Bcs day one_exam

Brevard Contractors School
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Day 1 Exam Review
Accounting Review:
The Chart of Accounts is used to catalog all Sources and Uses of Funds. The Chart of
Accounts is a list of all categories of a company's Assets, Liabilities and Equities. The
Chart of Accounts are numbered to provide a shorthand method to apply costs and
income.
The Chart of Accounts is basically a list of places (accounts). These accounts can either
be sources of money or uses of money. Asset accounts typically carry what is called a
Debit Balance and are located on the left side of the Balance Sheet, while Liabilities and
Equity typically carry what is called a Credit Balance, and they are located on the right
side of the Balance Sheet. An asset is anything a business owns that has a money value.
Anything a business owes is a liability. The difference between what a business owns and
what it owes is called equity or capital. Equity can also be called Net Worth. Net Worth
is the amount of equity or money that would remain if all the debts of the business were
paid and the business were liquidated. This is the portion of the business that belongs to
the owner(s). The summary document that lists assets, liabilities, and equity is called a
Balance Sheet. It is called the Balance Sheet because the left Asset side of the
spreadsheet must equal the right Liability + Equity side of the spreadsheet.
Assets = Liabilities + Net Worth.

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Chart of Accounts
Assets
Current Assets
Petty Cash Funds
Cash in Banks
Cash in Escrow Accounts
Notes Receivable
Accounts Receivable
Reserve for Bad Debts
Retainage
Inventories
Long-term Assets
Land
Building
Furniture and Fixtures
Autos and Trucks
Equipment
Machinery
Small Tools
Improvements
Accumulated Depreciation
Furniture and Fixtures
Accumulated Depreciation - Autos and Trucks
Accumulated Depreciation - Equipment
Accumulated Depreciation - Improvements
Suspense Account
Accrued Construction-In-Progress Debits (Income) Deferred Construction-in-Progress
Debits (expenses) Intangible Assets
Covenants Not to Compete
Goodwill

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Liabilities
Current Liabilities
Accounts Payable
Payroll Taxes Payable
Sales Taxes Payable
Income Taxes Payable
Other Taxes Payable
Accrued Expenses Payable
Notes Payable - Current Portion Long-term Liabilities
Notes Payable - Long-term Portion Other Credits
Deferred Construction-in-Progress Credits Suspense Account
Net Worth
Net Worth Accounts (for corporations) Capital Stock
Retained Earnings
Profit and Loss - Corporations
Net Worth Accounts (for partnerships) Owners' Equity Accounts
Owners' Drawing Accounts
Profit and Loss - Partnerships
Net Worth Accounts (for sale owners)
Financial data is entered into a database that uses The Chart of Accounts for the
category headings. This allows the accounts or "fields" to be summarized.
These summaries of financial data are called Financial Statements. The three primary
financial statements are the Balance Sheet, the Income Statement (Profit and Loss
Statement) and the Sources and Uses of Funds Statement.
The classic accounting equation is:
Assets = Liabilities + Net Worth.
Type of account to decrease to increase typical balance
Asset credit debit debit
Liability debit credit credit
Capital debit credit credit
Income debit credit credit
Expense credit debit debit

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This relationship between assets and liabilities plus net worth is evident in the classic
presentation of the Balance Sheet.
Assets: Debit Credit Debit Credit
Assets
Cash xxx
Accounts Receivable xxx
Bad Debt Reserves xxx
Fixed Assets xxx
Depreciation Reserve xxx
Liabilities xxx
Accounts Payable xxx
Taxes Payable xxx
Notes Payable xxx
Net Worth xxx
Capital Stock xxx
Retained Earnings xxx
Look at the Balance Sheet, it has 3 accounts, Assets on the left side, and Liabilities
and Net Worth on the right side of the page. The two sides allow for a debit or credit
balance for each account. The left column is called the debit side and the right side
column is called the credit side. Assets usually carry a debit balance, which means there
is a positive number located on the left side of the equation. Liabilities and Net Worth
usually carry a credit balance. The two sides of the balance sheet must always balance or
equal each other. The two sides of the account are like a mirror image of each other.
Debit Credit Debit Credit
X = X
Assets = Liabilities + Net Worth
Anytime the Asset side of the equation increases or decreases the Liabilities or Net Worth
side of the equation must also increase or decrease in an equal amount. In double entry
bookkeeping, any change will affect a minimum of 2 accounts. In asset accounts a debit
increases the account, and a credit decreases an account. In the Liabilities and Net Worth

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account a debit decreases the account and a credit increases the account. In this way the
double entry accounting system is maintained in balance.
The Income Statement is a snap shot of the business on a given day in time. Since a
business can make money or lose money the Income Statement is also called a Profit
and Loss Statement or the Summary of Operations. The Income Statement lists
income, direct costs, operating expenses and profits.
Construction Company
Income Statement
For the year 2002
Eared Income xxx
Returns and Allowances xxx
Net Sales xxx
Cost of Goods Sold xxx
Gross Profit xxx
Selling Expenses xxx
Profit before fixed Overhead xxx
Fixed Overhead xxx
Net Income xxx
Sources and Uses of Funds Statement also called The Statement of Cash Flows
summaries the management of cash during a specified period. The Statement of Cash
Flows is in many ways the most valuable report you can have.
The Builder's Guide to Accounting begins by asking how are you going to
manage asset and liability accounts in your company. The decisions you make have cash
consequences as well as tax consequences.
Look again at the Balance Sheet; each of these accounts can be managed. The cash
category, called the cash account can and must be monitored to insure that enough cash is
available to run the business. It is normal to keep a cash journal to make it easier to do
sales tax reports. Charge sales are kept in a separate journal from cash sales so they can
be monitored as accounts receivable. Cash flow problems are common to builders
because the construction business requires large investments.

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A cash budget should accomplish the following;
• Make cash available for day-to-day operations.
• Plan for the use of excess funds.
• Time operations for seasonal business changes.
• Provide for levels of inventory.
• Prepare for tax liabilities.
• Control the purchase of materials and help prevent over or under buying.
• Help you maintain a good credit rating.
Ratio Test for Cash
The Current Ratio compares current assets (cash, receivables and inventories) to current
liabilities (current notes payable, accounts payable, accrued taxes).
Current Ratio = Current Assets / Current Liabilities
A good current ratio is 2:1 or higher, which means current assets are double current
liabilities. A 1:1 ratio is weak. A negative ratio is cause for concern, not only is the
company low on cash, but growth potential is negative as well. It is common to try and
obtain more cash to increase the ratio, instead try to reduce your current liabilities. The
current ratio is the most popular and widely used test for a cash position.
The Quick Ratio compares current assets (not including inventories) to current liabilities.
An acceptable ratio rate is 1:1 or better. This quick ratio is also called the Acid Test
because it tests the ability of a company to pay its current debts from its current cash and
near cash assets. The acid test is a more consistent test as inventories are variable.
Quick Ratio = (Current Assets – Inventories) / Current Liabilities
Ratio analysis: Using the Balance Sheet and Income Statement it is possible to do
analysis on a business. Ratios are a quick and easy way to understand how well a
business is performing.
Also, one can obtain a SIC – Standard Industrial Classification for a
comparable class of industry and compare this companies ratios with the industry
standard. The analysis takes the form of ratio analysis. Certain accounts in the Balance
Statement or Income Statement are divided by other accounts to obtain ratios.

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Balance Sheet Ratios:
Both parts of the ratio are found on the balance sheet.
Current Ratio = current assets / current liabilities.
Quick Assets Ratio (acid test) = Current Assets-Inventories / Current Liabilities.
Owner's Investment vs. Creditors Investment = Capital / Current Liabilities.
Ability to Meet Obligations = Working Capital / Funded Debt.
Working Capital = Current Assets – Current Liabilities.
Owner Financing vs. Debt Financing = Net Worth / Assets.
Income Statement Account Ratios:
Both parts of the ratio are found on the income statement.
Percentage of Gross Profit = Gross Profit / Sales.
Expense Control Ratio = Operating Expenses / Sales Volume.
Margin of Profit = Net Income / Sales.
Combined Ratios:
One part is found on the income statement and one part is from the balance
sheet.
Trend in Charge Sales = Sales / Accounts Receivable.
Real Turnover = Cost of Sales / Inventory at Cost.
Day’s of Inventory Available = Total Working Days Per Year / Turnover.
True Investment Yield = Net Income / Net Worth.
There are two ways to prepare a cash budget. One is the Cash Movement Method and
the other is the Sources and Application of Funds Method.
The Cash Movement Method involves budgeting for the flow of actual cash in and
out of your business. The Sources and Application of Funds Method assumes an
operating budget and then subtracts expenses from cash flow to calculate the level of
available working capital.

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It is important to obtain a line of credit to insure that the construction company
has available cash for emergences. A manager must be careful not to rely upon 30 day
and 90 days materials revolving accounts in the event a customer does not pay. A
contractor must be careful not to take on more jobs than he/she has cash to buy materials
and pay labors until the contracts are completed.
Reserve for Bad Debts
A company needs a policy for collecting debts and for dealing with un-collectable debts.
Recognizing when a customer is late paying, and holding the customer to a payment
schedule can greatly reduce bad debts.
Debts can only be written off the books when;
• A debtor abandons his/her business.
• The debtor cannot be contacted.
• The debtor dies and leaves a worthless estate.
It is important to monitor bad debts to make sure the ratio of charge sales to bad debts are
not increasing. If they are, the company's policy or process used in evaluating charge
sales must be reevaluated.
Bad Debt Ratio: Total Credit Sales / Actual Bad Debt Losses.
Since the contractor knows that some percentage of receivables will never be collected
he/she makes an account for bad debts. The objective is to make sure the company does
not come to depend on cash that will never materialize.
Receivables:
The next account that can be managed is receivables. Receivables are short-term debts
(for a period of less than one year) that must be monitored and managed to make sure as
much as possible turns into cash. Also, a company will commonly set a dollar limit on
receivables, to make sure the company does not run out of cash. A second option is to sell
or pledge receivables at a bank against a revolving line of credit. It is important to track
your receivables trend as; if customers begin to take longer to pay, it is more likely that
bad debts will increase. This is particularly important in a declining economy.

