VENU NATARAJ SITE LOGO MOBILE

Simple Understanding of GAAP

What is GAAP

GAAP (Generally Accepted Accounting Principles) is a collection of commonly followed accounting rules and standards for financial reporting. The acronym is pronounced gap.

What Are the Principles of Accounting?

The best way to understand the GAAP requirements is to look at the ten principles of accounting.

1. ECONOMIC ENTITY PRINCIPLE

The business is considered a separate entity, so the activities of a business must be kept separate from the financial activities of its business owners.

2. MONETARY UNIT PRINCIPLE

The monetary unit assumption means that only transactions in U.S. dollar amounts can be included in accounting records. It’s important to note that accountants ignore the effects of inflation on the recorded dollar amounts.

3. TIME PERIOD PRINCIPLE

The business activities may be reported in short, distinct time intervals which may be weeks, months, quarters, a calendar year, or a fiscal year. The time interval has to be identified in the headings of the financial statements such as the income statement, statement of cash flow, and stockholders’ equity statement.

4. COST PRINCIPLE

The cost principle mentions the historical cost of an item. This refers to cash or cash equivalent that was paid to purchase an item in the past. This asset amount is adjusted for inflation. The historical cost is reported on the financial statements.

5. FULL DISCLOSURE PRINCIPLE

All information that is relative to the business and is important to a lender or investor must be disclosed in the content of the financial statements or in the notes to the statements. This is the reason that numerous footnotes are attached to financial statements

6. GOING CONCERN PRINCIPLE

This accounting principle refers to the intent of a business to carry on its operations and commitments into the foreseeable future and not to liquidate the business.

7. MATCHING PRINCIPLE

The matching principle requires that businesses use the accrual basis of accounting and match business income to business expenses in a given time period.

For example, the commissions for sales should be recorded in the same accounting period that sales income was made (and not when they were paid).

8. REVENUE RECOGNITION PRINCIPLE

Under the accrual basis of accounting, the revenues must be reported on the income statement in the period in which it is earned. This means that as soon as a product is sold, or the service has been performed, the revenues are recognized. This is regardless of whether the money is received or not.

9. MATERIALITY PRINCIPLE

The materiality principle refers to the misstatement in accounting records when the amount is insignificant or immaterial. Because of the materiality principle, financial statements usually show amounts rounded to the nearest dollar.

10. CONSERVATISM PRINCIPLE

If accountants are unsure about how to report an item, the conservatism principle calls for potential expenses and liabilities to be recognized immediately. It directs the accountant to anticipate the losses and choose the alternative that will result in less net income and/or less asset amount.

What Are the 10 Principles of GAAP?

There are ten principles that can help you understand the mission of the GAAP standards and rules.

1. PRINCIPLE OF REGULARITY

The principle states that the accountant has complied to the GAAP rules and regulations.

2. PRINCIPLE OF CONSISTENCY

The accountants should enter all items in exactly the same way that it has been fixed. By applying similar standards in the reporting process, accountants can avoid errors or discrepancies.

If the standards are changed or updates, the accountants are expected to fully disclose and explain the reasons behind the changes.

3. PRINCIPLE OF SINCERITY

As per this principle, the accountant should provide the correct depiction of the financial situation of a business.

4. PRINCIPLE OF PERMANENCE OF METHOD

The focus of this principle is that there should be a consistency in the procedures used in financial reporting.

5. PRINCIPLE OF NON-COMPENSATION

The full details of the financial information should be disclosed including negatives and positives. This should be done without the expectation of debt compensation by an asset or revenue by an expense.

6. PRINCIPLE OF PRUDENCE

The financial data representation should be done “as it is” and not based on any speculation.

7. PRINCIPLE OF CONTINUITY

The principle assumes that the business will continue its operations in the future.

8. PRINCIPLE OF PERIODICITY

The accounting entries are distributed across the suitable time periods.

9. PRINCIPLE OF FULL DISCLOSURE

While creating the financial reports, the accountants must strive for full disclosure.

10. PRINCIPLE OF UTMOST GOOD FAITH

This principle states presupposes that the parties remain honest in transactions.

Need of Construction Project Management

Need of Construction Project Management

Construction Project Management:

Construction project management is the art of tying together various construction tasks, such as planning, organizing, staffing, scheduling, supervising, budgeting, controlling, and closing, while meeting the project specifications. To help project managers make key decisions, construction managers use a number of project management tools. Communication, including project management meetings, is also essential because it keeps everyone on the same page.

State of Construction Industry

The construction industry is the largest industry in the world. Growth in this industry is an indicator of the economic conditions of a country. This is because the construction industry consumes a wide employment circle of labour.

It is more of a service industry than a manufacturing industry. While the manufacturing industry exhibits high-quality products, timeliness of service delivery, reasonable cost of service, and low failure rates, the construction industry is generally the opposite.

Most of the projects exhibit cost overruns, time extensions, and conflicts among parties.

