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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Subcontrators cost - what is the correct way to track the

Resolved Question:

Subcontrator's cost - what is the correct way to track the cost the primary contractor is paying on the subcontractor's behalf, make sure those costs are associated with the corresponding job numbers, how to show payments made to the subcontractor in advance, and then record his invoice once it comes in. One of my concerns is that job cost may end up being overstated.
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Thank you for your question, and thanks for requesting me directly

Megan C :

Basically you would track this through invoices. Whatever invoices submitted to the contractor from the subcontractor goes on the job. Just keep track of which jobs they are for

Megan C :

When the contractor is paid in advance, you would debit prepaid subcontractor fees and credit cash. Then, when the subcontractor spends the funds then remove the asset account and place it to the proper expense accounts

Megan C :

The job cost won't end up being overstated.

Customer:

What I'm seeing is, the costs being allocated to the jobs, when we pay the suppliers, but I don't see where those costs are offset when we pay the subcontractor. Or am I overthinking it or completely thinking incorrectly about it?

Megan C :

You're overthinking it. You just record expenses as they are paid, and if you prepay the subcontractor account for that as a prepaid account

Customer:

ok. thank you. I am still confused about how to show these subcontactor material costs, as Subcontractor costs for Cost of Sales, versus company (paid for not using a subcontractor) Cost of Sales.

Megan C :

If it makes you feel better just make two accounts and keep it separate.

Customer:

haha, well, I guess it would make it easier for me to track, to make sure we haven't overpaid the subcontractor.

Megan C :

sounds good.

Megan C :

is there anything else I can assist you with today?

Customer:

no. thank you.

Megan C :

You're certainly welcome. Please come back and see me again

Megan C :

and please don't forget to rate, before leaving the chat :-)

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