Construction chart of accounts in QuickBooks

Why standard QuickBooks accounts break construction books

The standard QuickBooks Online chart of accounts was built for generic retail and professional service firms. It provides a single Cost of Goods Sold account and dumps everything else into general overhead expenses.

For a general contractor or trade specialty subcontractor (electrical, plumbing, HVAC, framing), that default setup hides project profitability. When direct job materials, field labor, equipment rentals, and 1099 trade subcontractor invoices post to general expense lines alongside the shop rent and office internet, your Profit & Loss statement cannot report whether a specific job cleared its estimated 25% gross margin or bled cash.

A construction chart of accounts organizes accounts into a standardized numbering system that isolates Direct Job Costs (Cost of Goods Sold) from Operating Overhead (Expenses), creating the structural foundation required for job costing. For complete company preferences and project settings, see our QuickBooks Online construction setup guide.

You can download this complete structure as an Excel workbook:

The account numbering standard

QuickBooks Online allows custom account numbering under Account and Settings > Advanced > Chart of Accounts. Enabling account numbers standardizes your financial reporting across all project managers and estimators:

Account Number Range	Financial Statement Section	Purpose in Construction Accounting
1000 – 1490	Current Assets	Operating cash, payroll accounts, and contract retainage receivable
1500 – 1990	Fixed Assets	Work trucks, heavy machinery, trailers, and accumulated depreciation
2000 – 2490	Current Liabilities	Trade payables, subcontractor retainage payable, and overbillings
2500 – 2990	Long-Term Liabilities	Equipment notes, vehicle loans, and commercial bank credit facilities
3000 – 3990	Equity	Owner capital contributions, owner draws, and prior-year retained earnings
4000 – 4990	Income	Progress billings, approved change orders, and time-and-materials billings
5000 – 5990	Cost of Goods Sold	Direct Job Costs: materials, field labor, 1099 subs, rentals, permits
6000 – 6990	Overhead Expenses	Shop lease, general liability insurance, estimating software, legal/tax
7000 – 7990	Other Income / Expense	Financing interest expense, asset sales gains/losses

The decisive line is between the 5000s and the 6000s. If an expense is directly tied to a customer contract, it belongs in the 5000-series Cost of Goods Sold. If it would exist even if every job shut down tomorrow, it belongs in 6000-series Operating Overhead.

Complete construction chart of accounts hierarchy

Below is the standard 41-account hierarchy engineered specifically for general contractors and specialty subcontractors operating in QuickBooks Online:

Number	Account Name	Account Type	Detail Type
1010	Operating Checking	Bank	Checking
1020	Payroll Checking	Bank	Checking
1100	Accounts Receivable	Accounts Receivable	Accounts Receivable (A/R)
1150	Retainage Receivable	Other Current Assets	Other Current Assets
1200	Inventory - Direct Materials	Other Current Assets	Inventory
1300	Costs in Excess of Billings (Underbillings)	Other Current Assets	Other Current Assets
1400	Prepaid Commercial Insurance & Bonds	Other Current Assets	Prepaid Expenses
1510	Commercial Vehicles	Fixed Assets	Vehicles
1520	Machinery & Heavy Job Equipment	Fixed Assets	Machinery & Equipment
1590	Accumulated Depreciation	Fixed Assets	Accumulated Depreciation
2010	Accounts Payable	Accounts Payable	Accounts Payable (A/P)
2020	Commercial Credit Card	Credit Card	Credit Card
2110	Retainage Payable to Subcontractors	Other Current Liabilities	Other Current Liabilities
2120	Billings in Excess of Costs (Overbillings)	Other Current Liabilities	Other Current Liabilities
2210	Payroll Liabilities	Other Current Liabilities	Payroll Tax Payable
2220	1099 Backup Withholding Payable	Other Current Liabilities	Other Current Liabilities
2510	Heavy Equipment Loans Payable	Long Term Liabilities	Notes Payable
2520	Vehicle Loans Payable	Long Term Liabilities	Other Long Term Liabilities
3010	Owner’s Capital	Equity	Owner’s Equity
3020	Owner’s Draws	Equity	Owner’s Equity
3030	Retained Earnings	Equity	Retained Earnings
4010	Contract Revenue - Progress Billings	Income	Service/Fee Income
4020	Change Order Revenue	Income	Service/Fee Income
4030	Time & Materials Revenue	Income	Service/Fee Income
5010	Direct Job Materials	Cost of Goods Sold	Supplies & Materials - COGS
5020	Direct Field Labor	Cost of Goods Sold	Cost of Labor - COS
5030	Subcontractor Expense (1099)	Cost of Goods Sold	Cost of Labor - COS
5040	Job Site Equipment Rental	Cost of Goods Sold	Equipment Rental - COS
5050	Municipal Permits & Engineering Fees	Cost of Goods Sold	Other Costs of Service - COS
5060	Dumpsters & Job Site Cleanup	Cost of Goods Sold	Other Costs of Service - COS
5070	Job Site Safety & Small Tools (< $2,500)	Cost of Goods Sold	Supplies & Materials - COGS
5080	Freight & Direct Delivery Charges	Cost of Goods Sold	Shipping, Freight & Delivery - COS
6010	Advertising & Bid Marketing	Expenses	Advertising/Promotional
6020	Merchant & Bank Wire Fees	Expenses	Bank Charges
6030	General Liability & Workers Comp Insurance	Expenses	Insurance
6040	Estimating Software & Office Supplies	Expenses	Office/General Administrative Expenses
6050	Professional Fees - Legal & Accounting	Expenses	Legal & Professional Fees
6060	Shop & Storage Yard Lease	Expenses	Rent or Lease of Buildings
6070	Utilities & Mobile Communications	Expenses	Utilities
6080	Overhead Vehicle Gas & Repairs	Expenses	Auto
7010	Business Loan Interest Expense	Other Expense	Other Miscellaneous Expense

