What are Fixed Assets?

A bond in the construction industry is a type of surety bond, which serves as a financial guarantee for project completion. It safeguards the interests of stakeholders such as project owners, suppliers, and subcontractors, in the event that the contractor fails to fulfill the contract conditions. Bonds are usually required for public works projects in ensure taxpayers' money is well spent. There are different types of bonds such as bid bonds, performance bonds, payment bonds, and maintenance bonds. For instance, a performance bond guarantees the contract's terms are fulfilled, while a payment bond ensures laborers, suppliers and subcontractors are paid. Bonds are crucial in risk management in construction contracts.

A lien, particularly in the construction industry, is a legal claim or right that a contractor, sub-contractor, or supplier places on a property at which they have rendered services or supplied materials, but haven't been paid. Essentially, it's a security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. If the property owner does not fulfill the financial obligation, the lien holder may seek legal action to enforce their rights and might even result in the compulsory selling of the property to pay off the debt. Liens are crucial elements in construction law, ensuring parties are fairly compensated for their work and supplies provided.

Accrual accounting is a method of accounting that records financial events based on occurrences rather than on cash flow. In the context of the construction industry, this could include recognizing revenues and expenses tied to a specific project when they are earned or incurred, not when the money is actually received or paid out.For example, if a construction company orders materials for a project, under accrual accounting, the expense is recorded as soon as the order is made, regardless of when the actual payment is made. Similarly, if a customer is billed for a completed phase of the project, the revenue will be recorded even if the cash hasn't been received yet. This type of accounting provides a more accurate picture of a construction company's financial health by aligning income and expenses to the appropriate fiscal periods. It enables firms to match revenues with the corresponding costs, delivering a holistic view of a project’s profitability. However, it can also complicate cash flow management as there may be a time lag between recorded revenue and actual cash receipt.