CBC CBC Financial Management & Estimating 2

Question 1

Retainage in a construction contract is best described as:

Accepted Answer

A percentage of each payment withheld until project completion

Answer

Retainage is typically 5–10% of each progress payment withheld by the owner as security against incomplete or defective work.

Question 2

Which financial statement shows a contractor's assets, liabilities, and net worth at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet provides a snapshot of the company's financial position by listing what it owns (assets), owes (liabilities), and the owner's equity.

Question 3

A contractor submits a 'Pay Application.' What document typically accompanies it to support the amounts billed?

Accepted Answer

A lien waiver and updated Schedule of Values

Answer

Pay applications are supported by an updated Schedule of Values showing percent complete per line item and often conditional lien waivers for amounts being billed.

Question 4

What is 'over-billing' (overbilling) in construction accounting?

Accepted Answer

Billing for more work than has actually been completed

Answer

Overbilling occurs when a contractor invoices for a higher percentage of completion than has actually been achieved, creating a liability on the balance sheet.

Question 5

Which cost is considered a 'direct cost' on a construction project?

Accepted Answer

Concrete materials installed on the job

Answer

Direct costs are expenses directly attributable to a specific project, such as labor, materials, and equipment used on that job.

(CBC) Certified Building Contractor Practice Test

(CBC) Certified Building Contractor Practice Test

CBC CBC Financial Management & Estimating 2