Example of a magnificent project that suffered from huge cost overruns: Sydney Opera House costed about 14 times more than what was initially planned.

The construction industry is more challenging than other industries due to its unique nature. Every project is one of a kind and conflicting parties are always involved.

Thus, a project is defined whether it is in construction or not by the following characteristics:

  • A defined goal and objective
  • Specific tasks to be performed
  • A defined beginning and end
  • Resources being consumed

The goal of construction projects is to build something. What differentiates the construction industry from other industries is that its projects are large, built on-site and generally unique. It requires money, labour, equipment, and materials as well to complete. In spite of being one of the major economic indicators of a country, the construction industry has long been criticized for the poor performance with respect to many projects failing and or not meeting the expectations. This lack of performance leads to a huge percentage of wastage of the invested money and time.

For example, in the US every 1 billion dollars invested 122 million dollars gets wasted. These failures can be attributed to the challenging nature of this industry.

Another stark example can be seen in China: many construction projects are slowed down considerably due to government anti-corruption efforts. According to China Construction Bank, 15 of 26 of China’s top 100 listed companies, including Fosun Group, China Railway Group, China National Machinery Industry Corporation, China Southern Power Grid, and Sinopec, have suffered from asset impairment. The government is trying to tighten control over the investment industry and impose stricter capital controls.

The challenges faced in construction industry:

  • Hyper-competition
  • Every project is unique
  • Involvement of many contracting parties
  • High risk involved.

To overcome these challenges every project requires clarity in overall vision, goals and objectives. The other reasons for the failures of a construction project such as:

  • Inaccurate estimate due to miscalculation,  specification errors, omissions, excluded permits and changing market conditions.
  • Scope creep, i.e,  the amount of work grows beyond the original agreement.
  • Unreliable and unskilled labour
  • Unclear specifications 
  • Communication gap between the parties
  • Financing issues
  • Improper planning

This shows that unsophisticated strategic planning makes it difficult in making accurate market predictions and then leads to the project failure.  here comes the need for “Construction Project Management” which is defined as “an art and science of coordinating people, equipment, materials, money, and schedule to complete a specified project on time and within approved cost”

One of the most important principles of construction project management is the necessary balance between scope, budget and schedule without compromising on quality. This should be recognized in every project during the early development as well as during design and construction which can turn the project successful.

Introduction to Construction Environmental Management Plan (CEMP)

A Construction Environmental Management Plan describes how activities undertaken during the construction phase of development will be managed to avoid or mitigate negative environmental impacts on-site and how those environmental management requirements will be implemented. 

The Construction Environmental Management Plan is a site-specific plan developed to ensure that appropriate environmental management practices are followed during the construction phase of a project. 

When undertaking an assessment of a development application or major development, the EPA or a relevant authority may request a CEMP be provided as part of that assessment or may recommend or impose a condition requiring a CEMP be prepared prior to construction commencing.

It is advisable that the CEMP be prepared by a suitably qualified and experienced consultant, particularly when the development is large scale with complex issues. 

The Construction Environmental Management Plan should include the following general information about the project:

  • A description of the site location and the receiving environment, including the location of sensitive receivers.
  • A description of the project construction works to be undertaken, including timeframes and construction hours. 
  • Identification and analysis of potential environmental impacts, including environmental hazards and risks, proposed mitigation measures, and any residual risks.
  • Identification and description of the management measures to be implemented to mitigate linked source−receptor−exposure pathways. 
  • Identification of a person or persons with responsibility for implementing the CEMP.
    ○ The responsible person may be the owner, occupier, contractor, or head contractor for the site.
    ○ The responsible person or persons should have the authority to call for the immediate cessation of works if an issue arises.
    ○ The responsible person or persons should have responsibility for managing communications and complaints.
  • Identification of appropriate reporting and verification measures.
  • Description of appropriate contingencies to be implemented, if management measures are identified as being ineffective and/or resulting in an environmental nuisance. 

Scope of Construction Environmental Management Plan

The scope of the Construction Environmental Management Plan should consider the following subject areas as applicable to the individual project, such as:

  • Air quality 
  • Water quality and drainage 
  • Noise and vibration
  • Geology and soils 
  • Landscape and visual impact 
  • Nature conservation 
  • Archeology and cultural heritage 
  • People and communities 
  • Transportation 
  • Materials. 

Construction Environmental Management Plan is needed for projects:

  • Needing EIA screening or clearance.
  • Significant industrial facilities that e.g. contain manufacturing processes.
  • Larger residential and commercial development projects.
  • Any other project deemed by Authority as presenting an environmental risk warranting a CEMP.

The purpose of a Construction Environmental Management Plan can be:

  • Provide effective, site-specific procedures and mitigation measures to monitor and control environmental impacts throughout the construction phase of the project.
  • Ensure that construction activities so far as is practical do not adversely impact amenity, traffic or the environment in the surrounding area.
  • Highlighting stakeholder requirements
  • Ensuring the development is in compliance with the current environmental legislation.
  • Outlining the Environment Management Systems as per ISO standards and other applicable standards.
  • Detailing the mitigation committed to within the Environmental Impact Report / Statement and how it is implemented at the site.