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Average Days Receivables = (Average Receivables / (12 Month's
Charges)) x 365
When a receivable is assigned to a collection agency or considered a bad debt it should be
listed in a separate column in your accounts receivable and these amounts should be
excluded from monthly totals.
The next asset account is Long Term Receivables. These must also be managed to
insure that they turn into cash at maturity. It is also important to know that it is possible
to sell or pledge long term notes receivables to obtain financing. Banks, mortgage
companies, and factors will buy long term receivables, often at a discount. Long-term
receivables are often called Notes Receivable. Keep this in mind when agreeing to hold
paper on a construction job.
To qualify as a Notes Receivable the debt must be in writing in a formal legal
document, signed by both parties. For this reason a signed lease for more than one year
also qualifies as a note receivable. If you plan to sell off notes receivable your notes need
to carry an interest rate premium of 2 to 3 percentage points above the market average or
your notes will be severely discounted.
Retainage:
These are hold backs that customers kept, usually about 10% of the bid amount to insure
that the contractor does the "punch list" items and resolves all the incidental problems
which may exist after the project is "substantially complete" or has received a CO,
"certificate of occupancy.”
Retainages can't be considered past due receivables, and they must be separated
from delinquent receivables.
Long-Term Assets:
Long-term assets are assets that are expected to remain on the books for more than one
year before they are turned into cash. Some assets, such as trucks, front-end loaders, and
barns are used in the course of business and there is no intention to turn such long-term
assets into cash.

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Prepaid Assets and Deferred Assets:
Prepaid assets are sometimes called deferred assets. Some debts are paid for in advance,
such as insurance, deposits on real estate, utilities deposits, office supplies, and loan
interest: These prepaid assets should be listed on the books as assets. The distinction
between prepaid assets and deferred assets is that deferred assets are not put on the books
until the item is available for use, even though it has been paid for.
Intangible Assets:
Intangible assets are typically non-physical assets such as the "goodwill" that a
businessperson's reputation will earn, as well as non-competition clauses. Anytime you
pay more for an asset than it's appraised or "fair market" value the difference is classified
as "goodwill." Such non-tangible assets are listed on the books and amortized over a
period of years.
Current Liabilities:
These are debts the company must pay within 12 months. Notes payable, current: these
are accounts, which are due and payable before the end of the fiscal year, usually
December 31. Long Term Notes Payable: These are debts that are due and payable at a
future date beyond the current year.
Accounts Payable: are typically vendor accounts for materials and rentals, but they can
be truck and equipment loans, electric bills, and current real estate taxes.
Taxes: taxes of all sorts, employee taxes, sales taxes, income taxes, are collected for the
state and federal government and must be deposited at the bank or mailed out on a
periodic basis.
Depreciation Methods
• Straight Line Depreciation
• S/L -For Residential Real Estate
• S/L -For Commercial Real Estate
• 200% Declining Balance Depreciation
• 150% Declining Balance Depreciation
• MACRS

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In Declining Balance Depreciation you always use the asset life as the depreciation
factor. Do not use the remaining years as the depreciation factor.
Two ways to solve the problem:
Straight Line Depreciation rate = 1 / life of asset
1/life of asset = constant factor
constant rate = constant factor x depreciation factor (2 or 1.5 or 1.25)
yearly amount due = constant rate x book value
The yearly depreciation schedule for double declining with a 10 year life would be:
Year Depreciation Expense Accumulated Depreciation Book Value
1 .10 x 2 x 60000 12,000 $48,000
2 .10 x 2 x 48000 9,600 $38,400
Year Depreciation Expense Accumulated Depreciation Book Value
1 60,000 /10 years = 6000 * 2 = 12,000 $48,000
2 48,000 / 10 years = 4800 * 2 = 9,600 $38,400
Double Declining Balance Depreciation Method
The double declining balance (DDB) method is an accelerated depreciation method in
which more depreciation expense is recognized in earlier years and less is recognized in
later years. This method gets its name from the fact that it uses a rate twice the straight-
line rate. To compute depreciation expense using the DDB method, the following steps
are used.
1) Determine the straight-line rate per year. For instance, if the useful life of an asset is
ten years, The straight-line rate is 1/10 or 10%. If the useful life is five years, the straight
line rate is 1/5 or 20%.
2) Determine the DDB rate. This is simply double the straight-line rate. A straight-line
rate of 10% becomes 20% and a straight-line rate of 20% becomes 40%.

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3) Compute the current year's DDB depreciation. Assume that Mythical purchased a
machine costing $100,000 with an estimated useful life of five years and an estimated
salvage value of $10,000. The straight-line rate would be 20%. The DDB rate would be
40%. Depreciation for year one is $100,000 X 40% = $40,000. NOTE: Under the DDB
method, any salvage value is ignored in computing depreciation expense. Remember,
you never depreciate an asset below its salvage value.
As is true with all depreciation problems, you should prepare a depreciation schedule.
The depreciation schedule for this asset is shown below.
The journal entry to record depreciation expense is exactly the same regardless of the
method used. For any accounting period you would debit depreciation expense and credit
accumulated depreciation.
Calculator for MACRS:
http://www.pine-grove.com/depreciation/MACRS_Screen.htm
Calculator for Declining Balance depreciation:
http://www.acsu.buffalo.edu/~thill/programs/JavaScript/financial/dbc.html

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MACRS:
Modified Accelerated Cost Recovery System has 3,5,7, 10 year categories and uses the
following conventions.
• 3, 5, 7, 10 year assets are depreciated at 200% declining balance.
• 15 and 20 year assets are depreciated at 150% declining balance.
• Autos and trucks are depreciated for 5 years at 200%
• Office equipment such as computers are depreciated for 5 years at 200%
• Commercial Real Estate 39 years straight line only
• Residential real estate 27.5 years straight line only
Generally all property put in place under the MACRS system uses the mid-year
conversion. It is assumed that all assets are put in service at the middle of the year, and
the first year you are entitled to 1/2 the annual deduction.
Straight Line Depreciation for Real Estate:
It is currently required that you use straight line (SL) depreciation on all real estate.
Chapter 3 of the Contractors Manual details depreciation. Commercial Real Estate placed
in service after May 12, 1993 must be depreciated for 39 years. Residential rental
property is depreciated for 27.5 years.
Straight line depreciation rate = 1 / life of asset (either 27.5 or 39 years)
1/life of asset = constant factor (1/39 = .02564 or 1/27.5 = .03636)
yearly amount due = constant rate x book value
Depreciation has two functions. On the one hand you want to depreciate the
assets so you know how much has been used up and how much useful life the asset has
remaining. A secondary or tax objective is to match depreciation schedules with income
flows to shield the maximum amount of income from taxation. For this reason many
companies maintain two depreciation schedules on long term and real assets.

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Types of Business Entities:
• Proprietorship
• Partnership
• Corporation
Proprietorship is simply an individual in business for him or herself. The proprietorship
lacks a distinct legal form; there is no legal difference between the business and the
owner of the business. Partnership is two or more individuals in business for the
common good. A Corporation is a legal entity separate and distinct from the people who
own and manage the corporation.
Accounting Methods:
The Builders Guide to Accounting is not a great introduction to accounting; a
better booklet is "Step by Step Bookkeeping, the complete handbook for the small
business" by Robert C. Ragan, C.P.A. The Builders Guide to Accounting takes the
approach of asking the reader to consider their options in handling various accounting
conventions.
You are asked to consider whether your company will use Percentage of
Completion or Completed Contract method for recording income and expenses. This
relates directly to a primary accounting question; will your company use the cash
accounting method or the accrual accounting method? What method will your
company use for depreciation? Do you know how to match income with depreciation
schedules? The Builders Guide then tells you how to handle a number of journals, such
as payables journal, receivables journal, materials journal, petty cash journal, and how to
reconcile your checkbook.
Cash Accounting Method Vs Accrual Accounting Method:
A cash based accounting system records income and expenses only when the CASH
actually changes hands. For construction this would equate to completed contract
method. In an accrual based system a transaction is entered on the books as soon as the
transaction takes place, regardless of when cash is exchanged. Many companies use a
modified cash basis. They may reflect income and materials expenses on an accrual basis,
but do all other accounts on a cash basis to minimize bookkeeping. But remember that the

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IRS requires you to:
• use a method that clearly reflects income and
• requires that your company use this method consistently.
The Income Statement lists income, direct costs, operating expenses and profits.
Income Statement
Earned Income xxx
Returns and Allowances <xxx>
Net Sales xxx
Cost of Goods Sold <xxx>
Gross Profit xxx
Selling Expenses <xxx>
Profit before fixed Overhead xxx
Fixed Overhead <xxx>
Net Income xxx
Percentage of Completion VS Completed Contract Method:
Under the Completed Contract Method the income and the costs of a given
project are shown on the income statement only when the project is 100% complete. Both
the income from the project and any cost associated with the project are recorded at the
same time. Periodic payments, costs, and profits, are not recorded while the project is
under construction. Usually, completed contract method is limited to small jobs of short
duration. The IRS will not allow companies with revenues in excess of 10 million
annually to use completed contract method for tax purposes.
The Percentage of Completion Method is the most desirable method for contract
accounting. It requires you to start with an estimate of the total cost to construct the entire
project in advance. The percentage of completion method of accounting will allow you to
recognize the amount of money you have earned on a project at any given time. This is
then compared to how much you have invoiced the owner at the same particular time.
The result may be that you are under billed, or accrued income. (You have not billed as
much as you have earned). Or over billed, have unearned or deferred income (you have
billed more than you have earned). The formula for percentage of completion accounting
is performed in the following steps;

