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The Bookkeeping Error We Find in Almost Every Contractor's Books

Here is exactly what we found, why it matters, and what to check in your own books.

FinTruction Published May 10, 2026 5 min read

Last month we ran a free audit on a contractor's books.

We pulled his Profit and Loss statements going back three full years and walked through them line by line.

One number didn't follow the pattern.

Profit and Loss statement showing Automobile Expense at $15,654 in 2025, circled in red.
Profit and Loss statement — Automobile Expense at $15,654 in 2025, a 4× jump from the prior year.

Automobile Expense, 2025: $15,654. The year before, $4,154. A 4× jump in one year, no business reason for it.

So we clicked in.

Transaction detail showing a March 31, 2025 entry from Ford for $15,000, labeled 'Bought a new truck,' highlighted in red.
Transaction detail — a March 31, 2025 entry from Ford for $15,000, labeled "Bought a new truck."

One line. March 31, 2025. Ford. Description: bought a new truck.

A truck. For $15,000. Sitting in Automobile Expense.

But this wasn't even the real problem.

We kept scrolling.

Months of transaction entries showing recurring Ally Bank car payment line items at $1,381.08 each, all booked to Automobile Expense.
Recurring Ally Bank car payment entries — $1,381.08 each month, all booked to Automobile Expense.

Every month after the purchase, an Ally Bank line for $1,381. Car payment. Going straight into Automobile Expense too.

He financed the truck. And every monthly payment was being booked as an expense.

One truck purchase. Four errors in his books.

  1. The truck wasn't booked as an asset.

    It went to Automobile Expense instead of the balance sheet.

  2. The loan wasn't booked as a liability.

    Nothing on the balance sheet showing what's owed to Ally Bank.

  3. The loan payments weren't split.

    Only the interest is an expense. The principal pays down the loan — it's not a deduction. Instead, the full payment was hitting expenses every single month. He was effectively expensing the truck twice.

  4. No depreciation schedule.

    The truck should be written off over five years. There was nothing.

Here's what this costs him.

Tax side

When the IRS catches the double-expensing — back taxes. Penalties. Interest.

Deduction side

Five years of clean depreciation write-offs — lost.

Lender side

No truck on the books, no loan on the books. When he goes for a line of credit or to bond the next big job, the bank is making real decisions off numbers that aren't real.

This is what happens when a generalist touches construction books.

If you've ever financed a truck, a trailer, equipment — anything — some version of this could be sitting in your books right now.

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