- The IRS provides special treatment for general contractors. You just have to follow the guidelines.
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26 CFR 1.460-4 Methods of accounting for long-term contracts
Many taxpayers will choose to use PCM as their long-term contract method for their books (so they can give their banks and bonding companies the type of financial statements they prefer) and CCM (Completed Contract Method) for their tax returns (so they can have the maximum deferral of taxes).
- Enter Company name, select year from dropdown, enter “Date Prepared” and “Prepared by”.
- For each project that is not completed by the end of the fiscal period, enter the name of the project, the amount of Revenue which was reported as Income, and the amount of Direct Expenses which was reported as Cost of Goods Sold (COGS).
- When all entries have been made, enter the “SUMMARY” amounts to the accounts shown, using the General Journal of your accounting platform.
- For Quickbooks Desktop, go to “Company” at the top of the page, select “Make General Journal Entries” from the dropdown menu.
- For Quickbooks Online, follow the instructions in the video below.
- You can enter the transactions in bulk by just making the entries suggested in the “Summary” section.
- If more detail is desired, you can enter the DR and CR amounts for each project in the journal entry.
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