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Cost to Date = % of Completion
(Cost to Date + Estimated Cost to Complete)
% of Completion * Contract Amount = Revenue Earned
Revenue Earned – Amount Invoiced = Deferred OR Accrued
Income
Petty Cash Fund:
The Petty Cash Fund is a fixed amount of money that is set aside for purchases that are
too small to warrant writing a check. The fund must be controlled if the petty cash fund is
to work. The major control in the petty cash system is the voucher slip. Anytime money
is taken from the petty cash box a voucher must be presented to the person who keeps the
petty cash box. The controller of the cash fund then issues cash for voucher ticket.
This is called the voucher system. The petty cash fund should be replenished by
writing a check to petty cash which is supported by source documents (receipts) for the
money that has been spent out of the fund. Do not write a check to CASH as this is
difficult to document.
Petty Cash Voucher:
No: Date _________
RECEIVED OF PETTY CASH
Amount $________
For _________________________________________________________
Charge to:____________________________________________________
Received by: Approved by:
________________________ ________________________

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Reconciling the Petty Cash Fund is done as follows;
1: add all expenses on vouchers
2: add cash remaining in fund
3: determine shortage or overage
4: calculate petty cash remaining balance
5: Check amount = Fund limit – actual cash balance
eg:
Office Supplies 60.32
Postage 28.80
Parking 22.00
Delivery exp 28.15
Coffee 9.47
Printing expense 42.18
Expenses: 109.92
Calculating Shortage
Cash on hand = $300 – 190.92 = 109.08
Actual cash on hand 107.45
Shortage 1.63
Check to replenish fund $300 – 107.45 = 192.55
Cash Receipts Daily Journal

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Daily Summary of Sales and Cash Receipts
1: Cash Sales
Materials __________
Services __________
2: Misc. Sales __________
3: Collection of accounts receivable __________
4: TOTAL DAILY RECEIPTS __________
5: Cash in Petty Cash Box __________
6: Petty Cash vouchers and receipts __________
7: Total in Petty Cash Box __________
8: Petty Cash fund Limit = $300.00
9: Line 8 – line 5 = ________
10: Cash short / over ________
11: Total Cash and Daily Receipts (add lines 1-7) =========
Deduct Petty Cash Fund limit from deposit <__________>
12: Total Deposit __________
Sales Summary
13: Cash Sales ___________
14: Charge Sales ___________
15: Total Daily Sales ___________
Check Writing:
When you write a check there must be enough information on the check and the check
stub to readily allow you to reconstruct the expense and assign it to a ledger account.
Every check should have a source document to support the reason the check
was written. The supporting document can be a bill, a time card, a petty cash summary
voucher. Every check should have the date, payee, amount, purpose and job number or
name, and purpose of the payment.

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Reconciling the Checkbook:
There are two parts of reconciling the checkbook. You must first reconcile the bank
statement and then reconcile the check book.
To Reconcile the Bank Statement:
1: List balance as shown on statement balance
2: ADD checks in transit (not cleared)
3: DEDUCT checks outstanding
4: ADD/DEDUCT incorrect charges
5: The net amount is the reconciled bank statement
To Reconcile the Checkbook to the Bank Statement:
1: List balance as shown in checkbook
2: Deduct service charges
3: Deduct bad check charges
4: The net amount is the reconciled checkbook statement
These two numbers should be the same, at least on the test!
Review: The Income Statement:
The Income Statement summarizes business operations within a time period. The
Income Statement lists income, direct costs, operating expenses and profit.

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The Income Statement's standard divisions are;
Gross Sales
Less direct costs
Equals gross profit
Gross Profit
Less operating expenses
Equals income from operations
Income from operations
Less provision for taxes
Equals Net Profit
Construction Company
Income Statement
For the year 2002
Earned Income xxx
-Returns and Allowances xxx
=Net Sales xxx
-Cost of Goods Sold xxx
=Gross Profit xxx
-Selling Expenses xxx
=Profit before fixed Overhead xxx
-Fixed Overhead xxx
=Net Income xxx

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Review: The Balance Sheet:
The Balance Sheet is a summary of existing conditions of the business. The Balance
Sheet lists Assets, Liabilities, and Net Worth.
The Balance Sheet
Assets: Debit Credit Debit Credit
Assets
Cash xxx
Accounts Receivable xxx
Bad Debt Reserves xxx
Fixed Assets xxx
Depreciation Reserve xxx
Liabilities xxx
Accounts Payable xxx
Taxes Payable xxx
Notes Payable xxx
Net Worth xxx
Capital Stock xxx
Retained Earnings xxx
The Balance Sheet: (has the following major categories)
Current Assets
Current assets are liquid and near liquid assets. These assets include cash, accounts
receivable, inventories and other current assets.
Fixed Assets
Fixed Assets includes the gross value of equipment and machinery, small tools,
improvements, furniture, fixtures, structures, and land.
Other Assets
Intangible assets include such as covenant not to compete, and Goodwill of a business.

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Current Liabilities
Include such accounts as accounts payable, taxes payable, notes, contracts, ad deposits to
be refunded.
Long Term Liabilities
Some liabilities exist on the books for more than one year. If a liability is not paid off
inside of one year keep the remaining portion of the assets value separate from current
liabilities.
Contingent Liabilities
These are debts that have not occurred now, but are pending, such as pending lawsuits.
Equity Account
Capital stock or owners equity represents the original investment of the owners of the
business. Capital stock accounts are only changed by the addition of new capital or the
removal of old capital.
Retained Earnings
Each year’s profit and losses
Net Profit
Each year’s net profit or loss is recorded and placed into an earnings account when the
books are closed at the end of the year. This account may be called a retained earnings
account or equity account.

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Statement of Cash Flows
Is a summary of the sources and uses of cash. The Statement of Cash Flows shows
changes in long-term assets and liabilities and capital accounts.
The Statement of Cash Flows is often called the most important financial
statement, even though it is often the least used financial statement.
The Statement of Cash Flows has two sections:
• Fixed or long-term provisions of funds.
• Change in current assets and liabilities.
Sources of Capital
Net profit on a cash basis
Funds received from the sale of capital assets
Funds received in the form of a loan proceeds
Investments of capital by stockholders
Increases in long-term liabilities
Uses or (applications) of Capital
Funds paid for the acquisition of capital assets
Reduction in long-term liabilities
Dividends paid or payments to stockholders
Decreases in long-term liability accounts
The net difference between these two accounts, long term assets, and long term liability
and capital accounts result in a net increase or decrease in funds for the period.

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Funds Flow Analysis
Sources of Funds
Profit from operations __________________________
Depreciation __________________________
Decrease in cash __________________________
Decrease in receivables __________________________
Decrease in Inventories __________________________
Decrease in other assets __________________________
Increase in payables __________________________
Increase in notes __________________________
Increase in common stock __________________________
Increase in accrued expenses __________________________
Increase in deferred taxes __________________________
Gain form sale of asset __________________________
Other __________________________
TOTAL =======================
Uses of Funds
Increase in accounts receivable __________________________
Increase in notes receivable __________________________
Increase in inventory __________________________
Increase in plant and equipment __________________________
Increase in prepaids __________________________
Decrease in notes payable __________________________
Decrease in secured notes __________________________
Dividends __________________________
Decrease in mortgage __________________________
Increase in Cash __________________________
TOTAL =======================

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Summary:
The Balance Sheet is a general indicator of the strength of your operation.
The Income Statement shows how well you're controlling costs and expenses. The
yield on your operations, and the volume of business you're doing.
The Statement of Cash Flows tells you whether your operation is handling cash
properly.
Management Ratios:
Cost of goods sold = cost of goods sold / net sales
Goss margin = net sales – cost of goods sold / net sales
Profit margin = net profit / net sales
Profit margin = net profit before taxes $ interest / net sales
Profit margin = net profit after taxes, before interest / net sales
Expense radio = various expense items / net sales
Contribution to fixed cost and profit = net sales – direct costs (variable costs) / net sales
Net sales / gross assets
Gross assets / net sales
Net sales / net assets
Average inventory / net sales
Average inventory / cost of goods sold
Net sales / average inventory
Cost of goods sold / average inventory
Net sales / days of the year
Accounts receivable / sales per day
Net profit / assets
Net profit / net assets (capitalization)
Net profit before interest and taxes / net assets (capitalization)
Net profit after taxes, before interest / assets
Net profit after taxes, before interest / net assets (capitalization)
Owners Ratios:
Net profit / net worth
Net profit to common / common equity
Earnings per share = net income / average number of sales outstanding

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Lenders Ratios:
Current assets / current liabilities
Cash + marketable securities + receivables / current liabilities
Total debt / total assets
Long term debt / capitalization (net assets)
Total debt / net worth (equity)
Long term debt / capitalization – long term debt
Working Capital refers to the net difference between current assets and current
liabilities.
The Trial Balance:
This worksheet proves that the general ledger is in balance. In all cases debits should
equal credits.
Closing Adjustments:
This is much like reconciling the bank statement that we did last week, except there are
more accounts to reconcile.
1: debits to expense accounts
2: adjustments for coding errors in your books
3: Bank reconciliation adjustments
4: write-offs for bad debts
5: Changes in inventory based on your year-end physical
6: Recording of depreciation and amortization
7: Adjustments to the notes payable liability for the years interest
8: Corrections to liability and expense accounts for tax liabilities
9: Adjustments to percentage of completion report
10: adjustment for completed contract accounting

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Markup Profit
There are two methods for calculating Markup Profit, which are detailed in BGA,
Walker's and the Contractors Manual.
• Markup from Cost
• Markup from Selling Price
Markup from Cost:
Take (the percentage allocated to overhead + the required profit margin)= %
Direct cost of job * (1+ %) = bid
24% (.24) percent for overhead + 18% (.18) percent required profit = 42% or .42
54,000 * 1.42 = $76,680
Markup on Selling Price:
100 – (overhead + profit margin) = multiplier
Job cost / multiplier = bid
100 – 24% (.24) + 18% (.18%) = 58% or .58
54,000 / .58 = $93,103
What BGA wants you to see is how you calculate profit can make a big difference in how
much money your company earns. The exam board does not tell you to use Markup on
Selling Price, but it stands to reason that if you are a construction manager, and you
agree to do a job for cost plus a percentage, you want to use Markup on Selling Price.
Always use markup on selling price unless the contract specifically requires you to use
Markup from Cost. On the exam they will probably ask questions to test your
knowledge of the difference between these two methods.