Handling retainage on the balance sheet

In commercial and large residential contracting, owners and general contractors routinely withhold 5% to 10% from every progress draw until substantial completion.

If you bill $100,000 and the GC holds back $10,000, entering the invoice as an ordinary $100,000 Accounts Receivable balance corrupts your aging reports. The $10,000 retainage shows up as 90+ days past due, even though neither party expects payment until project closeout.

Instead, route retainage through dedicated balance sheet accounts:

1. Retainage Receivable (Account 1150): An asset account that records the retainage withheld by your customers. On progress invoices, add a line item that credits contract revenue for the full milestone and debits account 1150 for the 10% retainage holdback, leaving net Accounts Receivable reflecting the true due date.
2. Retainage Payable (Account 2110): A liability account that records the 5% to 10% you withhold from your 1099 trade subcontractors until their work is inspected and accepted.

For an in-depth breakdown of how progress billing, retainage, and job costing interact inside QuickBooks Online, see our dedicated guide to bookkeeping for contractors. How the balances in 1300 and 2120 are worked out each month, from a schedule of open jobs, is in our post on WIP in accounting.

Subcontractor 1099 compliance in the 5000s

Trade subcontractors must be separated from in-house W-2 labor. In QuickBooks Online, post subcontractor invoices to Account 5030 (Subcontractor Expense) and ensure each vendor is flagged as Track payments for 1099 in their vendor profile.

Two operational rules protect contractors from IRS audit penalties:

• Collect the W-9 before writing the first check: Never release a deposit or progress payment to an independent trade contractor without a signed W-9 on file.
• Isolate backup withholding: If a subcontractor refuses to provide an EIN or SSN, the IRS requires you to withhold 24% backup withholding. Post those withholdings to Account 2220 (1099 Backup Withholding Payable) until remitted on IRS Form 945.

The 4 common errors that distort contractor books

1. Lump-sum equipment purchases: Expensing a $65,000 truck or skid steer immediately into an expense account swings the month’s P&L into an artificial tax loss. Capitalize equipment in Account 1510/1520 and coordinate with your CPA on Section 179 depreciation schedules.
2. Booking unearned customer deposits as revenue: A 30% mobilization deposit collected before breaking ground is not income; it is an unearned liability. Depositing it directly to income overstates the start month and leaves the final completion month showing negative margins.
3. Crew leads buying materials on personal credit cards: When field foremen purchase lumber or plumbing fittings on personal cards without submitting itemized receipts, direct job costs are understated and job profitability figures become fictional.
4. Failing to use sub-customers for job costing: In QuickBooks Online, every job must be established as a Sub-Customer under the primary client, with Bill with parent enabled. Every expense line in the 5000s must carry the designated job name.

Our illustrative contractor cleanup case study demonstrates how nine months of miscoded job costs, misclassified owner draws, and unreconciled equipment loans are methodically audited and restructured.

How to import into QuickBooks Online

1. Download the ledgerbrook-construction-chart-of-accounts.xlsx spreadsheet.
2. Log in to QuickBooks Online, select the Gear icon, and navigate to Import data > Chart of Accounts.
3. Attach the downloaded Excel file and click Next.
4. Map the 4 columns: Account Number, Account Name, Type, and Detail Type.
5. Review the preview table and click Import.

When contractor books require a professional cleanup

If historical jobs were run without sub-customer tagging, retainage was posted to bad debt, or years of direct materials were lumped into office expenses, a simple chart of accounts import will not fix past balance sheet errors.

Rebuilding job-level historical records requires a specialized QuickBooks cleanup:

$99per month of backlog20% off 6+ months

If you are unsure whether your current QuickBooks file supports accurate job costing and progress billing, send your file for a confidential review. Once clean, our monthly bookkeeping service keeps job costs, subcontractor 1099s, and retainage reconciliations locked and accurate every single month.