fbpx

Waterford Business Solutions

How To Create an Industrial Chart Of Accounts : Plumbing Edition

Accounting for the Home Service Professional

How To Create an Industrial Chart Of Accounts : Plumbing Edition

Since we previously discussed a contractor’s chart of accounts, let’s dive into an industry-specific chart of accounts! Today we will be exploring the world of plumbing and the accounts which shape a knowledgeable and tax-friendly chart of accounts.

As a quick recap of the chart of accounts, six main account types make up the balance sheet and profit and loss statement. Income and expenses calculate a net profit on the income statement while assets, liabilities, and equity equate to the balance sheet.

Assets

All industries will include bank accounts, cash, accounts receivables, and undeposited funds as assets. Still, if we want to look at plumbing specifically, the fixed assets are where things begin to change.

Most businesses will have at least one truck to run a plumbing company. As a result, please remember, when adding your vehicles to a COA, that information to identify the specific truck should be used as the title, i.g. 2020 Ford E350. There should be accumulated depreciation of the car below this so that you can always review the tax value.

Machinery and Equipment are directly related to the industry. For example, we have seen Sewer Cameras, Plumbing Snakes, and Sprayers for lining pipes for our plumber clients. All purchases over $1,000 that will last more than one year should be classified as assets, so you can depreciate them over multiple years.

Liabilities

A liability is an amount owed to another entity from the business. In terms of industry-specific liabilities, they would go hand in hand with the assets only if they were financed.

Even though these following suggestions are not plumbing specific, they may still relate to your business, as it is something we have seen in plumbing company accounting. Any companies using prominent vendors such as Hajoca, Ferguson, or Gateway supply houses should look into using an Accounts payable system, so the bills show up when they are incurred, not when they are paid. Also, any industries that fall into their states’ sales tax perimeters should see this current liability on their books.

Equity

Equity should contain an owner’s draw/investment, opening balance equity, and retained earnings. Depending on the company, common stock may be included as an account here if the company is publicly traded. This category is more related to your business’ filing type.

Income and Cost of Goods Sold

The chart of accounts will differ for your plumbing business because of the income accounts and their associated cost of goods sold accounts. For plumbing companies, income is divided into two categories, Commercial and Residential. This breakdown allows for a direct track of which division is bolstering your sales. Service, Install, and Repairs can be subcategories within commercial or residential income.

These are the most common plumbing income categories, but some of our clients have adjusted those to work for their particular business by having: new construction or subcontracting.

The cost of goods sold should directly reflect the income accounts you choose for your company. So, for example, if you have only the commercial and residential breakdown, you should have COGS for each of these that are identical. In addition, plumber industry-specific cost of goods sold should include permits, equipment rentals, subcontractors, and credit card processing fees.

Expenses

An expense that has been incurred by a business and which is spread across multiple jobs is called a general expense. Admin wages, for instance, cannot be considered COGS since they are spread across many jobs.

Similar to the income accounts, breaking out general job supplies into those categories can be beneficial too. For example, when you buy piping materials that are only for installations and are bought in bulk, using a separate job supply account will allow you to track the bulk purchases.

I hope this has provided some insight into some specific accounts that a plumber should include in his books. But, as always, we recommend having an accountant who understands the inner workings of your industry to advise the most beneficial tax planning and insight on industry KPIs.

Ready to learn more?

Connect with us! 

Whats Up Next?

 

 

Accounting Information

Meals Deductions for ...

Meals Deductions for Taxes Taxes are a highly discussed topic when planning business financials....

Problems with startin...

What Problems Do most Starting/small business face? It is commonly assumed that starting your...

How To Create an Indu...

Since we previously discussed a contractor’s chart of accounts, let’s dive into an industry-specific...

Company Equity

Understand your company equity, the areas to equity, and how it breaks down in...

Company Liabilities

Understanding and identifying company liabilities can be challenging. We will show you the types...

Company Assets

Understanding and identifying company assets can be challenging. We will show you how to...

Balance Sheet

Understanding a balance sheet tends to be the most elusive in accounting. We started...

End of Year Employee ...

End-of-year employee appreciation is the time of year that bonuses and much more. However,...

2021 Business Tax For...

Waterford Business Solutions Accounting and Bookkeeping. Virtual Business Solutions providing 2021 Season Tax Forms...

Share This Article

Facebook
Twitter
LinkedIn
Email

Related Articles

Company Assets Waterford Business Solutions

Company Assets

Understanding and identifying company assets can be challenging. We will show you how to identify all types of assets in accounting and classify them!

Read More
Company Liabilities Waterford Business Solutions

Company Liabilities

Understanding and identifying company liabilities can be challenging. We will show you the types of liabilities in accounting and classify what you owe.

Read More
Waterford How to protect your business

"Bookkeeping Mistake!"

Free Bookkeeping Mistake Guide