Many small builders rely solely on cash accounting,
and limit bookkeeping updates to what is
spent and received in a given month. But the
unevenness of construction cash flow can leave
you with a distorted picture of
your true profit or loss.
Accrual accounting, on the
other hand, is designed to recognize revenue or sales as they
are earned, regardless of when they are billed or when payment
is received. It also recognizes expenses when they are
incurred, which does not always coincide with the receipt of
an invoice or payment of a bill. This method gives you a much
more accurate financial picture by showing the amount of
profit you actually earn