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AIA
AIA documents are very structured construction contracts.
• They make the architect the arbitrator or mediator between the owner and the
contractor. The architect will charge extra for this service.
• In so precisely spelling out the contractor's duties and obligations these contracts
place a lot of pressure on the contractor to perform.
• This is a good contract if you are certain you can meet the building schedule
requirements, or if the other party to the contract is in a superior position.
In Florida, the following contractual rules apply;
• Written text supercedes typed text
• Typed text supercedes printed text
• Florida courts tend to rule against the writer of the contract in the event of
disagreement.
•
A valid contract has to have the following elements;
• An offer (the bid is an offer)
• Acceptance
• Consideration by both parties.
So when you make a bid, determine how much time and money it cost to calculate the bid
– and include a preliminary invoice. Ok, if the owner accepts your offer you have already
supplied consideration when you prepared the bid, therefore you have a contract.
Sometimes people will change their mind, and they will get their lawyer to write and say
the contract did not exist because you have not begun work, i.e. you have not provided
consideration. You circumvent this problem by including an invoice with the bid that
details the amount of time and expense it took to create the bid and working drawings to
demonstrate that you have provided consideration. This invoice needs to be for $101.00
or more to have a binding contract.

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INVOICE:
TO: Beasley's Construction
320 N. Atlantic Ave 1A
Cocoa Beach, Fl. 32931
Bob Hansen estimating $250
Tom Richards – working drawings $175
(5) Copies blue prints - Architect $100
8 hours (John Beasley)
Site Inspection
Summary of Contract Law
The courts generally rule that a contract exists whenever the parties manifest the intention
to be bound by an agreement. Courts generally allow a party to be excused from a
contract by reason of fraud, duress, undue influence, a mistake, unconscionability, or
impossibility of intent.
Fraud = cheated, lied, misrepresented intent
Duress = made you do it, not a free will choice
Undue influence, if you were tricked or suckered or manipulated
Mistake = clearly did not understand the intent of the agreement or facts
Unconscionability = asked to do something that no average sane person would do
Impossibility = looked good on paper, but simply can not be done
The Law of Contracts is generally covered by each states common law. Another type
of law is the Federal Uniform Commercial Code. Personal Property is any type of
property other than real property. Most personal property sold around the United States is
covered under Article 2 of the Uniform Commercial Code. The exception to items
covered under the U.C.C. is real property (land) or land with improvements such as
buildings, as well as employment contracts, service contracts, and insurance contracts. A
sale is a contact (or agreement) involving the transfer of title to goods from a seller to a
buyer for a price (for consideration). A contract is a collection of promises the courts
will enforce. A breach of contract is a failure to perform on those promises.
The Essential Elements of a Contract
1: Mutual consent or assent. The parties to a contract must show by word or deed that
they have agreed to enter into a contract. This usually constitutes an offer and acceptance
of the offer.

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2: Consideration. Each party to a contract must intentionally exchange something of
value as an incentive to get the other party to the contract to return the exchange.
3: Legality. The objectives of the contract (to be enforceable by the courts) must be for a
legal activity.
4: Capacity. Each party to the contract must have contractual capacity. The person must
not have been declared incompetent by a court, must be of legal age, and not intoxicated.
If all of these four elements of a contract are available, then in most cases an oral contract
is a binding and enforceable agreement by the courts. Contracts for the sale of real estate
must be in writing; as well contracts for more than $500 dollars generally must be in
writing.
Types and Classification of Contracts
Express contracts are contracts where the parties have manifested their agreement by
oral or written agreement. An implied contract is one which can be discerned from the
conduct of both parties, but is not totally spoken or written.
A bilateral contract is one in which both parties exchange promises to do
something. Typically think of these as (AND) contracts. You do this AND I will do that.
Each party is obligated to perform under a bilateral contract. A bilateral contract is
accepted by way of an agreement.
A unilateral contract is one where one party makes an offer to the other party,
but the second party is not obligated to take the offer. IF – THEN contracts. IF you do
this, THEN I will do that. Rather of a take it or leave it offer. Only the offering party is
obligated to perform on the contract IF the offer is accepted. A unilateral contract is
accepted by performance. The contract is a done deal when the performance is
completed.
Example: I will pay you 1,000 dollars to put up the sheetrock. If the person responds by
starting to put up sheetrock what you have is acceptance of a unilateral contract. If the
person puts up half the sheetrock and quits, no contract exists.
If the person responds by handing the offeror a work order and says, sign this and we
will get started next Tuesday, then the contract has become a bilateral contract.
An executed contract is one where all the parties to the contract have fully performed on
their promises. An executory contract is one that is yet to be performed. One or more
parties to the contract have one or more promises as yet to perform.

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Essentials of an offer
1: An offer must be communicated to the offeree.
2: Both parties must manifest intent to agreement.
3: The offer must be explicit.
For an offer to constitute a valid contract there must be the communication of an offer
from one party to the other, and the intent of the agreement must be explicit (definite).
A valid contact is one that meets all the requirements of a binding agreement. A void
contract is one that does not meet all the requirements of a binding agreement.
Revoking an offer
In a bilateral contract you may revoke an offer anytime before the offer is accepted. In a
unilateral offer you cannot revoke the offer for a reasonable amount of time once the
party has begun to work or perform on the contract.
An offer can be revoked if a lengthy amount of time has passed, or if the contract says
“time is of the essence” and provides a date certain when the offer will be revoked. If the
offer is rejected then the offer is revoked. If a counter offer is made, then the offer was
revoked or terminated.
Statute of Frauds
The Statute of Frauds says that certain types of contracts must be in writing in order to
minimize corruption or fraud. For our purposes these contracts include promises to
answer for the duty of another, contracts that cannot be performed within one year, and
the transfer of real property.
The Statute of Frauds requires the following:
• define the parties to the contract or agreement
• specify the subject mater and terms of the contract or agreement
• must be signed by all parties to the contract or agreement.

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AIA – Summary of Forms:
A-101 or short form A-107 is the stipulated sum agreement.
A-10-111/CM is stipulated sum agreement for construction management.
A-111 is the cost of work plus a fee agreement.
A-401 is the contractor – subcontractor agreement.
A-701 is instructions to bidders
A-201 General conditions for construction contract.
G-701 is a change order
G-706 A is a release of liens form
G-702 application and certificate for payment
The primary forms reviewed on the exam are A201, A401, and A701.
The AIA form A-201 has 14 articles as defined in Walkers 1.09-1.18
1: defines the documents, the work, the project, execution, correlation, intent an
interpretations of the contract…
2: defines the architect as the "administrator" of the contract
3: Defines the owner, his rights and responsibilities
4: defines the contractor, his duties, in supervision, and construction of all labor and
materials, defines the warranty, as well as taxes, permits, fees, notices, cash allowances,
the progress schedule, draws to be kept on job site, drawings, samples…
5: defines subcontractors
6: sets forth owners rights
7: miscellaneous provisions
8: defines contract time
9: discusses payments and completion sum
10: covers protection of persons and property
11: insurance requirements
12: includes change orders
13: acceptance of defective and non-conforming work
14: termination of the contract.

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AIA 201 owner-contractor agreement calls for the successful bidder to submit a list
of subcontractors for approval. If the owner rejects a subcontractor after the contract is
bid, then any change in price caused by rejecting the subcontractor constitutes a change
order and the owner must pay the difference. 1:12 Walker
Section 1.1 define the basic definitions of the document. The contract documents consist
of the agreement between Owner and Contractor, Conditions of the Contract, drawings,
specifications, and addenda issued prior to execution of the contract. A modification is
(1) a written amendment to the Contract signed by both parties, (2) a change order, (3)
construction change Directive or (4) a written order for a minor change in the work.
Section 1.6 Ownership and use of the drawings, specifications and other instruments of
service. The contractor may keep one set of drawings for his records. The Architect shall
retain all rights to the drawings, all other copies of the instruments (drawings and
specifications) shall be returned to the architect.
2.2.3 The owner shall furnish surveys describing the physical characterizes, legal
limitations and utility locations for the site of the project, and a legal description of the
site.
2.4.1 Owners rights to carry out work: If the contractor defaults or neglects to carry out
the work in accordance with the contract documents and fails within a seven-day period
after receipt of written notice from the owner to commence and continue correction of
such default or neglect within diligence and promptness, the owner may after such seven-
day period give the contractor a second written notice to correct such deficiencies within
a three-day period. If the contractor within a three day period after receipt of such second
notice fails to commence and continue to correct any deficiencies, the owner may,
without prejudice to other remedies the owner may have, correct such deficiencies.
3.2.1 If the contractor discovers any errors, inconsistencies or omissions discovered by
the contractor shall be reported promptly to the architect as a request for information in
such a form as the architect may require.
3.3.2 The contractor shall be responsible to the owner for acts and omissions of the
contractor’s employees, subcontractors and their agents and employees, and other persons
or entities performing portions of the work for or on behalf of the contractor or any of its
subcontractors.
3.4.3 The contactor shall enforce strict discipline and good order among the contractors
employees and subcontractors.
3.7.1 Permits and fees: the contractor shall secure and pay for the building permit and
other permits and governmental fees, licenses, and inspections necessary for proper
execution and completion of the work which are customarily secured after execution of
the contract.
3.7.3 It is not the contractor’s responsibility to ascertain that the contract documents are
in accordance with applicable laws, statures, ordinances, building codes, and rules and
regulations.

