Construction Knowledge Center
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Recording Retention Money in Construction
How to account for the percentage of payment withheld by a client until project completion.
Applying Manufacturing Overhead
Allocating indirect production costs to Work-in-Process (WIP) based on a predetermined rate.
Sale of Manufacturing Scrap Metal
Recording the miscellaneous income from selling byproduct or waste materials from production.
Transferring WIP to Finished Goods
Recording the completion of production and moving costs from Work-in-Process to Finished Goods inventory.
Sale of Construction Site Scrap
Recording revenue from selling excess rebar or copper scrap from a job site.
Project Mobilization Advance
Receiving an upfront payment from a client to start a construction project.
Capitalizing Interest on Construction Loan
Adding the interest cost of a project loan to the cost of the building being constructed (IAS 23).
Purchase Price Variance (PPV)
Recording the difference between the standard cost of a material and the actual price paid.
Retention Payable to Subcontractor
Withholding a percentage of a subcontractor's payment as a guarantee for their work quality.
Capitalizing Interest on Project Loans
Adding interest costs to the value of a 'qualifying asset' during its construction period (IAS 23).
Provision for Onerous Contract (Expected Loss)
Recording an immediate loss when it becomes clear that the cost of a construction project will exceed the revenue.
Performance Bond Insurance Premium
Paying for a bond that guarantees the client that the project will be completed.
Contract Change Order (Increased Scope)
Adjusting the contract value and revenue when a client requests additional work mid-project.
Mobilization Advance — Monthly Amortization
Reducing the mobilization advance liability as work progresses and the advance is recovered through deductions on progress billings.
Bid Bond / Tender Guarantee Deposit
Recording the cash margin paid to the bank to issue a bid bond when submitting a tender.
Bid Bond Release (Post-Award or Rejection)
Releasing the bid bond margin back to the current account after the tender result.
Advance Payment Guarantee — Bank Fee
Recording the bank's annual commission for issuing an Advance Payment Guarantee (APG) on behalf of the contractor.
Letter of Guarantee (LG) Cash Margin
Recording cash blocked by the bank as collateral for issuing a performance or advance payment guarantee.
Contractor All-Risk (CAR) Insurance Premium
Paying the annual Contractor All-Risk insurance premium for a construction project.
Site Establishment Costs
Capitalizing the initial cost of setting up the construction site — fencing, signage, temporary roads, and site offices.
Progress Billing — Invoice Raised to Client
Issuing a monthly progress certificate invoice to the client based on work completed.
Contract Revenue Recognition — % of Completion
Recognizing revenue based on the percentage of the project physically completed at month-end.
Over-Billing (Billings Exceed Revenue Earned)
Recording the liability when the amount invoiced to the client exceeds the revenue actually earned based on completion.
Under-Billing (Revenue Earned Exceeds Billings)
Recording the asset when revenue earned based on completion exceeds the amount invoiced to date.
Retention Receivable — Release at Practical Completion
Collecting the withheld retention amount from the client after achieving practical completion and the defects period ending.
Contractual Claim Revenue Accrual
Accruing revenue for a claim submitted to the client for additional costs caused by employer-risk events (e.g., design changes, delays).
Disputed Variation Order — Contingent Revenue
Recording a variation order submitted to the client that is under dispute and not yet approved.
Price Escalation Clause — Revenue Adjustment
Increasing the contract value due to a contractual price escalation clause triggered by rising material or fuel costs.
Milestone Payment Received from Client
Collecting a payment linked to achieving a specific project milestone (e.g., structural completion).
Final Account Settlement
Recording the agreed final contract value after all variations, claims, and adjustments are settled.
Material Purchase — Cash (Site)
Buying construction materials (steel, cement, blocks) with cash for immediate site use.
Material Issued from Store to Site (WIP)
Moving materials from the central warehouse to a specific project site.
Surplus Material Returned to Store
Returning unused materials from a project site back to the central warehouse.
