PROJECT REPORT
Accounting System in Construction Industries
Preface
Financial management may be defined as the use of a company’s financial
resources and encompasses all decisions that affect a company’s financial health. Many
everyday decisions affect a company’s financial health. The difference between a
marginally profitable and a very profitable company is good financial management.
Business schools teach the fundamental principles of financial management; however,
because of the many unique characteristics of the construction industry, the usefulness of
these financial principles as taught by business schools is limited. To be useful, these
principles must be adapted specifically to the construction industry. For example, in the
construction industry equipment is mobile and may be needed for multiple jobs during a
single month.
Project Report
Traditional accounting methods and financial statements do not allow a company to
properly manage and account for its equipment. This Project report will help construction
professionals to learn how the principles of financial management can be adapted to and
used in the management of construction companies.
The Project is useful for general managers and owners of companies who are
responsible for managing the finances of the entire company; however, many of these
principles are useful to project managers. The project managers who desires to stand out
in a company, there is no better way than to improve the profitability of their project
through the principles of sound financial management. This Project explains the common
financial principles, demonstrating how these principles may be applied to a construction
situation and how these principles affect the financial performance of a company. Many of
the examples included in this Project are based on actual situations identified after
interacting with various construction professionals.
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Project Report
Acknowledgment
I would like to express my special thanks of gratitude to
I also Whole Heartedly Thanks the below Mentors for their key role in making me understanding the
Concept of Construction Project Management, Execution, Finance and Accounting of the Project.
L&T Mumbai Regional Office
Shri A. K. Mishra (Sector Project Manager)
Shri D. H. Deshpande (Contract Manager)
Shri Arun Kumar (Regional Finance & Accounts Manager)
Shri P. Rajesh Narayanan (Project Co-ordinator)
Shri P. Sudhakar (Asst. Mgr Procurement)
L&T Construction Project
Shri Abbasi Saifee (Project Manager)
Shri C.S.Velan (Asst. Project Manager)
Shri Jacob George (Project Finance & Accounts Manager)
Shri S. K. Pandey (Project Planning Manager)
Shri G. K. Mahamuni (Material Manager)
Shri D. K. Shembade (Constrution Manager)
Shri A Dwivedi (Project Accountant)
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Project Report
Objective of Project
❑The basic financial principles that are widely used in the business world and how to modify
them so that they work for the construction industry. Understanding of these principles will help
to manage the business most efficiently.
❑Construction accounting systems, which will help manage the accounting systems and use
accounting information to manage a company.
❑Understanding Financial and accounting principles, so that to interact with various
interrelated organization with construction Industries like Bankers, insurance Companies,
Underwriters, Supply Chain, etc at professional level.
Project Information including complexity of Job
Construction Contract description : Supply & Erection of LT/HT Lines, DTC, Laying of cables Etc,
in Pune Municipal Corporation area.
Contract Value : Rs 30,98,04,676.00
Client /Project Management Consultancy -
: The Chief Engineer (PZ), Maharastra State Electricity Board,
Rastapeth, Pune 411 011.
Contractual Start Date. : 10.09.2018.
Contractual Completion Date. : 09.09.2020
Payment Terms. :15 % Mobilisation Advance against BG,
:75% towards supply, installation testing & Commissioning,
:5% after issue of Completion certificate
:5 % towards completion on defect liability Period 2Year from final completion
of the Job.
Payment due on : Within 45 days from the date of submission of Bills
Defect Liability Period : Originally it was 2 years from the date of issue of completion
certificate. Subsequently it was changed to 365 days as per amendment
issued vide MSEB's letter Ref.No.TD/IR/APDRP/32129/1726 Dated 16.01.04.
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Project Report
Taxes & Duties. :The price is inclusive of all taxes & duties including WCT. (Service tax came
in effect after award of contract). No compensation on statutory variation
applicable.
Bank Guarantees : 1. Performance Guarantee - 10 % Valid Till Defective liability Period.
Amount Rs. 3,09,80,500.
2. Mobilisation Advance. 15 % Amount Rs.4,64,70,700.
Insurance Details : Insurance shall be jointly in the name of Employer & Contractor for the
period till Defect liability Period towards the following
a.) Full cover against damage to other People's Property
b.) Cover against death or injury.
c.) Full cover against Theft & Damages.
(EAR Insurance Policy for the period of Three years from commencement of
project and subsequent inclusion of Third party cover for the same period for
an amount of Rs. 50,00,000 /-.)
LD clause. : Originally it was 0.5% per week subject to a maximum of 10% of total
contract value. Subsequently it was changed 0.5% per week and subject to a
maximum of 10% of unfinished value of work
Forced Majeure Clause : Applicable.
Extension of Completion Date : Ref. Contract Agreement Article 6.4 & 6.5 Applicable.
Contractor to produce the reason for delay and the employer may
grant after verifying the reasons.
Price Variation : PV Clause Applicable based on IEEMA Price Index
Qty Variation :The Quantity may be varied but the quoted unit rates will be applicable for
the quantity variation.
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Project Report
Complexity of Project
We have executed under ground cable laying work & O/H line execution work with
replacement of O/H line conductor & A. B. switches within the maximum shut down
period in the highly congested city road where objection of O/H line was maximum. In
this execution was challenging due to lengthy procedure & shut down. It’s diversity
was in terms of liasioning with local governing authority (
PMC/PCB/KCB/MES/IAF/MIDC Hinjewadi & Railway authority etc ) & traffic police
for obtaining permission & execution inside heavy traffic & congested area . Public
resistance was also faced for excavation in front of their /establishment .The project is
also scattered in and around the Pune city.
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