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3.8.1 Allowances: The contractor shall include in the contract sum all allowances stated
in the contact documents. Items covered by allowances shall be supplied for such
amounts and by such persons or entities as the owner may direct.
3.11.1 Documents and samples at the site: The contractor shall maintain at the site for the
owner one record copy of the Drawings, specifications, addenda, change orders and other
modifications in good order and marked currently to record field changes and selections
made during construction, one record copy of approved shop drawings, product data,
samples and similar requires submittals.
3.12.1 Shop Drawing: Shop Drawings are drawings, diagrams, schedules and other data
specially prepared for the work by the contractor or a subcontractor, sub-subcontractor,
manufacturer, supplier or distributor to illustrate some portion of the work.
3.12.7 The contractor shall perform no portion of the work for which the contract
documents require submittal and review of shop drawings, product data, samples or
similar submittals until the respective submittal has been approved by the architect.
3.12.8 the work shall be in accordance with approved submittals except that the
contractor shall not be relieved of responsibility for deviations form requirements of the
contract documents by the architect’s approval of shop drawings, product data, samples
or similar submittals unless the contractor has specifically informed the architect in
writing of such deviation at the time of submittal.
3.13.1 The contractor shall confine operations at the site to areas permitted by law,
ordinances, permits and the contract documents and shall not unreasonably encumber the
site with materials or equipment.
9.3.2 Unless otherwise provided in the contract documents, payments shall be made on
account of materials and equipment delivered and suitably stored at the site for
subsequent incorporation in the work.
9.3.3 the contractor warrants that title to all work covered by an application for payment
will pass to the owner no later than the time of payment. The work…will be free and
clear of liens, claims, security interests or encumbrances in favor of the contractor,
subcontractors, material suppliers, or other persons…
Applications for getting paid are usually made monthly on form G-702
Definitions – which are provided in Walkers 1.18 are included with a contract to make
certain there is a "meeting of the minds" relating to understanding the terms of the
contract.
Glossary of Construction terms in the contract can be helpful as a source for information.;
These are good to know, but the glossary in the Contractors Manual should be
memorized if you can, as a number of questions come from the glossary in the
Contractors Manual.

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AIA – 401 documents which is the contractor sub-contractor contract agreement
The important element is that the final payment shall be due when the work is completed
satisfactorily to the architect and owner.
The sub-contractor shall not assign or sub-contract the work without written consent of
the contractor.
The sub-contractor shall report to the contractor within 3 days any injury to any of the
sub-contractors employees on the site.
If the sub-contractor is not paid by the contractor, through no fault of the sub-contractor,
within 7 days of the time in which payment should have been made the sub-contractor
may given 7 days written notice to the contractor stop work until the amount has been
paid.
Unless otherwise provided in the contract documents, the contractor shall pay the sub-
contractor each progress payment and the final payment under the sub-contract within 3
working days after the contractor receives any payments from the owner.
Back Charges: If the sub-contractor defaults or neglects to carry out the work in
accordance with the agreement, or fails within 7 days of receiving written notice from the
contractor to commence and continue corrections of such default or neglect with
diligence and promptness the contractor may after giving 7 from receipt by the sub-
contractor of any written notice, and without prejudice to any other remedy he may have
such deficiency made good, and may deduct the cost from the money owed to the sub-
contractor.
Time is considered to be of the essence in this contract. This means it is a timing specific
document.
Within 30 days of the architect issuing a certificate for payment covering such
substantially complete work the contractor shall within the extent of the documents make
payments to the sub-contractor the entire unpaid balance of the contract sum, or of that
portion of the contract sum contributable to the substantially completed work.
After a payment is due the sub-contractor the sub-contractor is entitled to the payment
plus interest.
Before issuance of payment to the sub-contractor by the contractor the sub-contractor
shall be required to submit evidence of all bills being paid.
Sub-contractors ability to assign his portion of the sub-contract is permissible with
written consent of the contractor.
Permits for sub-contractors shall be the responsibility of the sub-contractor for payment.
The contractor shall provide the sub-contractor with a copy of the estimated progress
schedule of the contractor's entire job.
Contractor shall notify the sub-contractor of all modifications of the contract promptly.
If the work is stopped for a period of 60 days through no fault of the sub-contractor
because the contractor has not made payment to the sub-contractor may, in writing, give
7 additional days notice and then terminate the contract.
The sub-contractor agrees that all esthetic work shall be done subject to the final approval
of the architect.

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The sub-contractor shall notify the contractor in writing 5 days in advance of
commencement of the work that is scheduled to begin; unless a notice to proceed
precedes the date of commencement issued by the contractor.
A contractor may terminate employment of a sub-contractor that repeatedly fails to
supply enough workers or materials if the contractor gives the subcontractor 2 written
notices over a 14 day period.
AIA Document 701
Instructions to bidders
Any changes to the bidding document must be made by addendum. AIA bids are received
in a sealed envelope.
The owner must prove financial testing no later than 7 days prior to the expiration of the
withdrawal of bids.
The bidder shall deliver the required bonds to the owner no later than 3 days following
the date of the execution of the contract.
By making a bid on the project the contractor represents all of the following to be true;
the bidder has visited the site; the bidder has used the provided documents to make a bid;
bidder understands local conditions.
No addenda will be issued later than 4 days prior to the final date of the receipt of bids.
If bonds are required the bidder must deliver them to the owner no later than 3 days
following the date of contract execution.

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Mechanics' Lien Law
Time Line for Filing and Serving Documents According to the Mechanics' Lien Law
Document Type – section Who serves or files notice Time to serve or file
Notice of Commencement
(713.135)
Owner or owners agent Record in County Clerks
office prior to obtaining
building permits
Notice to Owner
(713.06)
All suppliers of goods or
services in privity with
owners, except laborers
Post on site or send notice
by registered mail to
owners prior to
commencing work – but
not later than 45 days
after commencing work.
Notice of Claim
(713.08)
Every lienor including
laborers and persons in
privity with the owners.
File in the County Clerk's
office not later than 90
days after completion of
work
Notice of Delivery
(713.09)
Seller and purchaser of
materials delivered to a
location other than the
job site.
Serve on owner a notice
signed by both the seller
and the purchaser of
goods.
Waiver of Release
(713.20)
Any lienor other than a
laborer: laborer may
waive to the extent of
labor previously
performed
At anytime
Notice of Contest of Lien
(713.22)
Owner, agent, attorney of
owner, this accelerates
the time for filing a suit to
60 days.
Record in County Clerk's
office
Payment Bond
(713.23)
Contractor Before commencing the
construction
If the claim of lien is for $5,000 or less it is filed with the County Clerk's office.
If the amount of the claim of lien is in excess of $5,000 then it is filed with the Circuit
Clerk's Office.

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Summary of Construction Lien Law;
Liens for professional services: 713.03
Any person who performs services as architect, landscape architect, interior designer,
engineer, or surveyor and mapper, subject to compliance with the limitations imposed by
this part, has a lien of the real property improved for any money that is owing to him for
his services used in connection with improving the real property or for his services in
supervising any portion of the work of improving the real property, rendered in
accordance with this contract and with the direct contract. No lienor under this section
shall be required to serve a notice to owner. You must file a claim of lien.
Subdivision improvements: 713.04
Any lienor who, regardless of privity, performs services or furnishes material to real
property for the purpose of making it suitable as the site for the construction of an
improvement or improvements shall be entitled to a lien on the real property. Site
improvement shall include but not be limited to grading, leveling, excavating, and filling
of land, including the furnishing of fill soil; the grading and paving of streets, curbs, and
sidewalks; the construction of ditches and other area drainage facilities; the laying of
pipes and conduits for water, gas, electric, sewage and drainage proposes. No notice of
commencement shall have to have been filed to file a lien under this section. No lienor
shall be required to serve a notice to owner for liens under this section. You must file a
claim of lien.
Liens of Persons in privity: 713.05
A material man or laborer, either of whom is in privity with the owner and provides
labor, services, materials, or other items required by, or furnished in accordance with, the
direct contract and also for unpaid finance charges due under the lienors contract, shall
have a right to lien the property. No lienor under this section shall be required to serve a
notice to owner as provided in section 713.06.
Liens of Persons NOT in privity; proper payments:
713.06
All lienors under this section, except laborers, as a prerequisite to perfecting a lien under
this chapter and owner setting forth the lienors name and address, a description sufficient
for identification of the real property, and the nature of the services or materials furnished
or to be furnished. A notice must be served before commencing, or not later than 45 days
after commencing, to furnish his services or materials, but in any event, before the date of
the owner's disbursement of the final payment after the contractor has furnished the
affidavit under subparagraph 3-d 1.

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The notice to owner must be substantially the following form;
WARNING TO OWNER: UNDER FLORIDA LAW, YOUR FAILURE TO MAKE
SURE THAT WE ARE PAID MAY RESULT IN A LIEN AGAINST YOUR
PROPERTY AND YOUR PAYING TWICE.
TO AVOID A LIEN AND PAYING TWICE, YOU MUST OBTAIN A WRITTEN
RELEASE FROM US EVERY TIME YOU PAY YOUR CONTRACTOR.
NOTICE TO OWNER
To Owners name and address:
Liens for improving real property under contract with husband or wife on
property of the other or of both: 713.12
The spouse who contracts shall be deemed to be the agent of the other, unless such other
shall, within 10 days after learning of such contract, give the contractor and record in the
clerk's office, notice of his or her objection thereto.
Manner of serving notices and other instruments: 713.18
1: by actual delivery to the person to be served, or one partner, or an officer of the
corporation, director or managing agent.
2: by mailing the same, postage prepaid, by registered or certified mail to the person and
at the address listed on the notice of commencement, or shown on the building permit
application.
3: If neither of the above methods can be accomplished, then by posting the notice on the
premises.
Duration of a Lien: 713.22 (must renew lien each year to remain active)
No lien provide by part I shall continue for a longer period than 1 year after the claim of
lien has been recorded, unless within that timer an action to enforce the lien is
commenced in a court of competent jurisdiction.

