NASCLA Financial Management and Accounting 3

Question 1

What is the purpose of a 'construction budget' versus a 'project estimate'?

Accepted Answer

An estimate is used for bidding; a budget is used internally to control and track actual project spending

Answer

They are identical documents with different names

Answer

A budget is prepared by the owner; an estimate by the contractor

Answer

An estimate is prepared after construction; a budget before

Question 2

Which of the following is a direct job cost in construction accounting?

Accepted Answer

Labor wages paid to workers on a specific project

Answer

Office rent

Answer

Accounting fees

Answer

Business insurance premiums

Question 3

What is the purpose of a contractor's 'contingency' in a project budget?

Accepted Answer

To cover unforeseen costs and risks not included in the base estimate

Answer

To add profit to the project

Answer

To pay subcontractors in advance

Answer

To reserve funds for marketing expenses

Question 4

Which financial ratio measures how quickly a contractor can pay its current debts with current assets?

Accepted Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Return on equity

Answer

Gross margin percentage

Question 5

Under IRS rules, which depreciation method allows contractors to write off more of an asset's value in the early years?

Accepted Answer

Accelerated depreciation (MACRS)

Answer

Straight-line depreciation

Answer

Units-of-production method

Answer

Sum-of-years-digits depreciation

Question 6

What does 'underbilling' indicate in construction accounting?

Accepted Answer

A contractor has completed more work than it has billed for, representing earned but uncollected revenue

Answer

A contractor has billed more than the work completed

Answer

A subcontractor has underpaid their workers

Answer

A contractor has underestimated material costs