Your chart of accounts is the list of buckets every dollar gets sorted into. Pick good buckets and your reports answer real questions: which jobs make money, how much the crew really costs, whether you're billing ahead of the work. Pick bad buckets and you get a P&L that says "Expenses: a lot."
Most contractors start with the default list QuickBooks creates, which was built for a generic small business. It has no idea what a subcontractor is, never mind retainage. This guide gives you a contractor-specific template you can copy, with the reason for every line, so you can adjust it with confidence.
For the general principles behind any chart of accounts, see our chart of accounts guide for small business.
The one rule that matters most
Job costs and overhead live in different places.
- Cost of Goods Sold (COGS) holds costs you only have because you did a job: the crew's hours on site, the lumber, the electrician you subbed out.
- Operating expenses hold costs you'd have even with zero jobs this month: office rent, the bookkeeper, the estimator's salary, website, insurance on the office.
Why it matters: your gross margin (income minus COGS) is your job-level profit. If overhead creeps into COGS, every job looks worse than it is, and you might start bidding higher than you need to. If job costs creep into overhead, jobs look better than they are, and you might keep taking work that loses money. Our explainer on gross margin vs net margin shows how the two numbers relate.
The template
Numbers are optional in QuickBooks Online (turn them on under Settings, Account and settings, Advanced, Chart of accounts). We recommend them: they keep the list in a sensible order and make reports easier to read.
Assets (1000s)
| Number | Account | Why it's there |
|---|---|---|
| 1000 | Operating Checking | Day-to-day bank account |
| 1010 | Payroll Checking (optional) | Keeps payroll separate and easier to reconcile |
| 1050 | Savings or Reserve | Cash you're not spending this month |
| 1100 | Accounts Receivable | Invoiced and not yet paid |
| 1150 | Retainage Receivable | Amounts customers hold back until the job is done. Separate so it doesn't look like late payment |
| 1200 | Costs and Estimated Earnings in Excess of Billings (Underbillings) | Work done but not yet billed, from your WIP schedule |
| 1300 | Materials Inventory (only if you stock materials) | Materials bought for stock, not yet assigned to a job |
| 1400 | Prepaid Expenses | Insurance or software paid ahead |
| 1500 | Vehicles | Trucks and vans |
| 1510 | Equipment | Owned equipment |
| 1520 | Tools | Larger tools you track as assets |
| 1590 | Accumulated Depreciation | Reduces the asset accounts above over time |
Liabilities (2000s)
| Number | Account | Why it's there |
|---|---|---|
| 2000 | Accounts Payable | Bills you owe suppliers and subs |
| 2050 | Retainage Payable | Amounts you hold back from your subs |
| 2100 | Credit Cards (one per card) | Each card reconciled separately |
| 2200 | Billings in Excess of Costs and Estimated Earnings (Overbillings) | Billed ahead of the work, from your WIP schedule |
| 2250 | Customer Deposits | Deposits received before work starts |
| 2300 | Payroll Liabilities | Withholdings and amounts owed to your payroll provider |
| 2310 | Payroll Clearing | Helps payroll entries tie out. See our payroll clearing account guide |
| 2500 | Equipment and Vehicle Loans | One account per loan |
| 2600 | Line of Credit | Bank credit line |
Equity (3000s)
| Number | Account | Why it's there |
|---|---|---|
| 3000 | Owner's Equity or Common Stock | What owners put in |
| 3100 | Owner Draws or Distributions | What owners take out |
| 3900 | Retained Earnings | Profit kept in the business over time |
Income (4000s)
| Number | Account | Why it's there |
|---|---|---|
| 4000 | Contract Income | Main job revenue |
| 4100 | Change Order Income (optional) | See how much profit comes from change orders |
| 4200 | Service and Repair Income | For trades with both projects and service calls |
| 4900 | Discounts and Credits Given | Keeps discounts visible |
Have two very different lines of work, like residential remodels and commercial fit-outs? Use classes for that split rather than duplicating every income and cost account.
