Construction Today - November 2017 - 98
Residential
By Jennifer French, CPA
Choosing an
Accounting
Method
W
hen it comes to accounting,
many contractors have two
burning questions: which
accounting method is best
for my company, and which will give me the
best tax advantage?
For regular taxpayers, their only concern
is whether their overall accounting method
should report income on the cash basis or
the accrual basis of accounting. However,
contractors have other factors that need to be
considered. Contractors have the opportunity to use multiple methods of accounting
for their long-term contracts. These methods
will depend on whether the company is a
small or large contractor and whether their
contracts are short-term or long-term.
Cash vs. Accrual
Under the cash method of accounting,
taxable income is comprised of cash receipts,
98
CONSTRUCTION-TODAY.COM NOVEMBER 2017
net of expenses and constructive receipts paid during the year. A
constructive receipt occurs when money or property is available to
the taxpayer without any restrictions.
If the taxpayer receives a check in the mail on Dec. 30, 2017, but
does not deposit the check until Jan. 2018, it is still considered income in 2017 since the funds were available to the taxpayer in 2017.
Typically under the cash method, expenses are deducted in the period paid with the exception of some prepaid expenses. For example,
prepaid insurance of $1,000 paid in July 2017 that covers the period
July 2017 to June 2018 would be deducted half in each year since the
payment benefits both years.
The small business exception expands the use of the cash method
of accounting to individuals, S corporations and partnerships without
a C corporation as a partner with average annual gross receipts of $10
million or less. The cash method of accounting does not apply if your
business is a corporation or a partnership with a C corporation as a
partner, when average annual gross receipts exceed $5 million.
If a contractor is unable to use the cash method of accounting,
they must use the accrual method. This method attempts to match
expenses incurred during the year with the related income. Income is
reported when income is earned and the amount can be determined.
http://www.CONSTRUCTION-TODAY.COM
Table of Contents for the Digital Edition of Construction Today - November 2017
Contents
Construction Today - November 2017 - Cover1
Construction Today - November 2017 - Cover2
Construction Today - November 2017 - 1
Construction Today - November 2017 - Contents
Construction Today - November 2017 - 3
Construction Today - November 2017 - 4
Construction Today - November 2017 - 5
Construction Today - November 2017 - 6
Construction Today - November 2017 - 7
Construction Today - November 2017 - 8
Construction Today - November 2017 - 9
Construction Today - November 2017 - 10
Construction Today - November 2017 - 11
Construction Today - November 2017 - 12
Construction Today - November 2017 - 13
Construction Today - November 2017 - 14
Construction Today - November 2017 - 15
Construction Today - November 2017 - 16
Construction Today - November 2017 - 17
Construction Today - November 2017 - 18
Construction Today - November 2017 - 19
Construction Today - November 2017 - 20
Construction Today - November 2017 - 21
Construction Today - November 2017 - 22
Construction Today - November 2017 - 23
Construction Today - November 2017 - 24
Construction Today - November 2017 - 25
Construction Today - November 2017 - 26
Construction Today - November 2017 - 27
Construction Today - November 2017 - 28
Construction Today - November 2017 - 29
Construction Today - November 2017 - 30
Construction Today - November 2017 - 31
Construction Today - November 2017 - 32
Construction Today - November 2017 - 33
Construction Today - November 2017 - 34
Construction Today - November 2017 - 35
Construction Today - November 2017 - 36
Construction Today - November 2017 - 37
Construction Today - November 2017 - 38
Construction Today - November 2017 - 39
Construction Today - November 2017 - 40
Construction Today - November 2017 - 41
Construction Today - November 2017 - 42
Construction Today - November 2017 - 43
Construction Today - November 2017 - 44
Construction Today - November 2017 - 45
Construction Today - November 2017 - 46
Construction Today - November 2017 - 47
Construction Today - November 2017 - 48
Construction Today - November 2017 - 49
Construction Today - November 2017 - 50
Construction Today - November 2017 - 51
Construction Today - November 2017 - 52
Construction Today - November 2017 - 53
Construction Today - November 2017 - 54
Construction Today - November 2017 - 55
Construction Today - November 2017 - 56
Construction Today - November 2017 - 57
Construction Today - November 2017 - 58
Construction Today - November 2017 - 59
Construction Today - November 2017 - 60
Construction Today - November 2017 - 61
Construction Today - November 2017 - 62
Construction Today - November 2017 - 63
Construction Today - November 2017 - 64
Construction Today - November 2017 - 65
Construction Today - November 2017 - 66
Construction Today - November 2017 - 67
Construction Today - November 2017 - 68
Construction Today - November 2017 - 69
Construction Today - November 2017 - 70
Construction Today - November 2017 - 71
Construction Today - November 2017 - 72
Construction Today - November 2017 - 73
Construction Today - November 2017 - 74
Construction Today - November 2017 - 75
Construction Today - November 2017 - 76
Construction Today - November 2017 - 77
Construction Today - November 2017 - 78
Construction Today - November 2017 - 79
Construction Today - November 2017 - 80
Construction Today - November 2017 - 81
Construction Today - November 2017 - 82
Construction Today - November 2017 - 83
Construction Today - November 2017 - 84
Construction Today - November 2017 - 85
Construction Today - November 2017 - 86
Construction Today - November 2017 - 87
Construction Today - November 2017 - 88
Construction Today - November 2017 - 89
Construction Today - November 2017 - 90
Construction Today - November 2017 - 91
Construction Today - November 2017 - 92
Construction Today - November 2017 - 93
Construction Today - November 2017 - 94
Construction Today - November 2017 - 95
Construction Today - November 2017 - 96
Construction Today - November 2017 - 97
Construction Today - November 2017 - 98
Construction Today - November 2017 - 99
Construction Today - November 2017 - 100
Construction Today - November 2017 - 101
Construction Today - November 2017 - 102
Construction Today - November 2017 - 103
Construction Today - November 2017 - 104
Construction Today - November 2017 - 105
Construction Today - November 2017 - 106
Construction Today - November 2017 - 107
Construction Today - November 2017 - 108
Construction Today - November 2017 - 109
Construction Today - November 2017 - 110
Construction Today - November 2017 - 111
Construction Today - November 2017 - 112
Construction Today - November 2017 - 113
