Construction Finance and Accounting
The finances of a contracting company: why contractors fail, accounting basics and the job cost ledger, contractor financial statements, revenue recognition under IFRS 15 and ASPE 3400, the WIP schedule, over and underbillings and profit fade, job costing, labour burden and overhead with break-even volume, equipment costs, internal rates and capital cost allowance, working capital and the cash conversion cycle, lines of credit, covenants, term loans and leases, income tax, GST/HST and trust rules for holdbacks, surety underwriting and bonding capacity, and a capstone financial health review.
CON-320 Year 3 3 credits 12 lessons · 5 h 54 min
Offered by HSM University · Construction Management
This is the Canadian version of this course. See the American version.
What you'll learn
- Explain why contractors fail, why construction finance differs from other industries, and how growth, thin equity and payment in arrears can leave a profitable contractor short of cash
- Apply the accounting equation, double entry and accrual accounting to contractor transactions, including progress billings with holdback, month-end accruals and job cost ledger reconciliation
- Read and interpret a contractor's balance sheet, income statement, statement of cash flows, notes and supplementary schedules, and explain the levels of assurance on them
- Apply the five-step revenue model and the cost-to-cost method to construction contracts, including uninstalled materials, change orders, variable consideration and loss provisions, under IFRS 15 and ASPE
- Prepare and review a WIP schedule, calculate over and underbillings and loss provisions, and analyse profit fade and completed contract results
- Distinguish direct, indirect and overhead costs, account for labour burden and indirect cost pools through clearing accounts, and calculate break-even volume
- Calculate equipment ownership and operating costs and internal rates, evaluate own versus rent decisions, and compare book amortization with capital cost allowance
- Measure working capital and the construction cash conversion cycle, prepare company cash forecasts, and apply receivable, payable and growth levers to cash
- Evaluate financing options including operating lines, borrowing bases, covenants, term loans and leases, and explain how owner distributions and shareholder loans affect credit
- Explain the income tax, GST/HST and trust rules that apply to contractors and holdbacks in Canada, including holdback deferral, section 168(7) and director liability
- Explain surety underwriting, adjust working capital as a surety would, estimate bonding capacity and prepare the information sureties and lenders require
- Analyse a contractor with ratios, trends and screening scores, build an annual financial plan with scenarios, and present a financial health review with quantified recommendations
Course content
12 lessons · 5 h 54 min total · final exam
- 1 Why contractors fail and why finance matters 30 min · quiz
- 2 Accounting basics for contractors 30 min · quiz
- 3 Contractor financial statements 26 min · quiz
- 4 Revenue recognition on construction contracts 32 min · quiz
- 5 The WIP schedule and over and underbillings 28 min · quiz
- 6 Job costing and overhead accounting 32 min · quiz
- 7 Equipment accounting and internal rates 30 min · quiz
- 8 Cash flow, working capital and the cash conversion cycle 29 min · quiz
- 9 Financing: credit lines, loans and leasing 32 min · quiz
- 10 Taxes and holdbacks in Canada 28 min · quiz
- 11 Bonding capacity, surety and reporting to sureties and lenders 29 min · quiz
- 12 Financial analysis, planning and capstone: a financial health review 28 min · quiz
- E Final exam 20 questions
Requirements
Recommended background. You can start any course at any time.
Description
The finances of a contracting company: why contractors fail, accounting basics and the job cost ledger, contractor financial statements, revenue recognition under IFRS 15 and ASPE 3400, the WIP schedule, over and underbillings and profit fade, job costing, labour burden and overhead with break-even volume, equipment costs, internal rates and capital cost allowance, working capital and the cash conversion cycle, lines of credit, covenants, term loans and leases, income tax, GST/HST and trust rules for holdbacks, surety underwriting and bonding capacity, and a capstone financial health review.
Part of the Construction Management stream, typically taken in year 3.