Material Wastage / Breakage on Site
Writing off materials damaged or wasted beyond acceptable norms on the construction site.
Import Duties on Imported Materials
Capitalizing customs duties paid on imported structural steel or specialist equipment into the material cost.
Fuel & Consumables for Plant and Machinery
Recording diesel and lubricants used by excavators, cranes, and generators on site.
Advance Payment to Material Supplier
Paying a cement or rebar supplier in advance to secure materials at an agreed price.
Supplier Advance Offset Against Delivery
Clearing the advance when the supplier delivers materials and invoices the project.
Site Workers Monthly Payroll (Gross)
Recording the gross wages for all site-based staff — foremen, masons, carpenters, and laborers.
Social Security Contribution — Site Workers (Jordan)
Recording the employer's SSC obligation for Jordanian site workers.
Overtime — Site Workers (Peak Activity)
Accruing overtime wages for site workers during an accelerated construction phase.
EOSB Monthly Provision — Site Staff
Accruing the end-of-service benefit for long-term site employees as required by Jordanian labor law.
Worker Accommodation & Camp Costs
Recording the cost of housing, meals, and transportation provided to workers at a remote construction site.
Safety Gear / PPE (Site Workers)
Purchasing hard hats, safety boots, harnesses, and hi-vis vests for all site personnel.
Foreign Worker Visa & Mobilization Costs
Recording the visa fees, medical exams, and flight costs to mobilize foreign laborers to the site.
Labour-Only Subcontractor Cost
Recording the cost of a gang of workers supplied by a labour-only subcontractor (materials are provided by the main contractor).
Staff Transport to and from Site
Recording the cost of daily bus transport for workers between accommodation and the construction site.
Indirect Labor — Site Engineers & Supervisors
Recording the salary costs of site managers, quantity surveyors, and engineers who supervise multiple activities.
Subcontractor Invoice Accrual
Accruing the cost of work completed by a specialist subcontractor before their invoice is received.
Subcontractor Advance Payment
Paying a specialist subcontractor an advance to mobilize and procure materials.
Subcontractor Advance — Recovery Deduction
Deducting the subcontractor advance from a progress payment certificate as work is completed.
Subcontractor Retention Release
Releasing the retained amount to a subcontractor after their portion of works is complete and the defects period passes.
Subcontractor Back-Charge
Deducting costs from a subcontractor's payment for remedial work or damage they caused.
Subcontractor Termination Costs
Recording costs associated with terminating a non-performing subcontractor mid-contract.
Withholding Tax Deducted from Subcontractor
Deducting withholding tax from a domestic subcontractor's payment as required by Jordanian tax law.
Subcontractor Final Account Settlement
Recording the agreed final payment to a subcontractor after all work, variations, and disputes are resolved.
Specialist Consultant Fee (Structural / MEP)
Paying a structural engineer or MEP consultant for specialist design and supervision services.
Plant & Equipment Purchase (Owned)
Buying a construction excavator or concrete mixer for use across multiple projects.
Plant Depreciation Allocated to Project WIP
Charging a project with its share of plant depreciation based on machine hours used.
Plant Hire / Equipment Rental
Recording the weekly rental of an excavator or tower crane from a plant hire company.
Tower Crane Monthly Hire
Recording the monthly hire charge for a tower crane on a multi-storey building project.
Scaffolding Hire
Recording the monthly rental of scaffolding system for the building façade works.
Small Tools & Consumables
Purchasing hand tools, drill bits, saw blades, and other consumables for site use.
Site Office Setup (Temporary Buildings)
Recording the cost of portable site offices, cabins, and site-specific facilities.
Site Utilities — Electricity and Water
Paying for temporary electricity supply and water connection to the construction site.
Site Security (Guard Service)
Monthly cost of a contracted security company protecting the construction site from theft and unauthorized access.
Plant Maintenance & Repair on Site
Recording the cost of repairing a breakdown of company-owned plant machinery on site.
