Construction accounting glossary
Plain definitions of the terms builders hear most.
Short answer: This glossary defines the construction accounting terms custom home builders use most, in plain words: job costing, cost codes, budget vs actual, change orders, allowances, draws, lien waivers, retainage, customer deposits, spec homes, WIP schedules, percent complete, and over and under billing. Each term links to a deeper guide where we have one.
- Allowance
- A budget amount in the contract for an item the client picks later, such as tile or fixtures. Overages are usually billed as changes.
- Budget vs actual
- A report comparing the planned cost of each cost code to the actual cost to date.
- Change order
- A written change to the scope and price of a contract.
- Conditional lien waiver
- A waiver of lien rights that takes effect once the stated payment is received.
- Cost code
- A label for a type of work, used to group costs the same way in the estimate, project software and books.
- Cost-plus contract
- A contract where the client pays actual costs plus an agreed fee or markup.
- Customer deposit
- Money received before the work it pays for. A liability until earned.
- Draw
- A payment released from a construction loan as work is completed.
- Fixed-price contract
- A contract with an agreed total price, regardless of the builder's actual cost.
- Job costing
- Assigning every cost to the house and cost code it belongs to.
- Over billing
- Billing more on a job than has been earned based on percent complete.
- Percent complete
- Cost to date divided by estimated total cost, as used on a WIP schedule.
- Retainage
- Part of a payment held back until a later milestone.
- Spec home
- A house built without a buyer under contract, held as inventory until sale.
- Under billing
- Doing more work on a job than has been billed.
- Unconditional lien waiver
- A waiver of lien rights that is effective when signed.
- WIP schedule
- A monthly report of open contracts showing earned revenue, billings and over or under billing.
Common questions
Is this tax guidance?
No. These are general definitions. Ask your CPA about tax treatment.
Can you explain these on our numbers?
Yes. That is what our monthly review call is for.
Related
By John Mos, Founder. Updated . We do not give tax or legal advice. Please ask your CPA or attorney.
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