The Complete Guide to Chart of Accounts for a Construction Company (With Free Template)   

Back in high school, a kid kept everything stuffed into his backpack. You would see papers, half-eaten snacks, gym clothes, and irrelevant things. Finding textbooks for him was like going on a treasure hunt, but without the treasure.  

Running a construction business without a proper chart of accounts can be very similar. So, let’s show you how to build a clean and organized chart of accounts for a construction company so you can get a clear view of your business’s performance.  

What is a Chart of Accounts for a Construction Company?  

A chart of accounts is the backbone of your construction company’s finances. It is a master list that keeps track of every dollar coming in and out. It’s made up of all the different accounts your business uses, like income, expenses, assets, and liabilities.   

Each has its number and name to keep things organized.  

The main goal of the chart of accounts is to separate earnings from spending. It filters all financial activity into clear categories so you can easily see the bigger picture.   

And it’s not just about looking back at where your money went. A good chart of accounts helps you identify trends, plan, and make smarter decisions to grow your business.  

Let’s say you’re running a residential construction company named Batcave. Your chart of accounts might have categories like materials Revenue, labor Costs, equipment rental, and vehicle expenses.   

So, when you check your reports, you see how much you’re spending on subcontractors versus buying supplies. That insight helps you plan better bids, control costs, and stay profitable.  

How a Chart of Accounts Works in Construction?  

Every time your business records a transaction, it enters the accounting system’s chart using double-entry accounting. Over time, all these entries form the financial statements you use to see how your company is doing.  

The way you set up your chart of accounts depends a lot on the kind of work you do and how you earn your income. For example, a contractor’s chart of accounts will look very different from that of a material supplier or an equipment rental company.   

Each type of business needs different categories to track its money properly. There’s no one-size-fits-all here. Every construction company builds its own chart of accounts based on how it operates and what it needs to track.   

That said, everyone still follows basic rules set by the Financial Accounting Standards Board (FASB) and Generally Accepted Accounting Principles (GAAP) to keep things consistent and legit.  

Once you set up the structure of your chart, you generally stick with it year after year. Keeping it consistent helps you easily compare your financial results and see if you’re growing, holding steady, or need to make changes.  

Breaking Down Chart of Accounts  

When you break down a chart of accounts, there are six main types of accounts you’ll always see:  

• Assets  

• Liabilities  

• Equity  

• Revenue  

• Expenses  

• Cost of Goods Sold (COGS)  

If you’re thinking that sounds familiar, you’re right. These categories tie directly into your two major financial reports: the balance sheet and the income statement.   

The balance sheet follows the basic formula (Assets = Liabilities + Equity), while the income statement shows how much you make or lose (Income = Revenue – Expenses).  

1. Assets  

Assets are everything your construction business owns that has value. This includes cash, accounts receivable, equipment, and materials you’ve bought or leased for a project.  

Assets can be physical things you can touch, like machinery, trucks, or tools, or they can be non-physical, like the value of your brand.  

In construction, though, most assets are pretty hands-on. Think about your excavators, scaffolding, or the lumber stacked up for a project. These are the essentials you rely on to get the job done.  

2. Liabilities  

Liabilities are everything your construction company owes to other people. This includes accounts payable, contracts payable, bonds, mortgages, loans, and other debts you’re responsible for.   

In the construction world, liabilities usually show up as unpaid bills for materials, labor costs you haven’t paid yet, or deposits customers have given you for future work.  

3. Equity  

Equity is what’s left after you subtract what you owe (liabilities) from what you own (assets). Here’s the simple formula:  

Equity = Assets – Liabilities  

This number gives you your book value. It illustrates what would be left for the owners or shareholders if the business paid off all its debts and sold everything it owned.   

It’s a general measure of ownership, but you need to remember that figuring out exactly who owns what in a company can get messy. A lot of factors, like investments, profit shares, and agreements, can complicate the picture.  

4. Revenues  

Revenue is the total money your construction business brings in before subtracting expenses. It’s all about how good you are at landing projects and making sales.   

But keep in mind that revenue only shows how much money you’re making. It doesn’t say anything about how efficiently you’re running things or if money is leaking out.   

In construction, revenue usually includes customer payments, project fees, and income from renting out equipment.  

5. Expenses  

Expenses are the costs of keeping your business up and running. This covers everything from payroll, supplies, and materials to fuel, taxes, insurance, advertising, repairs, and rent.   

All the direct costs tied to specific projects, such as labor, materials, equipment rentals, and permits, are part of your expenses, too.   

6. COGS  

COGS (Cost of Goods Sold) is a crucial number for contractors. It shows the direct costs of delivering a project over a set period. You might hear it called job costs, and it’s often tracked using construction management tools.   

The simple trick to finding your gross profit margin is subtracting your COGS from your total revenue. That margin tells you how efficient your projects, operations, and bidding processes are, and it’s one of the best ways to stay on top of your business’s financial health.  

Why Construction Businesses Need a Chart of Accounts?  

