A generic chart of accounts doesn’t work for construction. If you’re using the default QuickBooks template, you’re lumping costs together in ways that hide where your money actually goes. The structure needs to match how contractors actually run jobs, which means supporting job costing at the account level and separating direct costs from overhead.

Start with income. Don’t use a single “sales” account. Break it into contract revenue for your base work, change order revenue for approved scope additions, and retainage released for amounts held back and later paid. You may also want a separate account for service or time-and-materials work if that’s part of your business. Tracking these separately shows you how much revenue comes from original contracts versus changes, which tells you something real about estimating accuracy and project management.

Cost of goods sold is where most construction charts of accounts fall apart. Create separate COGS accounts for direct labor, materials, subcontractors, equipment costs (rental and owned equipment allocated to jobs), and permits and fees. Some contractors add an “other job costs” bucket for things like dumpsters, porta-potties, and job site supplies. The goal is that every dollar spent on a specific job flows to a direct cost account coded to that job, not to a general expense category.

Overhead lives in operating expenses, not COGS. Office rent, admin salaries, general insurance, vehicle costs for your personal truck, marketing, software subscriptions, and accounting fees all belong here. Mixing these with direct job costs destroys your gross margin numbers and makes it impossible to tell which jobs made money.

On the balance sheet, add accounts that construction requires. Retainage receivable tracks amounts held back by customers until project completion. Retainage payable tracks amounts you’re holding back from subs. Customer deposits sits as a liability until the work is performed. Work in progress accounts handle over and under billings if you’re running percentage-of-completion. These accounts don’t exist in most default templates but they matter for accurate financials.

Keep the detail level useful, not excessive. You don’t need 40 material subaccounts. Five to seven direct cost categories that every transaction can be coded to consistently is better than a hundred that nobody uses correctly. The real detail lives in your job costing reports, which pull from job assignments on each transaction, not from how many subaccounts you have.

Set it up right once and the books actually tell you something. Set it up wrong and you’ll be looking at financials that are technically accurate but operationally useless. If you’re starting a construction business or trying to fix a chart of accounts that’s grown messy, bookkeeping services in Pasadena built around construction accounting can save you from rebuilding it later.