There are three types of costs incurred in the operation of a construction company: Direct job costs, indirect job costs, and overhead (also known as General & Administrative (“G&A”)) costs. Project Managers, Project Administrators, Estimators, and Accounting Dept. Staff need to understand the differences amongst these cost types to assure an accurate presentation of a company’s financial position and operating results:
Direct and indirect job costs are usually combined and included as total job cost on your Company’s Work in Process Schedule. Accurate identification of the cost type is important to assure percentage of completion and gross margin computations. Consider working with your CPA to review your software’s General Ledger Chart of Accounts to confirm proper classification of all of your expense accounts.
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