Plant Transfer Between Projects
Moving an owned excavator from Project A to Project B mid-contract.
Head Office Overhead Recharge to Project
Allocating a portion of head office running costs (salaries, rent, IT) to each active project.
Closing Over-Applied Overhead
Adjusting at year-end when the overhead absorbed into projects exceeds actual overhead incurred.
Closing Under-Applied Overhead
Adjusting at year-end when actual overhead exceeded the amount absorbed into project costs.
WIP Write-Down — Onerous Contract
Reducing the WIP balance when a project is confirmed as loss-making and the WIP value exceeds recoverable amount.
Project Close-Out — WIP to Cost of Sales
Transferring all remaining WIP costs to Cost of Sales upon project completion and final revenue recognition.
Defects Liability Provision — Post Completion
Accruing the estimated cost of remedying defects during the defects liability period.
Warranty / Defect Claim Settled
Using the defects provision to pay for remedial work on a completed project during the warranty period.
Construction Loan Drawdown
Drawing down a tranche of a project finance loan to fund construction activities.
Construction Loan Repayment (Principal + Interest)
Making a monthly repayment on the project finance loan after the construction phase.
Letter of Credit for Material Import
Opening a documentary letter of credit with the bank to import specialist materials from abroad.
L/C Settlement — Materials Received
Releasing the L/C and recording the materials when the supplier's shipping documents are presented.
Retention Bond (In Lieu of Cash Retention)
Recording a bank guarantee provided to the client instead of withholding cash retention.
Factoring of Progress Invoice
Selling a certified progress invoice to a factoring company to receive immediate cash.
VAT on Progress Billing Invoice (Output)
Charging 16% VAT on a progress certificate raised to a client in Jordan.
VAT Input on Material Purchases
Recording recoverable VAT on material purchases from VAT-registered suppliers.
Withholding Tax Remittance to ISTD
Paying accumulated withholding taxes deducted from subcontractors to the ISTD.
Corporate Income Tax Provision (Year-End)
Accruing the estimated income tax on the construction company's annual taxable profit.
Zakat on WIP and Contract Assets (Saudi Arabia)
Accruing Zakat on the construction company's Zakatable base including WIP and net working capital.
Import Duty on Imported Plant & Machinery
Capitalizing customs duties on imported construction equipment (e.g., excavator, tower crane).
Municipality Building Development Levy
Paying a government levy charged on the construction of new buildings in a municipality.
Surplus Material Sold to Third Party
Selling leftover materials (sand, aggregate, blocks) at project close-out to another contractor.
Plant Disposal at Project End
Selling or writing off site plant (generators, site huts) at the end of a construction project.
Liquidated Damages Paid to Client (Delay)
Recording the penalty paid to the client for failing to achieve practical completion by the contractual date.
Defects Liability Period Repair Cost
Recording the actual cost of remedying a structural crack identified during the defects liability period.
Joint Venture Project — Initial Contribution
Recording the cash contribution to a construction joint venture (JV) formed to bid and execute a large project.
Construction JV — Share of Profit
Recording the proportional share of a joint venture project's net income.
Intercompany Loan to Project SPV
The parent construction company lending funds to a Special Purpose Vehicle set up for a specific project.
Extension of Time (EOT) Cost Claim
Accruing the additional prolongation costs associated with an extension of time granted by the client.
Preliminary & General (P&G) Monthly Cost
Recording the time-related preliminary costs that run monthly throughout the project (management, security, utilities).
Nominated Supplier / Subcontractor Payment
Paying a supplier nominated by the client directly, in accordance with the main contract.
Contract Asset Reclassified to Receivable
Moving an unbilled contract asset to a trade receivable once the progress certificate is formally issued.
Expected Credit Loss — Construction Receivables
Provisioning for potential non-collection of certified progress invoices from a financially stressed client.
Approved Variation Order — Cost and Revenue
Recording both the additional revenue and the direct cost for a formally approved variation order.
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