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Need help setting up chart of accounts for new construction

Forum|Forum|7 years ago
October 16, 2018
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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!

QuickBooks Online

Best answer by Rustler

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

RustlerAnswer

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

A

arkvalleyinfoAuthor

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.

1

1231 4582 5385 304

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......???

qbteachmt

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.

C

cmcclung

Question on this - If I have Spec homes as inventory and Custom client builds as well - shouldn't the items be linked to a sales income account instead of WIP (Asset) account? If so, would I need to have 2 sets of cost codes (Items) - one for specs and one for client build? I have my current item lists linked to a "Construction Inventory" - other asset account which is essentially my WIP but when I have received draw payments for the custom builds then those payments aren't showing up as income.

B

bc042954-gmail-c

What is WIP

qbteachmt

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.

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