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An owner or his agent or attorney may elect to shorten the time prescribed in subsection 1
within which to commence an action to enforce any claim of lien or claim against a bond
or other security under s. 713.23 or 713.24 by recording in the clerk's office a notice in
substantially the following form:
Notice of Contest of Lien
To (name of lienor)
You are notified that the undersigned contests the claim of lien filed by you on (date),
and recorded in _______Book, _____Page, of the public records of Brevard County,
Florida, and that the time within which you may file suit to enforce your lien is limited to
60 days from the date of service of this notice. This (date)
Signed (owner or attorney)
Moneys received for real property improvements; penalty for misapplication: 713.345
A person, firm, or corporation, or an agent, officer, or employee thereof, who receives
any payment on account of improving real property must apply such portion of any
payment to the payment of all amount then due and owing for services and labor which
were performed on, or materials which were furnished for, such improvement prior to
receipt of the payment.
Any person who knowingly and intentionally fails to comply with paragraph A is
guilty of misapplication of construction funds, punishable as follows;
1: $100,000 or more is a first degree felony.
2: Less than $100,000 but more than $20,000 is a second degree felony.
3: Less than $20,000 is a third degree felony.

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Florida Construction Industry Licensing Board
Summary Chapter 489
It is important to understand that Chapter 489 of the Florida Statutes gives the
construction board the power to regulate the construction industry, and to discipline
contractors or persons who hold themselves out as contractors. One of the questions on
your exam is likely to be what law or statute gives the Bureau of Professional Regulation
the authority to govern the construction industry; the answer is Chapter 489.
The regulation of professions by government has two major
objectives: (2-6)
• To protect the public and ensure safety by preventing unqualified individuals
from practicing a given profession; and
• To establish standards of practice for those who engage in a particular profession.
The professional boards provide a valuable service to the public by determining who is
eligible to be licensed to practice of profession, investigating complaints against
licensees, and taking disciplinary action against licensees when professional standards
have been violated.
They serve two important functions: (2-6)
• (1) protection of the public by identifying and taking action against incompetent
or unethical practitioners and;
• (2) serving notice of professional standards on members of the profession and
those seeking to become members of the profession.
Chapter 489 Florida Statutes provide for the licensure and regulation of all types of
contractors in Florida.
Who Needs to be Licensed?
Generally, any person who, for compensation, undertakes to, submits a bid to, or does
himself or by others construct, repair, alter, remodel, add to, demolish, subtract from, or
improve any building or structure, including related improvements to real estate for
others or for resale to others, must be licensed. (2-7)

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Licensing Exemptions:
The following are exempted from licensure;
• Highway, street, road, bridge, and railway contractors;
• Employees of licensed contractors acting within the scope of the contractor's
license and with the knowledge and permission of the licensed contractor;
• Federal, state, and local government employees (except school boards, the board
of regents, and community colleges, unless for the purpose of performing routine
maintenance or repair or construction not exceeding $200,000 to existing
installations) who do not hold themselves out for hire or otherwise engage in
contracting except in accordance with government employment;
• Court appointed officers;
• Public utilities;
• Persons who sell or install finished products, materials, or merchandise which are
not fabricated into and do not become a permanent fixed part of the structure.
• Property owners acting as their own contractor;
• Any construction on United States property;
• With certain exceptions, persons performing work of a casual or
inconsequential nature, with a contract price of less than $1,000,
unless the person represents that he or she is a qualified contractor.
• Any construction or operation of irrigation and drainage ditches;
• Registered architects or engineers acting within the scope of their practice;
• Persons who only supply materials or supplies;
• Liquefied petroleum gas dealers;
• Heating and AC dealers and installers which AC's have a capacity of 3 tons or
less.
• Architects, landscape architects, and engineers who offer design-build services.

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Subcontractor Requirements:
A construction contractor must subcontract the electrical, mechanical, plumbing,
roofing, sheet metal, swimming pool, and air conditioning work when a local
examination for certificate of competency or license is required in these areas,
unless the contractor himself holds a State certificate of competency or license in that
area.
Not required to sub-contract the following:
• General, Building, and Residential contractors are NOT required to
subcontract the following; wood shingles, wood shakes, or asphalt or
fiberglass shingle roofing materials on NEW building they are constructing.
• General contractors can build swimming pools.
• General Contractors can build sanitary sewer collections systems, storm water
systems, or the water distribution system on new site development work, site
redevelopment work, mobile home parks or commercial properties;
• General Contractors can connect utility lines from the mains on mobile home
parks.
Sub-Contractors – Independent Contractors or Employees?
An independent contractors allow you to considerably lower payroll tax savings
(no FICA, FUTA or state unemployment tax) there are fewer administrative costs,
no withholding income, no payroll taxes, no workers' compensation costs, no age
discrimination problems, no Americans with Disabilities Act as both acts apply
only to employees, also no retirement costs, and fringe benefits.
BUT if the independent contractor violates any laws, then the person who holds
the contractors license and pulled the building permits will be held responsible, just as
if the individuals had been employees of the contractor.

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If the independent contractor:
• Does not have liability insurance
• Does not have workman's compensation insurance
• Does not pay FICA and FUTA matching funds
• Does not train employees to use tools properly
• Does not meet OSHA safety requirements
• Does not have the proper licensing
• Hires illegal aliens (non-nationals)
• Hires persons under the age of 16
• Causes or allows employee(s) to be hurt or killed
Then the licensed contractor of record on the job in question will be responsible for the
above listed expenses.
IRS test for Independent Contractor Status:
Independent if:
• Control, - contractor does not define when, where, and how the job is to be
done.
• Training, - if the contractor does not train workers or pays to train workers.
• Services, - If the contractor does not allow the independent contractor to
determine who and how the work is to be done, requiring only a finished
product.
• Integration, - the operations of the contractors business must not depend upon
the services of the independent contractor.
• Hiring, supervision, paying assistants, - The contractor must not hire,
supervise nor pay assistants for the independent contractor.
• The contractor must not hire the independent contractor on a regular (weekly
basis).
• Hours of work, the contractor must not set the hours of work the independent
contractor must work, but rather define a finished product.
• The contractor must not require the independent contractor to work for
him/her on a full time basis.
• Working on the employers premises, the contractor must not require the
independent contractor to perform work at the contractors shop.
• The contractor must not set the order or sequence of work, (this is a difficult
test to pass for the construction industry).
• Oral or written reports by the contractor suggests that the independent
contractor is an employee.
• Hourly, weekly, or monthly pay suggests a continuing relationship, which
argues against independent contractor status.

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• Payment of business/travel expenses argues against an independent contractor
status.
• Furnishing of tools and materials, once again the nature of the construction
industry makes it difficult to pass this test unless the independent contractor is
responsible for buying the materials to perform the work on his/her bid.
• The contractor must not have the right to discharge the independent
contractor before his contract bid is finished. In this case it is wise to construct
a contract around the AIA contractor – sub-contractor form A-401.
The independent contractor can help by doing the following:
• Have his/her own business cards
• Have a city and county business license
• Have liability insurance, pay workman's comp on employees
• Bids on jobs, and works by the job
• Buying all his/her own tools and materials.
• Renting a separate office or construction barn at a separate location.
• Runs a risk of making a profit or loss if his bid is inaccurate, or if the job goes
badly.
• If he/she works for more than one firm on a regular basis.
• Makes his/her services available to other licensed contractors or the general
public.
• Receives no bonuses, tools, or travel expenses
• The contractor files a 1099-MISC on the independent contractor.
• REMEMBER this from the Circular E. Backup Withholding: If you are
required to file a 1099 on an independent contractor or materials supplier, or
persons to whom you paid "interest, dividends, rents, royalties, commissions, non-
employee compensation in the course of your trade or business" and the payee
fails to furnish you with a Taxpayer Identification Number (TIN) then generally
you must withhold 31% of taxable payments.
• Have a written contract, signed by both parties, that makes it clear that the
company doesn't have the right to control the methods or procedures for the
worker to accomplish the work contracted for (2-13).
• The Independent contractor hires his/her own workers as necessary.
• Compensation based on work finished, not hours worked.
• Never give an independent contractor a bonus.

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Note:
If the IRS determines that the independent contractor is an employee you will be
responsible for the entire 15.3% due for FICA plus the 6.2% on the first $,7000 due
FUTA, as well as penalties which will likely exceed the payment amount due. This
applies to the independent contractor, for the last 4 years he worked for you, as well
as all his/her employees! Be certain that the individuals you are hiring are truly
independent contractors, and that they are collecting FICA and FUTA, as well as
paying workman's comp insurance on their employees. If they are not, you are taking
a huge risk. In this type situation, the contractor stands to lose more than he/she
stands to gain. Any miscalculation, or accident could land the contractor in
bankruptcy court. When you bid your jobs, include all the real expenses of doing
business; let some other poor fool take the low-ball jobs.
If you have to, bid only city, county, state, or federally funded projects where every
bidder is required to incur the same cost structures.
Rules of Thumb:
• Real property (land) 20% to 50% of project costs
• Real estate agent 3% of project costs
• Materials (improvements) 33% of project costs
• Labor 33% to 50% of project costs
• Insurance 2% to 10% of project costs
• Capital costs (interest rates) 7% to 12% of project costs
• Machinery, tools, 5% to 15% of project costs
• Overhead, office, and other fixed expenses 3% to 12%
According to Dunn and Bradstreet Standard Industrial Code (SIC) business
summaries, the average contractor makes 24% profit.
The elements listed above are all you have available to manipulate in order to realize a
profit. If you can realize only 10% savings in each one of these categories you will
realize about a 30% to 35% profit on your overall project.

