Summary
A generic chart of accounts can't answer the questions every Ontario contractor needs answered: which jobs make money, how much holdback is owed in each direction, and whether you've billed ahead of or behind the work. A construction chart of accounts adds contract revenue types, direct job cost categories, holdback receivable and payable, over and under billings, WSIB and HST accounts, paired with job and cost codes. This guide shows a complete structure, explains the 2026 Construction Act annual holdback release, works through a WIP example, and covers T5018, CCA classes and CRA business number (BN) setup, with a WIP and holdback calculator.
Construction is one of the hardest industries to keep clean books for. Every project is its own small business, with its own contract, budget, change orders, subcontractors and payment schedule. Money is held back for months, invoices run ahead of or behind the work, and the same truck or excavator serves five jobs in a week.
Most accounting software ships with a chart of accounts built for retailers or service firms. Contractors who use it as-is end up with one "Revenue" line, one "Cost of Sales" line and no way to tell a profitable job from a losing one until year-end, if then. Lenders, bonding companies and buyers notice.
This guide sets out a chart of accounts designed for Ontario general contractors, trades and builders. Ledgerive's bookkeeping services set up and maintain construction books, including job costing, holdbacks and WIP reporting.
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1. Why Construction Needs Its Own Chart of Accounts
- Job profitability: you need revenue and cost by job, not just by company.
- Cash timing: holdbacks, progress billings and retainage make profit and cash diverge.
- Lender and bonding requirements: sureties and banks expect WIP schedules and percentage-of-completion reporting.
- Compliance: T5018, WSIB, HST and payroll all need clean, separate accounts.
2. Numbering Structure
| Range | Category | Examples |
|---|---|---|
| 1000–1999 | Assets | Bank, receivables, holdback receivable, underbillings, equipment |
| 2000–2999 | Liabilities | Payables, holdback payable, overbillings, HST, source deductions, loans |
| 3000–3999 | Equity | Share capital, retained earnings, shareholder loans |
| 4000–4999 | Contract revenue | Fixed-price, cost-plus, time-and-materials, change orders |
| 5000–5999 | Direct job costs | Labour, labour burden, materials, subcontractors, equipment, permits |
| 6000–6999 | Indirect costs (field overhead) | Equipment ownership, small tools, yard, supervision not charged to jobs |
| 7000–8999 | General and administrative; other | Office, insurance, professional fees, interest, gains on equipment sales |
Keep the chart lean. Detail by job belongs in job and cost codes (section 4), not in hundreds of general ledger accounts.
3. Construction-Specific Accounts
| Account | Number (example) | Purpose |
|---|---|---|
| Accounts receivable – progress billings | 1100 | Invoiced amounts due, net of holdback |
| Holdback receivable | 1150 | Holdback withheld by owners or general contractors |
| Costs and estimated earnings in excess of billings | 1200 | Underbillings (contract asset) |
| Accounts payable – subcontractors | 2100 | Separate from suppliers for T5018 and lien tracking |
| Holdback payable | 2150 | Holdback you withhold from subcontractors |
| Billings in excess of costs and estimated earnings | 2200 | Overbillings (contract liability) |
| WSIB payable | 2450 | Premiums owed to WSIB |
| Contract revenue – fixed price / cost-plus / T&M | 4100–4300 | Revenue by contract type |
| Change order revenue | 4400 | Tracks approved extras separately |
| Labour burden | 5150 | CPP, EI, vacation pay, WSIB and benefits on field labour |
4. Job and Cost Codes
Job costing works on two dimensions alongside the general ledger: which job and which part of the work. Many contractors base their cost codes on CSI MasterFormat divisions, combined with a cost type.
| Phase code | Description | Cost types used |
|---|---|---|
| 01 | General conditions (site supervision, temporary facilities) | L, M, E, O |
| 03 | Concrete | L, M, S, E |
| 06 | Wood and composites (framing, millwork) | L, M, S |
| 09 | Finishes (drywall, flooring, paint) | L, M, S |
| 22 / 23 | Plumbing / HVAC | S |
| 26 | Electrical | S |
- Cost types: L = labour, M = materials, S = subcontract, E = equipment, O = other (permits, bonds, dumping).
- Match the estimate: use the same codes in estimates and job budgets so you can compare estimated vs. actual line by line.
- Change orders: give approved extras their own code or job suffix so they're priced and tracked separately.
- Equipment charged to jobs: charge internal equipment at an hourly rate to the job, crediting an equipment recovery account.
5. Holdbacks Under the Construction Act
Ontario's Construction Act generally requires owners and payers to retain 10% of the value of work as holdback. Amendments that took effect on January 1, 2026 changed how holdback is released on longer projects.
- Annual release: on projects longer than a year, owners must publish a notice within 14 days after each contract anniversary and pay accrued holdback for that year, generally 60 to 74 days after the notice, unless a lien has been preserved or perfected.
- Flow-down: contractors and each subcontract tier must release accrued holdback within 14 days of receiving their annual payment, unless a lien applies to that subcontract.
- Transition: contracts signed from January 1, 2026 start annual release at the first anniversary; earlier contracts start at the second anniversary after January 1, 2026.
- Proper invoices: an invoice is deemed proper unless the owner notifies deficiencies in writing within 7 days.
Chart of accounts impact: track holdback receivable and payable by job and contract year, using sub-accounts or job reports, so annual release amounts can be reconciled and paid down to subcontractors on time.