Construction Project Management: An Overview

Image here

Did you know that the construction industry employs roughly 51 million people and accounts for 9% of the country’s GDP?

And when you combine the unorganized sector and allied services it provides for another 45 million jobs. It is forecasted that over the next few years it is going to add another 16 million jobs to the market.

The irony is that 45% of the construction industry in India is unregulated.

The small and medium scale projects get built without proper construction management leading to wastage and cost overruns.

If you are a fresher or just completing your 12th/ 10+2 education and are wondering which career to move towards then Construction Project Management is one of the best bets to get into and in the process help in the Nation Building process.

To give you a better understanding of what construction project management is, how to enroll, what you’ll study, and what kind of jobs you can get into later in the market…read along.

What is Construction Project Management

Building project management is the construction project management process. However, in contrast with other types of projects, when you talk regarding handling a project, the difference is primarily that the project is mission-based. This means the coordination of the project finishes at the completion of the project building.

According to the Construction Management Association of America (CMAA), construction managers (CMs) oversee the construction of a project.

As construction project management is a highly specialized subject, most of the organizations looking to hire a construction manager or construction project manager would aspire to have candidates with a degree or specialization in this subject.

So it becomes important for you to know what all is needed as prerequisites to take up this course and what you learn in this course. Let’s now take a look at it.

Image here

To be able to pursue a speacialation in construction project management in India, you need to be an Architect or a Civil Engineer. However, for a PMP certification course which gives you the ability ot apply for any general management roles you can be a graduate from any field.

What do you learn in the construction project management course?

Construction Project Management course teaches the process of planning, coordination, budgeting and supervision of the construction project.

It is usually a two years masters or PG certification program where you’ll be taught about:

  • Project Management process (according to PMBOK and APMBOK)
  • Finance Management
  • Human Resource Management
  • Material Management
  • Machinery Management
  • Risk management
  • Health and Safety Management
  • Construciton Regualatory and Legal Framework understanding

Image here

What are your roles as a Construction Project Manager?

As a construction project manager, you will be expected to manage all the construction activities of a construction project.

The role of a construction project manager broadly includes:

  • Estimating project costs
  • Negotiating and controlling project costs
  • Formulation of budget
  • Creating and maintaining schedules
  • Communicating with clients, stakeholders
  • Coordinating and working with architects, building specialists, regulatory specialists
  • Managing the construction activities at the site
  • Managing the resources at site including: workmen, machinery and materials at site
  • Providing guidance and feedback to all the project governance personnel

Image  here

What is the difference between construction management and project management?

A construction manager manages the construction activities of a construction site whereas the project manager manages the overall aspects of the project. The construction project manager manages multiple site activities and plays a consultant role to a project manager.

A construction manager reports to a project manager. A project manager reports to a project director and a project construction manager is consulted by the project manager to govern the construction activities.

A project manager is usually involved from the inception stage of the project and oversees the overall deliverability of the project, whereas a construction manager is involved just before the commencement of construction activity of a project. The construction project manager, however, is involved at the organisational level and provides the direction needed for the project manager to formulate the project.

Image here

Best Construction Project Management Courses in India

Most of the reputed and premier institutes in India offer a PG or a Certification course in Construction Project Management.

A full-time course is preferable to pursue, as it helps with more than just education. The benefits of a full-time course are:

  • Ability to connect with the industry personnel through seminars and workshops as part of the curriculum.
  • Alumni status of the institute gives access to the resources and contact of industry personnel to collaborate and grow with
  • Exposure to live construction sites and projects as part of the curriculum is vital to understanding the industry and its workings thoroughly.
  • The trend in India as of today signals that a full-time course is given more weightage in comparison to a correspondence course by the hiring agencies. This trend is however gradually shifting towards accepting correspondence courses also with the same enthusiasm as a full-time course.

Project Management Certification courses in India

NICMAR campus offers both full-time and correspondence courses in construction project management. It is the most respected and recognized institute both in and outside India.

IIT’s also have Construction Management, Project Management for Construction, and Construction Project Management degrees being offered.

In Bangalore SJB School of Architecture and Planning is currently offering a full-time PG course in Construction Project Management. 

SJB School of Architecture and Planning, Bengaluru

Project Management Certification Online: is it worth it

In reality, a complete Construction Project Management Certification course is not really conducive online as you need to have at least a few practical sessions with onsite (project site) experience to really become a successful construction project manager.

Having said that, NICMAR does offer a correspondence PG Diploma course in Construction Project Management.

Alternatively, there are PMP training certification courses offered by Simplilearn, Unacademy, Udemy, and Coursera which can help you with a general understanding of management principles (PMBOK and APMBOK). You can then take up a diploma course in construction management offered by IGNOU or other universities locally to gain the knowledge needed to fulfill the role of a construction project manager.