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How to prepare accounting guide for contracting company ؟


Is there suitable accounting guide for all companies

The accounting guide should be flexible and coordinated with your company nature of activity There is no fixed guide but there are general regulations control preparing the accounting guide for the company The accounting guide varies from a company to another according to the prospective required to show data whether reports or financial lists.

The general form of the contracting company guide


Current assets:-

1- first level

(Assets – obligations – expenses – revenues) This division is the common in dividing the guide as a first level.

 2- The second level

Assets division to ( current assets - long term assets - other debit balances - store monitoring)

3- The third level

Dividing current assets to ( cash in money box - cash in banks - employees' custody - employee's loans - clients … etc)

 4- The fourth level

Dividing fund in banks for example to( National banks - Rahim banks - other banks…. etc)

 5- The fifth Level

Dividing funds in other banks to( National Investment bank - African Arab Bank - French Bank)


Overview

1- Cash in money box

Specific account for cash available in the company money boxes and you can create severalfunds according to work needs.You can create (company main money box - Purchases money box - petty cash money box)

2- Employees custody

Special account for work custody which shall be settled through documents provided by custody taker and names of the employees who deal with custody only not all company employees.

3- Employees loans

Special account for the amounts should be deducted from the employee such as salary loan– penalties and loaded fees upon the employee - punishments - salary dues and all company employees are added under this account.

4- Clients

Work destinations or work owners whom we deal with of loaded extracts or executed work invoices. Contracting companies have different clients as its work nature, you can classify the fourth level to ( government sector clients' - Private sector clients' - real estate clients' - maintenance clients).

5- Letters of guaranty

Guaranties provided to work contracted destinations which are divided to primary letter of (guaranty - final letters of guaranty - in advance payments letters of guaranty).You can classify the fourth level such as final letter of guaranty to Ministry of transport guaranties # Ministry of health guaranties, you can also classify it to (National Bank guaranties -Saudi French bank guaranty ) and the fifth level is the guaranty data.

6- Stock balances

Stock opening balance can be classified under type of ( goods to raw stocks - complete production stock - spare parts stocks ) and these may be classified under name of each store,( main store - sub Store)

7- Payment documents

In contracting and real estate investment companies, there are sales cases and housing units or land layouts or fixed asset for drafts or checks due to collection with postdate,payment documents cover this part and it may be classified according to bank wallet  of the document such as (National Bank payment documents - African Arab Bank)

8- Contractors in advance payments

 Payments paid to sub-contractors and deducted partially from executed extracts of the subcontractors.



  

Long Term Assets:-

1- Fixed Assets

It can be classified according to labor area to general administration assets # Riyadh area assets and the fifth level to ( cars - equipment and machines - furniture and accessories - electronic devices - wood - prefabricated houses,etc)

2- Under execution projects

Projects or assets under execution and movable to the next year till completed and the fourth level can be classified according to area and the fifth level project name or the asset.

3- Soft assets

Programs and computer applications # trademarks # property and intellectual rights.

4- Real Estate investments

 Projects account for real estate investment and it is debit for all paid costs upon the project whether purchased land value in addition to expenses and reduced by each sold unit.


Other Debit Balances

1- Due revenues

The account used to confirm the due revenues of the executed works at the end of the year, for which no extracts wereprepared for the independency of the financial period for its private expenses and revenues.

2- Reserved amounts

  • Deducted amounts of loaded extracts for owners and reserved at the end of the project 
  • and it is a deducted percentages of each extracts according to the agreement with the owner.

3- Work guaranty

  •  Deducted amounts of loaded extracts for owners and reserved at the end of the project
  • and it is a deducted percentages of each extracts according to the agreement with the owner.

 

Stores Monitoring

1- Stores monitoring

The commercial companies which deal with independent accounts of purchases, sales and goods of contracting companies, situation varies according to purchase and sale transactions in the account of stores you can classify stores monitoring to accounts  under names of each store as shown above.

2- Opening stock

Recorded under name of stores monitoring # main store ….. Etc. in the opening entry.

3- Purchases

 Debit            From stores monitoring # main store 

 credit                                                    To suppliers account # Name of supplier or cash etc.

4- Issuing to a project

  Debit           From account of operations expenses # Cement # Project name       

  Credit                                                      To account stores monitoring # main store monitoring # (materials cost) 

5- Issuing to a subcontractor

Issuing will be under different price

Debit              From/ subcontractors account # Contractor 

Credit                                                      To account / Stores monitoring # main Store monitoring (materials cost) 

                                                                    To various revenues # issued materials difference

Balance of stores monitoring represents last period according to continuous inventory system.


Current Obligations

1- Suppliers

Basic account in contracting companies as there are materials suppliers for work sites and you can classify them to groups according to activity and area.

2- Payment notes

When purchasing a fixed asset or purchasing materials for payment notes.

3- Subcontractors

The account is for confirming executed works of the contractors through work period as there is an error of loading expenses for the amount of paid payments of the contractor while you should confirm the extract amount or the executed works 

Debit party operations expenses # contractors works # project name 

Credit party # subcontractors #contractor name # and when paying contractor payment it is debit by the amount and the cash office is credit.

4- Contractors' work guaranty

Deducted part of subcontractors extracts for the contractor paid at the end of the project.

5- Equipment rent

Special account to confirm due rent of equipment such as digger – scaffold, etc.

6- Production works guaranty

Special account of the deducted guaranty of production works of the company as a guaranty which returned at the end of the project.

7- In advance payments clients

When receiving in advance payments for booking units, selling investment units and this account is debit for the value of the collected payments from the client and closed when completing selling process in the client account.

8- Allocations

An account opened to confirm the due allocations whether monthly or annual such as end of service allocation – loans allocations.


Other Debit Balances

1Bank Loans

There are short term loans which considered current obligations while long term loans considered long term obligations and the nature of account is determined in the guide according to the loan period.

2Overdraft

Bank accounts under credit limit with the company to withdraw and deposit and interest is calculated according to balance and period.

3Due expenses

The account is used to confirm due expenses of the financial period such as due salaries and wages # Due rents # Due securities.

4- Other Debit accounts

Used in case of there are debit accounts of special nature such as the public authority of social security.

5- Tax Authority

An account for the deducted taxes of the origin and it is due for taxes whether debit or credit.

6- Depreciation Account

 I is preferred to open an account for each registered fixed asset of the fixed assets such as cars Depreciation account, etc.





Expenses And Revenues

1- General expenses

Allocated for special expenses of the general department or any indirect expenses such as sales and marketing # projects management, etc.

2- Operations expenses

Allocated for direct expenses for certain project and the fourth level can be classified as shown to electricity works # AC works, etc.

3- Equipment management expenses

In contracting companies it is preferred to open independent account to monitor equipment expenses such as digger # cars.

4- Production management expenses

Monitor cement factory # mixing factory # breaker or any production center in the company.

5Revenues

We can classify revenues in contracting companies to government revenues # building works revenues # equipment management revenues # Real Estate investment revenues.


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