6. WIP, Over Billings and Under Billings
Under the percentage-of-completion method, revenue is recognized based on progress, commonly measured as costs incurred divided by total estimated costs. Comparing earned revenue with billings shows whether you're overbilled or underbilled.
| Line | Amount |
|---|---|
| Contract value (incl. approved change orders) | $1,200,000 |
| Estimated total cost | $1,020,000 |
| Cost to date | $612,000 |
| Percent complete (612,000 ÷ 1,020,000) | 60% |
| Revenue earned to date (60% × 1,200,000) | $720,000 |
| Billed to date | $780,000 |
| Overbilling (contract liability, account 2200) | $60,000 |
| Holdback receivable at 10% of billings (account 1150) | $78,000 |
- Overbillings aren't bad in themselves, but they mean cash has been collected for work not yet done.
- Persistent underbillings can signal cost overruns or slow billing and are a red flag for lenders and sureties.
- Update estimates monthly: WIP is only as good as the estimate-to-complete on each job.
7. Interactive WIP and Holdback Calculator
Enter one job's figures to see percent complete, earned revenue, over or under billing and holdback.
8. HST, Payroll, WSIB, T5018 and BN Registration
- CRA business number: your nine-digit business number links your GST/HST (RT), payroll (RP) and corporate income tax (RC) accounts. Put it on every invoice and subcontract.
- BN registration for HST: most contractors pass the $30,000 small supplier threshold quickly; complete BN registration for GST/HST before invoicing, and keep HST collected and input tax credits in separate accounts.
- Subcontractor HST numbers: record each subcontractor's GST/HST number to support input tax credits.
- Payroll and burden: map CPP, EI, vacation pay and WSIB to the labour burden account so job costs reflect the true cost of labour.
- WSIB clearance certificates: obtain them from subcontractors before paying to avoid liability for their premiums.
- T5018 reporting: if construction is your primary business, report payments to subcontractors on T5018 slips, generally within six months after the end of your reporting period. A separate subcontractor payables account makes this far easier.
- Payroll account timing: open the RP account under your CRA business number before the first field crew is paid.
9. Equipment and CCA Classes
| Asset | Typical CCA class | Rate |
|---|---|---|
| Power-operated mobile equipment (excavators, loaders) | Class 38 | 30% |
| Trucks and vehicles | Class 10 | 30% |
| General equipment and tools over the small-tool limit | Class 8 | 20% |
| Small tools under the small-tool cost limit | Class 12 | 100% |
Set up asset accounts by class, keep a fixed asset register by unit, and track equipment operating costs (fuel, repairs, insurance) in the indirect cost range so internal equipment rates can be set accurately. Equipment-heavy contractors planning purchases should model financing costs; see our State of Small Business Financing in Canada report for current rates.
10. Setup Checklist and Common Mistakes
- Set up the chart before the first job, or migrate at a year-end to avoid splitting comparisons.
- Match estimating and accounting codes so budget-to-actual reports work.
- Don't net holdback against receivables or payables; track it separately.
- Don't book all field labour to overhead: charge it to jobs through timesheets.
- Reconcile WIP monthly, not just at year-end.
- Watch cash: rising costs and slow payments are top concerns for small firms, as our small business growth challenges survey summary shows.
Clean job data feeds better forecasts and bids: our financial modeling services build cash flow and backlog models for contractors, our business plan services support bonding and lender applications, and our fractional CFO services provide monthly WIP reviews. Contractors bidding on community and charity capital projects may also find our overview of business plan services for non-profits in Ontario useful for understanding how those clients plan and fund projects, and newcomer contractors launching through immigration programs can use our Start-up Visa and PNP business plan checklist.
11. Frequently Asked Questions
What is a chart of accounts for a construction company?
A chart of accounts is the numbered list of accounts a company uses to record transactions. For a construction company it includes standard assets, liabilities, equity, revenue and expenses, plus construction-specific accounts such as holdback receivable and payable, over and under billings, contract revenue by type, and direct job costs for labour, materials, subcontractors and equipment, usually combined with job and cost codes.
How do Ontario contractors account for holdbacks?
Under Ontario's Construction Act, owners and contractors generally retain 10% of payments as holdback. Contractors typically record holdback withheld by customers as a separate holdback receivable and holdback they withhold from subcontractors as holdback payable, tracked by job. From January 1, 2026, accrued holdback on longer projects must generally be released annually, so tracking holdback by contract year is now important.
What are overbillings and underbillings in construction?
Under the percentage-of-completion method, an overbilling occurs when a contractor has billed more than the revenue earned to date, creating a liability (billings in excess of costs and estimated earnings). An underbilling occurs when revenue earned exceeds amounts billed, creating an asset. Lenders and bonding companies review these balances on the work-in-progress schedule.
Do Ontario construction companies need to file T5018 slips?
Generally yes, if construction activities are the business's primary source of income. Businesses must report payments to subcontractors for construction services on T5018 slips and a T5018 summary, generally within six months after the end of the chosen reporting period. Payments under the reporting threshold are not required to be reported.
Should a small contractor use percentage-of-completion accounting?
Many contractors with longer contracts use the percentage-of-completion method because it matches revenue to work performed, and lenders and bonding companies often expect it. Under Canadian accounting standards for private enterprises, the completed-contract method may be used in some situations, such as short contracts. Discuss the right method with your accountant.
Summary
An Ontario construction chart of accounts should separate contract revenue types and direct job costs, track holdback receivable and payable by job and contract year under the 2026 annual release rules, record over and under billings from a monthly WIP schedule, and keep HST, payroll, WSIB and T5018 data clean. Pair it with job and cost codes, complete BN registration early, and keep every CRA business number account current.
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Source: Fasken, Ontario's Construction Act amendments effective January 1, 2026. Account numbers, cost structure and the WIP example are illustrative; tax and legal points are general.