Construction Today - November 2017 - 114
Construction Today - November 2017 - 115
Construction Today - November 2017 - 116
Construction Today - November 2017 - 117
Construction Today - November 2017 - 118
Construction Today - November 2017 - 119
Construction Today - November 2017 - 120
Construction Today - November 2017 - 121
Construction Today - November 2017 - 122
Construction Today - November 2017 - 123
Construction Today - November 2017 - 124
Construction Today - November 2017 - 125
Construction Today - November 2017 - 126
Construction Today - November 2017 - 127
Construction Today - November 2017 - 128
Construction Today - November 2017 - 129
Construction Today - November 2017 - 130
Construction Today - November 2017 - 131
Construction Today - November 2017 - 132
Construction Today - November 2017 - 133
Construction Today - November 2017 - 134
Construction Today - November 2017 - 135
Construction Today - November 2017 - 136
Construction Today - November 2017 - Cover3
Construction Today - November 2017 - Cover4
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue6
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue6a
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue5
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue5b
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue5a
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue4
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue4a
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue3
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue3a
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue2
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue2a
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue1
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol17issue1a
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol16issue6
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol16issue5
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol16issue4
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol16issue3
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol16issue2
http://digital.construction-today.com/nxtbooks/knighthouse/ct_vol16issue1
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201712
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201711
http://digital.construction-today.com/nxtbooks/knighthouse/ct_20170910
http://digital.construction-today.com/nxtbooks/knighthouse/ct_20170708
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201706
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201705
http://digital.construction-today.com/nxtbooks/knighthouse/ct_20170304
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201702
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201701
http://digital.construction-today.com/nxtbooks/knighthouse/ct_20161112
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201610vol2
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201610
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201609
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201608
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201607
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201606
http://digital.construction-today.com/nxtbooks/knighthouse/ct_201605
http://digital.construction-today.com/nxtbooks/phoenix/ct_201604
http://digital.construction-today.com/nxtbooks/phoenix/ct_20160304
http://digital.construction-today.com/nxtbooks/phoenix/ct_20160102
http://digital.construction-today.com/nxtbooks/phoenix/ct_20151112
http://digital.construction-today.com/nxtbooks/phoenix/ct_20150910
http://digital.construction-today.com/nxtbooks/phoenix/ct_20150708
http://digital.construction-today.com/nxtbooks/phoenix/ct_20150506
http://digital.construction-today.com/nxtbooks/phoenix/ct_20150304
http://digital.construction-today.com/nxtbooks/phoenix/ct_20150102
http://digital.construction-today.com/nxtbooks/phoenix/ct_20141112
http://digital.construction-today.com/nxtbooks/phoenix/ct_20140910
http://digital.construction-today.com/nxtbooks/phoenix/ct_20140708
http://digital.construction-today.com/nxtbooks/phoenix/ct_20140506
http://digital.construction-today.com/nxtbooks/phoenix/ct_20140304
http://digital.construction-today.com/nxtbooks/phoenix/ct_20140102
http://digital.construction-today.com/nxtbooks/phoenix/ct_20131112
http://digital.construction-today.com/nxtbooks/phoenix/ct_20130910
http://digital.construction-today.com/nxtbooks/phoenix/ct_20130708
http://digital.construction-today.com/nxtbooks/phoenix/ct_20130506
http://digital.construction-today.com/nxtbooks/phoenix/ct_20130304
http://digital.construction-today.com/nxtbooks/phoenix/ct_20130102
http://digital.construction-today.com/nxtbooks/phoenix/ct_20121112
http://digital.construction-today.com/nxtbooks/phoenix/ct_20120910
http://digital.construction-today.com/nxtbooks/phoenix/ct_201208
http://digital.construction-today.com/nxtbooks/phoenix/ct_201207
http://digital.construction-today.com/nxtbooks/phoenix/ct_201206
http://digital.construction-today.com/nxtbooks/phoenix/ct_201205
http://digital.construction-today.com/nxtbooks/phoenix/ct_201204
http://digital.construction-today.com/nxtbooks/phoenix/ct_201203
http://digital.construction-today.com/nxtbooks/phoenix/ct_201202
http://digital.construction-today.com/nxtbooks/phoenix/ct_201201
http://digital.construction-today.com/nxtbooks/phoenix/ct_201112
http://digital.construction-today.com/nxtbooks/phoenix/ct_20111011
http://digital.construction-today.com/nxtbooks/phoenix/ct_201109
http://digital.construction-today.com/nxtbooks/phoenix/ct_201108
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201107
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201106
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201105
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201104
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201103
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201102
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201101
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201012
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201011
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201010
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201009
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201008
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201007
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201006
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201005
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201004
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201003
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201002
http://digital.construction-today.com/nxtbooks/businessmedia/ct_201001
http://digital.construction-today.com/nxtbooks/schofield/ct_200912
http://digital.construction-today.com/nxtbooks/schofield/ct_200911
http://digital.construction-today.com/nxtbooks/schofield/ct_200910
http://www.nxtbook.com/nxtbooks/schofield/ct_200909
http://www.nxtbookMEDIA.com