Construction Accounting

Handling Customer Deposits (CD) and Work In Process (WIP) in your accounting system

The steps in the graphic below demonstrate the accounting flow for a project which has three milestone deposits required by the contract.

  • Milestone 1 Deposit = $100,000;
  • Milestone 2 Deposit = $200,000;
  • Milestone 3 Deposit = $300,000.  

The process outlined below shows the accounting for each milestone cycle.

The Accounting Flow:

Repeat the process:

  • Customer makes Deposit ► DR Checking and CR Customer Deposits;
  • Work is done on the Project ► DR Work In Process and CR Accounts Payable
  • Pay the Accounts Payable ► DR Accounts Payable and CR Checking
  • Complete Milestone ► DR Customer Deposits and CR Project Income
  • Match Milestone Expenses to Milestone Income ► DR Project Cost to Build and CR Work In Process