costs. The balance remaining in the bank always represents funds belonging to the owner and should never appear on the contractor's books as assets belonging to him. Hence the separate set of books.

Arrangements are sometimes effected whereby the contractor signs the checks drawn against these special funds and the owner countersigns them. This may require additional work for the contractor's accounting organization. The owner is, however, given definite knowledge of payments made and the purpose for which the money is used. The contractor has the owner's approval for all disbursements prior to making them.

The separate set of books consists of a cash book, journal, purchase register, creditors' ledger, and subcontractors' contract ledger. Accounts receivable, when few in number, are included in the general ledger; otherwise a subsidiary ledger is opened. The information usually appearing in the owner's contract ledger is kept, but the few sheets necessary to record it on one job can be inserted in the binder containing the accounts with subcontractors.

ACCOUNTS IN GENERAL LEDGER. The accounts in the special general ledger would be chiefly the following:

Cash-for the balance in the bank.

The necessary imprest funds.

The account with the owner for cash advanced by him.
Deposit account.

Unadjusted Permit Deposit account.

Construction account.

Construction Equipment account.

Creditors' controlling account.

Subcontractor's controlling account.

Payrolls and Petty Cash Disbursements account.

Transfer Entry account.

Contractor's Fee account.

Contractor's current account.

Others might be required by special contract or job conditions.

The account with the owner is credited with the cash advanced by him from time to time. The cash remaining at the completion of the work is returned and charged to him.

The value of construction equipment remaining on hand at the completion of the work is charged to this account with him whenever the equipment is taken over by him. The difference between the inventory value of the equipment so turned over to the owner and the debit of the account showing the cost of all equipment purchased is transferred to the cost of construction. The contractor's fee account is charged with all checks drawn to his order on account of his fee. The total cost of construction and the contractor's fee are charged to the account with the owner to close the books.

The contractor's current account is a record of all amounts due him for material or services furnished other than those for which he is paid his contract fee. This account is charged with sums due from him for the return of material, or for any other cause.

The contractor should open a special fee account on his regular books, to which the payments on account of fee are credited. The credit balance of this account should always agree with the debit balance of the fee account on the special set. His current accounts receivable with the job would include charges for all material and services (other than fee) furnished to it, and credits for any material returned to him. The debit balance of this account should at all times agree with the credit balance of the current account with him on the special set.

Some of the pro forma journal entries illustrated in Chapter XII are not required on a special set of books for a particular job. The first transaction with the owner is the deposit of

cash. No entries are required based on estimates of funds the owner is asked to deposit from time to time. Other entries. are unnecessary through the contractor's standing in the ordinary creditor relationship to the job in so far as he delivers material, etc.

If the contractor wants his regular books to show the actual construction cost of this particular operation, he can, at the completion of the work, make two journal entries on them. One would credit a construction account and charge the owner for the total cost of the work and the other would reverse it.

ACCOUNTING FOR FUNDS ADVANCED. The cash book should have two disbursement pages, one of which is perforated so that a removable copy can be secured, through use of carbon sheets. This duplicate disbursement sheet can be submitted to the owner accompanied by the statement and canceled checks returned by bank. Invoices covering each payment can be delivered for examination. All invoices and canceled checks should be returned to the contractor after audit by owner and retained by the former.

The duplicate disbursement sheet should have a continuing total, with deductions noted from time to time for any cash collected other than the advances by the owner, so that when the last check is drawn on account of construction or the contractor's fee, the total of the last duplicate disbursement sheet will represent the full cost of the operation to the owner. The difference between this total and the advances made by the owner is the sum to be returned to him when the bank account is closed.

As all transactions, except delivery of physical property, must finally result in a cash transaction, this is all the accounting that is absolutely essential. This separate set of books and their supporting papers should be retained permanently by the

contractor.

Financing by the Contractor

Whenever the contract with the owner provides that the contractor is to pay for labor and materials out of his own funds and in due course render monthly applications for work performed, the accounting with material dealers, subcontractors, and for payrolls is carried on the contractor's regular books. The accounting to the owner consists chiefly of periodically furnishing payrolls, receipted invoices, and other evidences of disbursements in support of the cost of constructing his project.

GENERAL LEDGER ACCOUNTING. When funds are not supplied in advance by the owner, the contractor's accounting on his general books is the same as when working under a lumpsum contract, except that such disbursements as the contract with the owner provides are to be paid by the contractor out of his fee and are temporarily charged to a Construction Expense account for convenience in billing.

FIELD CHECKING. The contractor should suggest that someone on the site representing the owner check all deliveries of material and time earned by workmen and evidence this checking by signature on the contractor's field reports of material received at the site and on his payrolls.

ACCOUNTING TO OWNER. Each payroll is prepared in duplicate. After its mathematical correctness has been verified and payments made to workmen, the duplicate copy should be filed with papers to be submitted to the owner.

All invoices for the delivery of material or the rendering of services should be obtained in duplicate by the contractor. When payments are made, the duplicates should be receipted by the vendors and the receipted duplicate copies filed.

All payments to subcontractors and all disbursements out of petty cash should be evidenced by duplicate receipts. These receipts are also placed with the other duplicate papers.