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Penalties for Unlicensed Activity:
Engaging in or holding oneself out to be a contractor without first obtaining a
license is a violation of Florida Law. Any person who falsely holds himself out to be a
licensed contractor or who engages in contracting without first obtaining a license is
guilty of a first-degree misdemeanor. The DBPR or a county, municipal, or local
licensing board may issue a cease and desist order to prohibit any person from engaging
in the business without a valid license.
Any contract entered into by a contractor not licensed pursuant to Part I or Part II of
Chapter 489, Florida Statutes, is legally unenforceable. Any contract entered into by an
unlicensed repairperson or handyman for more than $1,000 dollars is unenforceable.
In addition if the person holds themselves out to be a contractor and causes injures to a
person due to negligence, malfeasance, or misfeasance, and is not certified by the state
nor licensed pursuant to the laws of the city or county in which he does business, the
consumer is entitled to three times the actual damages sustained and costs and attorney's
fees.
Licensing Requirements:
Certified Contractor is a contractor who successfully passes a state-administered
examination and obtains a certificate of competency issued by the DBPR. Certified
contractors are allowed to contract in ay city, county, or district in the state without being
required to fulfill the competency requirements of that jurisdiction.
Registered Contractor is any contractor who has registered with the DBPR and has
fulfilled the competency requirements in the city, county, or district for which the
registration is issued. Registered contractors can only contract in the jurisdiction that
issued the license.
Financial Responsibility Requirements – NET WORTH REPORTING
• Net Worth of $10,000 in cash or a line of credit or any combination of the two.
(Letter from your bank attesting to the fact that you have $10,000, a letter of
bond-ability, or compliance bond issued for $10,000).
• A credit report that checks to see if the contractor has any construction related
judgments on his/her record (the usual credit report will not work).
• Public Liability Insurance 50,000 property/ 300,000 personal injury

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• Workers compensation coverage or a personal exemption
• A financial statement, not more than 12 months old, containing information
indicating the current assets and liabilities, total assets and total liabilities, and
total Net Worth of the applicant
• Must answer questions pertaining to unpaid or past-due bills or claims for labor,
materials, services, liens, suits or judgments or record or pending against the
applicant or his firm.
The Financial statement needs to look like something out of Builders Guide to
Accounting. As much as seeing how much money you have, they DBPR wants to see if
you can put together financial statements. All you have to provide is a Profit and Loss
Statement, and ratio analysis, but you can include an Income Statement. Almost no one
provides a Sources and Uses of Funds Statement.

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Davy Jones
320 N. Atlantic Ave #1A
Cocoa Beach, Fl. 32931
Balance Sheet
December 31, 2001
Assets
Current Assets
Cash in bank 10,000
Stocks and bonds 2,000
IRA account** 12,000
Savings 2,450
Accounts receivable (business accounts) 0
Notes receivable (include all mortgages and leases) 0
Materials held for trade purposes 1,200
Total Current Assets 27,650
Long Term Assets
Long Terms notes receivable (mortgages) 0
Tools 8,560
Machinery and tractors, trailers 2,300
Trucks, cars, motorcycles, boats *** 14,800
Real Property (house and commercial) 62,500
House Hold belongings 15,000
Total Long Term Assets 103,160
Total Assets 130,810
Current Liabilities
Credit Cards 2,300
Line of Credit at bank 850
Trade accounts payable 0
Rent due before Dec. 31 (optional) 0
Mortgages payable due before Dec. 31 (optional) 3,456
Auto loans due before Dec. 31 6,000
Total Current Liabilities 12,606
Long Term Liabilities
Auto and truck loans due more than one year 3,200
Home equity loans 19,000
Equipment mortgages 0
Revolving loans – Sears – Rooms to Go 0
House and real property mortgages 10,500
Total Long Term Liabilities 32,700
Total Liabilities 45,306
NET WORTH 85,504
Net Worth = Total Assets – Total Liabilities

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All financial documents should carry notes at the bottom of the document detailing the
conventions used by the preparer of the documents. These notes are used to explain the
choices you used in making the statement. e.g.;
** IRA can not be withdrawn until 59 years old
*** Market value of assets – not book value
Term of License
The license is good for 2 years. It must be renewed every two years, and the contractor is
required to take 14 hours of continuing education every two years to be able to renew the
license.
Continuing Education
The contractor must take 14 credit hours of continuing education every two years to
be able to renew the license.
Business Records
Business records and complete financial statements for the business must be kept at
the place of business for the preceding three years. NOTE from Circular-E that the IRS
requires you to keep your records for four years.
Qualifying Agents
If a joint venture, partnership, corporation, trust, or other business organization wishes to
do business and engage in contracting the applicant must apply through a qualifying
agent.
• The applicant must state the name of the business
• List its directors, partners, or officers, or trustees
• Show compliance with the fictitious name statute
• The qualifying agent is legally qualified to act for the business organization
• The qualifying agent has the authority to supervise construction
• The qualifying agent must be either a certified or registered contractor

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In addition, if the qualifying agent is the only licensed contractor affiliated with the
business organization, the business organization must notify DBPR of the termination of
the qualifying agent and obtain another qualifying agent within sixty days (60).
The qualifying agent is responsible for supervision of all operations of the business, for
all fieldwork at all sites, and unless a financially responsible officer is designated. A
sole primary qualifying agent is jointly and equally responsible with secondary qualifying
agents for fieldwork supervision.
A secondary qualifying agent is responsible only for supervision of filed work at
sites where his license was used o obtain the building permit, and any other work for
which he accepts responsibility. A secondary qualifying agent is not responsible for
supervision of financial matters.
A change in the status of a qualifying agent is effective form the date of the change
forward, and will not relieve the qualifying agent of responsibility for projects or actions
that took place during the time he was acting as a qualifying agent.
Florida courts have held that Chapter 489 imposes a professional duty upon the sole
qualifying agent of record for a general contractor to supervise all of the general
contractor's projects. Failure to carry out this duty may serve as grounds for revocation of
a qualifying agent's contractor's license.
A qualifying agent's claim that he had no personal knowledge of activities of the business
entity or of its employees that result in violations of Chapter 489 will not absolve the
qualifying agent.
Definitions:
Primary qualifying agent means a person who possesses the requisite skill,
knowledge, and experience, and has the responsibility, to supervise, direct, manage, and
control the contracting activities of the business organization with which he is connected.
Professional Responsibility – Liability
Changes in Licensure information:
business organization must inform the DBPR by mail of any change in the information
required to be submitted on the application for qualification of a business organization
within forty-five days following the change.

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Grounds for disciplinary action against a contractor:
• Obtaining a license by fraud or misrepresentation
• Being convicted and found guilty of a crime related to contracting
• Knowingly violating applicable building codes
• Assisting a person in unlicensed practice of contracting, or evading licensing
• Acting as a contractor in another name other than on the license
• Committing mismanagement or misconduct causing financial harm to a customer
• Abandoning a construction project (abandoned after 90 days)
• Being disciplined by any city or county for violation of licensing law
• Failing in any material respect to comply with the licensing law or rule
• Signing a statement that a job is bonded, falsely stating subcontracted work has
been paid for, labor or materials have been paid for, falsely indicating that
workers' comp and public liability insurance are provided
• Committing fraud or deceit in the practice of contracting
• Committing incompetence or misconduct
• Committing gross negligence
• Proceeding on any job without building permits
• Intimidating, threatening, coercing or otherwise discouraging the service of a
notice to owner or a notice to contractor under the mechanic's lien laws;
• Failing to satisfy a civil judgment obtained against a licensee or a business within
a reasonable time.

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Circular E
Employer's Tax Guide
Purpose: To Calculate withholding taxes using Circular E.
You need to have a working knowledge of Circular E. You will use the tables in Circular
E weekly or bi-weekly when paying employee wages. It is important that you are familiar
with the process, and with the filing dates associated with Circular E. The deductions
computed in Circular E are Federal Income Tax Withholding, Social Security
(FICA), Medicare, and Federal Unemployment Tax (FUTA).
Summary of Circular E:
Employees are to file Form W-4 before December 1 of each year. The W-4 defines their
address, social security number, martial filing status, and their number of withholding
allowances.
Backup Withholding. If you are required to file a 1099 on an independent
contractor or materials supplier, or persons to whom you paid "interest, dividends, rents,
royalties, commissions, non-employee compensation in the course of your trade or
business" and the payee fails to furnish you with a Taxpayer Identification Number
(TIN) then generally you must withhold 31% of taxable payments.
Federal Unemployment Tax, FUTA is filed on Form 940 or 940 EZ by January 31.
All employers must file Form 941 on a quarterly basis and deposit any income tax,
Social Security, and Medicare taxes. You pay these taxes on Form 941 if your total tax
liability for the quarter is less than $1000 dollars. If all taxes were deposited on time, you
are given a 10 day extension for filing.

