awareness of fundamental accounting concepts and financial principles to successfully manage the finances of construction companies, including accurately pricing projects based on actual overhead and profit recovery needs, successfully controlling the cost to operate a construction company through the comparison between company budgets and actual financial statements, and proactively forecasting cash needs before falling into a potential cash trap that could force the company into bankruptcy.
| Preface |
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ix | |
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1 | (25) |
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2 | (2) |
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The Importance of Calculated Profit |
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4 | (1) |
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The Importance of Calculated Profit to Owners |
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4 | (3) |
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The Importance of Calculated Profit to Lenders |
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7 | (1) |
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The Importance of Calculated Profit to the Internal Revenue Service |
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7 | (1) |
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The Importance of Calculated Profit to Management |
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8 | (1) |
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Methods to Calculate Profit |
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8 | (2) |
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Methods to Recognize Revenue for Short-Term Contracts |
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10 | (1) |
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10 | (1) |
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10 | (1) |
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11 | (2) |
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13 | (1) |
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Methods to Recognize Revenue for Long-Term Contracts |
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13 | (1) |
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Percentage of Completion Method |
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13 | (4) |
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Completed Contract Method (With and Without Absorption) |
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17 | (3) |
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20 | (1) |
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21 | (1) |
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22 | (1) |
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22 | (4) |
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2 Financial Accounting Review |
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26 | (31) |
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27 | (1) |
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28 | (1) |
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Financial Transaction Principles |
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28 | (1) |
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29 | (1) |
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Money Measurement Principle |
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29 | (1) |
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29 | (1) |
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Revenue Recognition Principle |
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29 | (1) |
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29 | (1) |
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30 | (1) |
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30 | (1) |
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30 | (1) |
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30 | (1) |
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Application of the Financial Accounting Formula |
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31 | (5) |
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36 | (1) |
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36 | (4) |
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40 | (4) |
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44 | (1) |
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44 | (1) |
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45 | (3) |
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48 | (6) |
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54 | (1) |
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55 | (2) |
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57 | (41) |
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58 | (1) |
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59 | (1) |
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60 | (1) |
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60 | (1) |
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61 | (2) |
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63 | (1) |
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Before and After Line-Item Analysis |
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63 | (2) |
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65 | (3) |
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68 | (3) |
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71 | (1) |
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Cost-Volume-Profit Analysis (Breakeven Analysis) |
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72 | (5) |
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77 | (1) |
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78 | (7) |
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85 | (1) |
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86 | (2) |
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Expense to Revenue Ratios |
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88 | (1) |
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89 | (3) |
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92 | (2) |
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94 | (4) |
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98 | (15) |
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99 | (1) |
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Project Profit Center Analysis |
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100 | (3) |
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Company Profit Center Analysis |
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103 | (1) |
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Determining Profit Centers |
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103 | (1) |
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Profit Center Analysis Process |
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104 | (1) |
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Allocation of Company Costs |
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105 | (1) |
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106 | (1) |
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Dropping the Losing Profit Center |
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107 | (1) |
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108 | (1) |
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109 | (1) |
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110 | (3) |
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113 | (14) |
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114 | (1) |
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115 | (1) |
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116 | (4) |
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Demonstration Problem: Budgeting |
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120 | (1) |
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Preparing the Budget for Profit Centers |
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121 | (1) |
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Demonstration Problem: Budgeting by Profit Center |
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122 | (2) |
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Additional Thoughts on Budgeting |
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124 | (1) |
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124 | (1) |
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125 | (2) |
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6 Cost-Volume-Profit Analysis |
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127 | (16) |
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128 | (1) |
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The Decision-Making Process |
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129 | (1) |
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130 | (2) |
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132 | (2) |
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134 | (1) |
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135 | (1) |
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136 | (2) |
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138 | (1) |
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139 | (1) |
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140 | (1) |
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140 | (3) |
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7 Overhead And Profit Allocation |
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143 | (18) |
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144 | (2) |
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Allocation Considerations |
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146 | (1) |
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147 | (1) |
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148 | (1) |
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149 | (1) |
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Direct Labor Cost and Direct Material Cost Methods |
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150 | (2) |
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Direct Labor Hours Method |
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152 | (1) |
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152 | (5) |
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157 | (1) |
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158 | (3) |
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161 | (13) |
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162 | (1) |
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Controlling Company Costs |
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163 | (1) |
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Preparing the Monthly Budget |
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163 | (1) |
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163 | (1) |
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164 | (1) |
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Completing the Monthly Budget |
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164 | (1) |
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Analyzing the Monthly Budget |
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165 | (1) |
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Comparing Actual to Budgeted Earnings |
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165 | (1) |
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Comparing Actual to Budgeted Project Costs |
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165 | (1) |
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Comparing Actual to Budgeted Variable Company Overhead Cost |
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166 | (1) |
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Comparing Actual to Budgeted Fixed Company Overhead Cost |
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166 | (1) |
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Comparing Actual to Budgeted Profit |
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166 | (1) |
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167 | (1) |
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168 | (2) |
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Creating the Trend Statement |
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170 | (1) |
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171 | (1) |
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171 | (3) |
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174 | (23) |
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175 | (1) |
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Negative Cash Flow (The Cash Trap) |
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175 | (3) |
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Preparing the Cash Flow Projection |
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178 | (2) |
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180 | (9) |
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189 | (2) |
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191 | (1) |
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192 | (1) |
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192 | (5) |
| Index |
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197 | (6) |
| About the Authors |
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203 | |
Yunfeng Chen is an assistant professor of construction management technology at Purdue University. She has diverse experiences and educational backgrounds in business administration, construction, and real estate. She is an active member of several professional organizations, including Associated General Contractors of America (AGC) and Construction Financial Management Association (CFMA), and she serves as a reviewer for multiple leading journals and conferences, such as the Journal of Construction Engineering and Management (JCEM) by the American Society of Civil Engineers (ASCE) and the Construction Research Congress (CRC). Chen is the founder and director of the Construction Automation, Robotics, and Ergonomics (CARE) Lab at Purdue. She has received multiple research grants from state and national funding agents, such as the Georgia Department of Transportation, the Indiana Department of Transportation, and the National Science Foundation.
Frederick "Fritz" Barnes Muehlhausen was an associate professor of construction management technology at Purdue University, where he taught construction finance, estimating, costs, and field operations between 1980 and 2019. He had passion, expertise, and experience in the financial aspect of the construction business. Muehlhausen worked in the construction industry for eleven years in various roles, including estimator, cost analyst, general manager, and secretary-treasurer of a board of directors for a construction firm. He received a bachelor's degree and a master's degree in industrial construction management from Colorado State University, as well as a doctoral degree in building construction and contracting at Purdue University. Muehlhausen was a member of American Association of Cost Engineers (AACE), American Institute of Constructors (AIC), Sigma Lambda Chi (SLC), and the National Academic Honor Society for Construction Managers (NAHSCM). His passion and dedication to teaching were recognized and appreciated by his students, and he received various teaching awards, including the D. Dorsey Moss Excellence in Teaching Award, which is Purdue's highest recognition for teaching excellence as voted anonymously by students.
