If you are a building contractor or developer, you may build and sell spec houses.
When you build a spec home or a development, you want the costs of
construction to be contained in your profit and loss statement in the same time
period as the income from the sale of that home. Prior to the sale, you want to
treat the costs your company has incurred as assets, since you have not yet
received any income against those costs. These assets will appear on your
balance sheet. Once the home is sold, you transfer the construction costs out
of the asset account into a cost of goods sold account.
To track the costs and income for each individual home, set up each home or
property as a customer in QuickBooks. If you have multiple properties in a
single development, make the development the Customer and set up the properties
as individual Jobs.
If you want to track the costs of construction by phase or division, create
classes and subclasses for each division and stage. For example, the General
division would be a class and the Survey phase a subclass. (If tracking costs
by major division is sufficient, then don't create the subclasses.)
Create items to track the costs for different services, materials, and other
charges. Using items makes reports comparing estimates to actuals more
meaningful. (Costs for items are listed by item, whereas expenses are grouped
as a whole.) Set up the new items to contain both purchase and sales fields.
For the Account field on the purchase side of the window, assign the item to an
"other asset" account called Development Costs.
As you incur construction costs (cost of the land, building permits, and so
on), you want to consider these costs as assets. The Development Costs asset
account (the "other asset" account you created) lets you track these
costs as you pay them. By treating the building costs as assets, they appear in
your balance sheet, not in your company's profit and loss statement.
When you write checks for construction work or other construction costs, you
should enter them under the Items tab in the &check_s; detail area. Also
choose the name of the home in the Customer:Job field.
Record the sale of a spec