According to a U.S. Bank study, 82% of failed businesses cite cash flow problems as a major reason. Without a clear, organized chart of accounts, it’s almost impossible to know where your money is going or find cash flow issues.   

The chart of accounts gives you the foundation to create financial statements like income statements and balance sheets. These reports offer a goldmine of insights into your business’s performance.   

So, it helps manage day-to-day operations, pitch to investors, or keep your stakeholders in the loop; having solid financial data at your fingertips makes all the difference.  

How To Create a Chart of Accounts for Construction Businesses?  

As we discussed earlier, a chart of accounts is a list of the accounts you use, each with its name and number.   

You decide what to call each account, how to group your transactions, and how detailed you want it to be. That said, no matter how you organize it, everything will still fall under one of the main categories, such as income or expenses.  

For example, let’s say you buy office supplies. You could file them under office expenses or office supplies. Either way, they still count as expenses when you consider the bigger financial picture.  

This freedom means you can build a chart of accounts that fits your business perfectly. Smaller companies might keep it simple with a one-page list. On the other hand, larger construction businesses could have a chart that’s 10 or even 20 pages long to cover all their different departments and operations.  

Each account usually gets a name and a unique number to make tracking easier. Some companies even use codes for different departments.   

For instance, you might label everything from your sales team with 05. So anytime you see 05 on a transaction, you’ll know it’s immediately linked to sales.  

One important thing: once you build your chart of accounts, try to keep its basic structure the same. You can add new accounts during the year if necessary, but it’s best to save any major changes for the start of a new fiscal year.   

And before making any big moves, always check in with your accountant to keep everything running smoothly.  

Here’s how you can put together a simple, real-world chart of accounts for a construction company using a numbering system:  

First, you’d set it up like this:  

• Assets – 1  
• Liabilities – 2  
• Equity – 3  
• Revenue – 4  
• Cost of Goods Sold (COGS) – 5  
• Expenses – 6  

Then, you’d break each category down into smaller groups and give each item its unique number. Here’s what a sample might look like:  

1 – Assets (SFP)  

• 1000 – Cash  
• 1010 – Accounts Receivable  
• 1020 – Construction Materials Inventory  
• 1030 – Prepaid Expenses  
• 1040 – Equipment  
• 1050 – Vehicles  

2 – Liabilities (SFP)  

• 2000 – Accounts Payable  
• 2010 – Credit Card Payable  
• 2020 – Loans Payable  
• 2030 – Customer Deposits  
• 2040 – Accrued Payroll  

3 – Equity (SFP)  

• 3000 – Owner’s Equity  
• 3010 – Retained Earnings  
• 3020 – Owner’s Draws  

4 – Revenue (Income Statement)  

• 4000 – Contract Revenue  
• 4010 – Change Order Revenue  
• 4020 – Equipment Rental Income  

5 – Cost of Goods Sold (COGS) (Income Statement)  

• 5000 – Direct Labor  
• 5010 – Subcontractor Costs  
• 5020 – Construction Materials  
• 5030 – Equipment Rental for Jobs  
• 5040 – Job Site Utilities  

6 – Expenses (Income Statement)  

• 6000 – Office Supplies  
• 6010 – Insurance  
• 6020 – Advertising and Marketing  
• 6030 – Rent  
• 6040 – Fuel and Vehicle Expenses  
• 6050 – Small Tools and Equipment  
• 6060 – Legal and Professional Fees  
• 6070 – Training and Certifications  
• 6080 – Depreciation Expense  

A few quick notes:  

• SFP stands for Statement of Financial Position (a fancy way of saying your balance sheet).  

• Revenue, COGS, and Expenses all show up on your Income Statement.  

• This structure helps you easily organize your transactions, and when your accountant or bookkeeper looks at your reports, everything ties neatly back to these categories.  

• You can adjust or expand the list depending on your company’s size and what you want to track more closely!   

Final Thoughts  

Now that you’ve seen what a chart of accounts looks like for a construction business, you’re ready to start building your own. To make it easier, go ahead and download our template above; it’s a solid starting point.  

As you create your chart of accounts, remember one thing: consistency matters. Try not to make frequent changes to your setup. Keeping things stable means you’ll be able to compare financial results over time without confusion, which is how you spot trends and make better decisions for your business.  

Speaking of making better decisions, Tangent Consulting helps construction business owners like you outsource the entire accounting department. For over a decade, we’ve been helping hardworking pros, contractors, handypeople, and small business owners ditch the overwhelm and take control of their finances.        

Let’s get your accounting system working for you!       

P.S. If you are reading this, it means you can have access to our free consultation for your business. Avail this for free today before we change our mind 😉    

FAQs  

How to manage construction accounting?  

You can use a good chart of accounts, track job costs separately, and stay on top of cash flow with regular financial reports.  

What expense account should I use for contractor payments?  

Contractor payments should be recorded under subcontractor costs job costs in your chart of accounts.  

How can we relate time and cost in construction projects?  

Time and cost are tightly linked within the construction industry. Delays usually mean higher expenses, so tracking project timelines helps control your budget.