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Quarters Ending Due Date last deposit date
January – March March 31 April 30 May 10
April – June June 31 July 31 Aug 10
July – September Sept 30 Oct. 31 Nov 10
Oct – Dec Dec 31 Jan 31 Feb 10
Record Keeping:
Keep all records of employment taxes for at least 4 years.
Who must have an Employer Identification Number?
If you are required to report employment taxes or give tax statements to employees or
annuitants, you need an EIN. Request an EIN on Form SS-4.
Wages and Compensation:
Wages subject to Federal employment taxes include all you pay an employee in salaries,
vacation allowances, bonuses, commissions, and fringe benefits.
Wages not paid in money but "in kind" such as lodging, food, clothing, and services, are
generally subject to income tax Withholding and Social Security, Medicare and FUTA
taxes.
Meals and lodging: The value of meals is not taxable income and is not subject to income
tax withholding and if they are furnished for the employer's convenience and on the
employer's premises. The same holds true for lodging if it is furnished for the employer's
convenience, on the employer's premises, and as a condition of employment.
Fringe Benefits:
You must include fringe benefits in an employee's gross income. Fringe benefits include
cars you provide, flights on aircraft you provide, free or discounted commercial flights,
vacations, discounts on property or services, membership in county clubs, or social clubs,
and tickets to entertainment or sporting events. You must include an amount equal to fair
market value of the benefits, less any amount the employee paid.
Supplemental Wages:
These wages are wages paid in addition to regular wages, and they include bonuses,
commissions, overtime pay, payments for sick leave, severance pay, awards, prizes, back
pay and retroactive pay increases, as well as nondeductible moving expenses.

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Calculating Supplemental Withholding:
If you have been withholding income tax from an employees regular wages, then use 1 of
the following methods for supplemental wages.
1: Withhold a flat 28% (no other percentage is allowed).
2: Add the supplemental and regular wages for the most recent payroll period this year.
Then figure the income tax withholding as if the total were a single payment. Subtract the
tax already withheld from the regular wages. Withhold the remaining tax from the
supplemental wages.
Payroll Period:
A payroll period is a period of service for which you usually pay wages.
Social Security and Medicare Taxes:
The Federal Insurance Contributions Act (FICA) provides for a Federal system of old-
age, survivors, disability and hospital insurance.
Tax rates:
The employee tax rates for social security is 6.2% (amount withheld) . The employer tax
rate for social security is 6.2% (12.4% TOTAL). The wage limit base is 87,900
The employee tax rate for Medicare is 1.45% (amount withheld). The employer tax
rate for Medicare is 1.45% (2.9% TOTAL). There is no wage base limit for Medicare
tax; all covered wages are subject to Medicare tax.
Advanced Earned Income Credit (EIC):
An employee who is eligible for the EIC and has a qualifying child is entitled to receive
EIC payments with his or her pay during the year. To get these payments the employee
must give you a properly completed FORM W-5.
Depositing Taxes:
Income tax withheld, social security, and Medicare taxes are to be filed on Form 941
at a local Federal Reserve Bank or electronically.
Form 945 is for filing non-payroll tax liabilities and payroll and non-payroll may not be
filled on the same form.

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Depositing on Time:
To be considered timely, the funds must be available to the depositary or FRB on the
deposit due date before the institution's daily cutoff deadline (usually 2:00 P.M.).
HOWEVER, a deposit received by the authorized depository or FRB after the due date
will be considered timely if the taxpayer establishes that is was mailed in the USA at
least 2 days before the due date.
Deposit Penalties:
2% late fee on Deposits made 1 to 5 days late.
5% late fee on Deposits made 6 to 15 days late.
10% late fee on Deposits made 16 or more days late.
Filing Form 941:
Form 941 must be filed each quarter.
Penalties for late payment:
For each whole or part month a return is not filed when required, there is a penalty of 5%
of the unpaid tax due with that return. The maximum penalty is 25%. Also, for each
whole or part of a month the tax is paid late, a penalty of .5% of the amount of the tax
generally applies. The maximum penalty is also 25%.
Federal Unemployment Tax (FUTA):
Only the employer pays FUTA tax, it is not deducted from the employee's wages.
Test for FUTA:
1: You paid wages of $1,500 or more a year for any calendar quarter for the present year
and the previous year.
2: You paid $1,000 or more to household employees in the previous year.
3: You paid farm workers more than $20,000 in any calendar quarter, or employed 10 or
more farm workers for 20 or more weeks.

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Computing FUTA Tax:
The FUTA tax rate is 6.2%. The tax applies to the first $7,000 you pay each
employee as wages during the year. FUTA is only paid by the employer.
Florida does not have any SUTA tax:
Florida does not have any SDI tax:
Calculating Tax liabilities:
1: From the Form W-4, obtain employees filing status, either married or single, and
number of withholding allowances claimed. From the time card obtain the employees
gross wages subject to income taxes. With this information you are ready to go to the
Circular E wage and tax tables and calculate the income tax to be withheld on a weekly
or bi-weekly basis. Write down the amount from the tables.
2: Calculate Social Security, FICA; - refer to Circular E for current rates.
• 6.2% (.062) * wage rate up to annual maximum of 87,900
• .145% (.0145) * wage for Medicare – on total wages -no maximum
• 7.65% (.0765) total FICA and Medicare deducted from employees check.
The employer must match each of the FICA and Medicare deductions made by
the employee. These are matching funds of 7.65% which are contributed by the
employer making the total payment due 15.3% of gross wages.
3: Calculate FUTA, Federal Unemployment Tax, this amount is paid completely
by the employer. The FUTA tax rate is 6.2% (.062) on the first $7,000 of annual
wages.
If you pay SUTA to the state up to 5.4% maybe deducted from the 6.2% paid to
the FUTA leaving a balance of .8% or (.008) to be paid on Form 940. Florida has
no SUTA.

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Some abbreviations:
FICA Social Security Tax
FUTA Federal Unemployment Tax
EIC Earned Income Credit
FRB Federal Reserve Bank
SSA Social Security Administration
FIT Federal Income Tax
To obtain a current copy of Publication 15: Circular E, Employer's Tax Guide: go
to the IRS website listed below and type in "Publication 15." To obtain 940, 941,
W2's, and W4's you may go to the same website and type in the desired
publication and then download it in Adobe format.
http://www.irs.ustreas.gov/formspubs/index.html

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%
% of Completion · 16
1
1099 · 45, 53
9
940 EZ · 53
A
Accounts Payable · 3, 4, 10, 21
accrual accounting method · 14
Advanced Earned Income Credit · 55
AIA · 28
AIA – 401 · 35
AIA – Summary of Forms · 32
AIA 201 · 33
AIA Document 701 · 36
Averages Days Receivables · 9
B
Backup Withholding · 53
Bad Debt Ratio · 8
Balance Sheet · 1, 3, 4, 5, 6, 7, 21, 25, 49
bilateral contract · 30
breach of contract · 29
Business Records · 50
C
Calculating Tax liabilities · 57
cash accounting method · 14
Cash Movement Method · 7
Cash Receipts Daily Journal · 18
Certified Contractor · 47
Changes in Licensure · 51
Changes in Licensure information · 51
Chapter 489 · 41, 47, 51
Chart of Accounts · 1, 2, 3
Circular E · 45, 53, 57, 58
Closing Adjustments · 26
Combined Ratios · 7
Completed Contract · 14, 15
Continuing Education · 50
contract · 14, 15, 26, 27, 28, 29, 30, 31, 32, 33, 34,
35, 36, 38, 39, 42, 43, 45, 47
credit · 3, 4, 6, 8, 12, 47, 50
Credit Balance · 1
Current Assets · 2, 6, 7, 21, 49
Current Liabilities · 10
Current Ratio · 6, 7
D
debit · 3, 4, 12
Debit Balance · 1
Declining Balance Depreciation · 10, 11
Deferred Assets · 10
Deposit Penalties · 56
Depositing Taxes · 55
Depreciation Methods · 10
E
Elements of a Contract · 29
Equity Account · 22
Essentials of an offer · 31
F
FICA · 43, 44, 46, 53, 55, 57, 58
Fixed Assets · 4, 21
Form 940 · 53, 57
Form W-4 · 53, 57
Fringe Benefits · 54
Funds Flow Analysis · 24
FUTA · 43, 44, 46, 53, 54, 56, 57, 58
G
Grounds for disciplinary · 52
I
Income Statement · 3, 5, 6, 7, 15, 19, 20, 25, 48

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independent contractor · 44
Intangible Assets · 2, 10
IRS · 15, 44, 46, 50, 58
L
last deposit date · 54
Lenders Ratios · 26
Liabilities · 1, 3, 4, 6, 7, 10, 21, 22, 49
Licensing · 41, 42, 47
Licensing Exemptions · 42
Licensing Requirements · 47
Long Term Receivables · 9
Long-Term Assets · 9
M
MACRS · 10, 12, 13
Management Ratios: · 25
Markup from Cost · 27
Markup on Selling Price · 27
Markup Profit · 27
Mechanics' Lien Law · 37
N
Net Profit · 20, 22
Net Worth · 1, 3, 4, 7, 21, 47, 48, 49
NET WORTH REPORTING · 47
Notes Receivable · 2, 9
Notice of Contest of Lien · 40
notice to owner · 38, 39, 52
O
Owners Ratios · 25
P
Penalties for Unlicensed Activity · 47
Percentage of Completion · 14, 15
Petty Cash Fund · 16, 17, 18
Prepaid Assets · 10
Q
Qualifying Agent · 50
Quick Ratio · 6
R
Receivables · 8, 9
Reconciling the Checkbook · 19
Record Keeping · 54
Registered Contractor · 47
Reserve for Bad Debts · 2, 8
Retainage · 2, 9
Retained Earnings · 3, 4, 21, 22
S
secondary qualifying agent · 51
Sources and Application of Funds Method · 7
Sources and Uses of Funds Statement · 3, 5, 48
Sources and Uses of Funds Statement. · 3, 48
Sources of Capital · 23
Statute of Frauds · 31
Step by Step Bookkeeping · 14
Straight Line Depreciation for Real Estate · 13
Sub-Contractors · 43
Summary of Contract Law · 29
Summary of Operations · 5
Supplemental Wages · 54
T
Tax rates · 55
Term of License · 50
The Balance Sheet · 21
The Builder's Guide to Accounting · 5
The Income Statement · 5, 19
The Law of Contracts · 29
The Statement of Cash Flows · 5, 23, 25
The Trial Balance · 26
U
unilateral contract · 30
Uses or (applications) of Capital · 23
V
Voucher · 16
W
Working Capital · 7, 26

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