Cost of Goods Sold (5000s)
| Number | Account | Why it's there |
|---|---|---|
| 5000 | Direct Labor | Field wages for time spent on jobs |
| 5050 | Labor Burden | Employer payroll costs, workers' comp and benefits for field staff |
| 5100 | Materials | Materials bought for a specific job |
| 5200 | Subcontractors | Payments to subs |
| 5300 | Equipment Rental | Rented equipment used on jobs |
| 5400 | Job Fuel and Small Tools (optional) | If you can assign them to jobs |
| 5500 | Permits and Job Fees | Permits, inspections, dumpsters tied to a job |
| 5600 | Job Supplies | Consumables used on site |
| 5900 | Warranty and Callback Costs | Repair work on finished jobs, so it doesn't hide in a new job |
Operating expenses (6000s)
| Number | Account | Why it's there |
|---|---|---|
| 6000 | Office and Admin Salaries | Office manager, estimator, owner salary if paid through payroll |
| 6050 | Payroll Costs, Office Staff | Employer costs for non-field staff |
| 6100 | Rent and Utilities | Office, shop and yard |
| 6200 | Vehicle Expenses (not job-specific) | Fuel, repairs and insurance for trucks you can't tie to jobs |
| 6300 | Insurance, General | General liability and other business policies |
| 6400 | Software and Subscriptions | Accounting, estimating, project tools |
| 6500 | Marketing and Advertising | Website, ads, signs |
| 6600 | Professional Fees | Accountant, legal, consultants |
| 6700 | Shop Supplies and Small Tools | Tools and supplies not assigned to a job |
| 6800 | Bank and Merchant Fees | Card processing and bank charges |
| 6900 | Depreciation Expense | The yearly cost of vehicles and equipment |
Other income and expense (7000s and 8000s)
| Number | Account | Why it's there |
|---|---|---|
| 7000 | Interest Income | Interest earned |
| 7100 | Gain or Loss on Sale of Equipment | When you sell a truck or machine |
| 8000 | Interest Expense | Loan and credit line interest |
How to set it up in QuickBooks Online, step by step
- Export your current list first. Chart of accounts, then Run report, then export to Excel. That's your backup.
- Turn on account numbers in Settings, Account and settings, Advanced.
- Rename before you add. If QuickBooks already has "Cost of Labor", rename it "5000 Direct Labor" rather than creating a new one. Renaming keeps the history attached.
- Add the missing accounts. Chart of accounts, New, pick the type (for example, Cost of Goods Sold) and the closest detail type.
- Merge duplicates. Rename a duplicate to the exact same name and type as the account you're keeping, and QuickBooks will offer to merge them. Merging can't be undone, so double-check first.
- Make old accounts inactive instead of deleting. History stays intact.
- Point your products and services at the new accounts, so bills and invoices land in the right place automatically.
- Update bank rules that categorize into old accounts.
- Set up job costing. The chart of accounts tells you what kind of cost it is; Projects tell you which job. Our guide to setting up job costing in QuickBooks Online covers that part.
Doing this mid-year? Changing account names is fine any time. Moving transactions between accounts for past months changes past reports, so agree a cutover date with your accountant first.
Accounts contractors often get wrong
- No retainage accounts. Retainage gets lumped into receivables, and A/R looks overdue when it isn't.
- No WIP accounts. Without over- and under-billing accounts, profit swings with billing timing instead of with the work. Our WIP schedule guide explains the monthly entry, and percentage of completion vs completed contract explains why it matters.
- Labor burden left in overhead. An hour of field labor costs more than the wage. If burden sits in overhead, jobs look more profitable than they are.
- Trucks and equipment expensed. Bigger purchases usually belong on the balance sheet. See fixed asset records for small business.
- Too many accounts. A separate account for every supplier makes reports unreadable. Use vendors for that, not accounts.
Adjusting it for your trade
- HVAC, plumbing and electrical with service work: split Service and Repair Income from Contract Income, and consider a separate COGS line for service parts. Our bookkeeping for HVAC and plumbing guide covers this.
- Specialty subcontractors: you'll use Retainage Receivable more than Retainage Payable.
- General contractors: Subcontractors is likely your biggest COGS line. Consider splitting it by trade if you bid that way.
When to get help
A good chart of accounts is a one-time setup. Keeping costs in the right accounts every month is where most contractors' books drift. ABFI's contractor accounting clients get this structure, job costing and a monthly close with WIP, retainage and job reports reviewed by a controller.
Comparing tools first? See our list of the best accounting software for contractors.
Keep reading
- How to set up job costing in QuickBooks Online
- Job costing for contractors
- How to build a WIP schedule
Sources
- Intuit, QuickBooks Online Help, search "Turn on account numbers" and "Merge accounts", quickbooks.intuit.com/learn-support. Checked November 6, 2026.
- Financial Accounting Standards Board, ASC 606 Revenue from Contracts with Customers overview, www.fasb.org/page/PageContent?pageId=/projects/revenue-recognition.html. Checked November 6, 2026.
Questions owners ask
What accounts should a construction company have?
At minimum: separate COGS accounts for direct labor, labor burden, materials, subcontractors and equipment rental; balance sheet accounts for retainage receivable and payable; and over- and under-billing accounts if you run longer jobs.
Should subcontractor costs be COGS or an expense?
COGS, when the subcontractor works on a customer job. It's a direct job cost.
Do I need separate accounts for each job?
No. Use one set of cost accounts and tag each transaction to a job with QuickBooks Projects. Accounts tell you what kind of cost; projects tell you which job.
Where does the owner's truck go?
If the business owns it, it's a fixed asset with depreciation. Fuel and repairs go to job costs if tied to a job, otherwise to vehicle expenses.
Can I change my chart of accounts mid-year?
Yes. Renaming and adding accounts is fine any time. Moving past transactions changes past reports, so agree the approach with your accountant first.
Want books built the way contractors actually work?
ABFI sets up a contractor chart of accounts, job costing and WIP in your QuickBooks, then closes your books every month. Start with a complimentary Business Accounting Diagnostic.