Chart of accounts (builder)

A chart of accounts (COA) is the list of account codes that organises every transaction in a builder’s accounting system (Xero, MYOB, Buildxact, QuickBooks). Each transaction is coded to one or more accounts, building up the income statement and balance sheet over time. A well-designed COA makes job costing, BAS preparation, and end-of-year tax return work straightforward. A poor COA buries useful information and forces re-categorising at every quarter.

The five standard COA categories (consistent across all Australian small-business accounting systems):

Income (revenue): contract revenue, variation revenue, deposit forfeitures, interest income.
Expenses (cost of goods sold + overheads): directly attributable to jobs (COGS) plus business overheads.
Assets: bank accounts, debtors, inventory, plant and equipment, prepaid expenses.
Liabilities: creditors, ATO liabilities (GST, PAYG, super), retention held, customer deposits, loans.
Equity: owner’s capital, retained earnings, drawings.

Builder-specific COA structure recommendations:

Split COGS into trade categories. Instead of a single “subcontractor” line, separate trades: chippy, sparky, plumber, plasterer, brickie, tiler, painter, etc. This makes job-cost analysis far more useful.
Separate retention held as a liability. Money you’ve held from a subbie’s progress claim is theirs, not yours. The standard accounting treatment is to recognise it as a liability (“Retention payable”) at the time you receive it, and clear it when paid out at the end of defects-liability.
Separate customer deposits as a liability. A 10% deposit on a $500K build is $50K in your bank that you haven’t earned yet. The standard treatment is “Customer deposits” liability that clears progressively as work is invoiced.
PC and PS items as separate income lines. Distinguishes scope-managed revenue from main contract revenue and simplifies variation reconciliation.
Plant and equipment as a fixed asset class. Tools, vehicles, scaffolds, generators, compressors. Depreciation runs against this class.
Vehicle running costs separately from plant. Fuel, rego, insurance, repairs. The tax treatment of vehicles is more complex than other plant.

Common builder COA defects:

Single “construction expenses” line: every cost lumped together. Job costing impossible.
No separation of GST-inclusive vs GST-free expenses: BAS preparation becomes a re-coding exercise each quarter.
Customer deposits run through income: overstates revenue and creates a tax bill on money not yet earned.
Retention held as a contra-asset rather than liability: misrepresents the cash position.
Plant treated as expense not asset: depreciation lost; instant deduction strategies missed.

Starter COA for residential builders. Xero, MYOB, and Buildxact ship industry templates, but most aren’t builder-specific out of the box. A good starting point on a fresh setup:

Use Xero’s “Construction Industry” template (or equivalent) as a base.
Add 10-15 trade-specific COGS lines reflecting your typical sub list.
Add “Retention payable” and “Customer deposits” liabilities.
Add “Variations income” as a separate revenue line.
Add at least 3-5 plant and equipment classes (handpower, vehicles, scaffold, generators, larger plant).

For builders.

Set the COA up correctly at start of business. Migrating later is painful and often partial; transactions stay coded to the old structure forever.
Review the COA annually with your BAS agent or accountant. Add lines where they would inform decisions; archive lines you don’t use.
Don’t customise without thinking. Every new code is a re-coding decision for every transaction. Keep it lean.

Also known as: COA, ledger codes, account list.

Category: Business / accounting / setup.

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