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Project Accounting Basic Details Project Accounting Basics Before I start narrating on Project Accounting – PA, would like to thank my friend Veeranjaneya who actually guided me to understand this module and gain confidence on the same and the same would like to pass it on to my blog followers. With this article I would like to put forward some basic understanding on PA and how it is integrated with other modules. Why Project Accounting (PA)? Let’s understand PA implementation with an instance, say we own a private business that is responsible for hosting a Series of Shows/Movies or a Business which involves huge number of Employees/Labor management etc. and if we want to account our Revenue and Expenses in Oracle Application we need PA, In PA each Series of Show/Movies could be a Project defined in the PA Application. Also we need PA to monitor/track status and financial aspects of a project. Oracle Projects Suite consist of the below: 1. Oracle Project Foundation 2. Oracle Project Costing 3. Oracle Project Billing 4. Oracle Project Resource Management 5. Oracle Project Management 6. Oracle Project Collaboration Oracle Project Foundation Oracle Project Foundation provides the common platform shared across other Project Products (costing, billing etc.) Oracle Project Costing Oracle Project Costing is an integrated project-based cost collection, management and accounting solution that allows organizations to effectively manage projects and activities. Costing is the processing of expenditures to calculate their cost to each project and determine the GL accounts to which the costs will be posted. Oracle Project Billing Oracle Project Billing can automate revenue generation, simplify client invoicing, improve your cash flow and measure the performance and profitability of Contract Projects. Oracle Project Billing provides you with the ability to define revenue and invoicing rules for your projects, generate revenue, create invoices, and integrate with other Oracle Applications to process revenue and invoices. Oracle Project Billing also integrates with Oracle Receivables. SURYAKANTH GUNTI 1 Project Accounting Basics Oracle Project Resource Management PRM is an integrated project staffing application to help you to manage project resource needs, profitability and organization utilization by locating and deploying qualified resources to projects across your enterprise. Oracle Project Management Project Management provides project managers the visibility and control they need to deliver their projects successfully Basic PA concepts Projects A project is a primary unit of work that you can break down into one or more tasks. When you set up a project, you must set up the work breakdown structure (WBS), and enter project and task information. Project Templates A standard project template when created, can be used in creating other projects Project Types All Projects are assigned a Project Type. The project type determines how Oracle Projects processes costs (expenditure items) for a project and provides defaults and controls for project entry and processing. Contains the default revenue distribution rule, bill rate schedules etc. It’s the key to Auto Accounting. You must associate each project type with a project type class ‘Indirect’ to collect and track expenditure. ‘Capital’ to collect and track costs and capitalize ‘Contract’ to collect and track costs and billing for services performed for and reimbursed by a client. Let’s now begin with creating a Project: Navigation: Forms Menu Projects SURYAKANTH GUNTI 2 Project Accounting Basics The primary table that stores Project information is PA_PROJECTS_ALL. Both Project and Project Template information is stored in this table. The “Template_Flag” is an indicator of the nature of the record in this table. Field ‘SEGMENT1’ denotes the Project Number and Project_ID is field common in almost all the PA and other Tables. Your project, which consists of one or more tasks, can be as simple or detailed as you want it to be. You can define an unlimited hierarchy of tasks, called a work breakdown structure (WBS), to organize and monitor project activities. PA_TASKS stores user-defined subdivisions of project work. All the details relating to the task could be retrieved from this table. Tasks can be broken down into multiple levels of subtasks. The depth and width of the Work Breakdown Structure (WBS) are unlimited. Project Key Members: Employees who can enter and maintain project data, view cost details charged to the project. Each project can have only one project manager at a time PA_PROJECT_PLAYERS stores the information of key members and could be linked with HRMS PER_ALL_PEOPLE_F using the field ‘person_id’. Project Customers: All the Contract Projects should have a customer defined in the Project Customer Screen. Customers are defined in AR and is selected in PA PA_PROJECT_CUSTOMERS stores customer related information and this could be linked with RA_CUSTOMERS in AR using the field ‘customer_id’ Project Classifications User-definable project classification categories and codes. For analysis and reporting SURYAKANTH GUNTI 3 Project Accounting Basics Project Agreements Agreement screen is used to enter the contract value agreed upon with the customer, payment terms etc. Invoice and Revenue hard limits at the funding screen makes sure that you won’t Invoice/Recognize revenue more than the funding. Total agreement amount is allocated to various tasks/projects at the funding screen. Funding could be done at the Project Level or at the task level. Defining Project Agreement Navigation: Billing Agreements Table : PA_AGREEMENTS_ALL Funding Screen You must fund a project before the project can accrue revenue and be billed. Funding is the step that allocates an amount associated with a customer agreement to a specific project. Table : PA_PROJECT_FUNDINGS SURYAKANTH GUNTI 4 Project Accounting Basics Project Expenditure You charge expenditures to a project to record the actual work performed or cost incurred. Actual expenditure could be timecards, expense reports, usage logs and supplier invoices. An expenditure is a group of expenditure items, or transactions, incurred by an employee or an organization for an expenditure period. Expenditure Concepts: Expenditure Type Class An expenditure type class tells Oracle Projects how to process an expenditure item. Oracle Projects predefines all expenditure type classes. Examples of exp. type classes are Expense Reports, Miscellaneous Transaction, Usage Costs, Supplier Invoice etc. Expenditure Category An expenditure category describes the source of your organization’s costs. For example, an expenditure category with a name such as Labor refers to the cost of labor. An expenditure category with a name such as Supplier refers to the cost incurred on supplier invoices. Expenditure Type When you define an expenditure type, you assign it a unit, an expenditure category, a revenue category, and one or more expenditure type classes. Navigation: Expenditures Pre-approved batches Enter SURYAKANTH GUNTI 5 Project Accounting Basics Based on the Class selected say Miscellaneous Transaction enter the Expenditure Items as below Submit and Release the Batch Table PA_EXPENDITURES_ALL stores groupings of expenditure items incurred by an employee or an organization for a specific expenditure period. An expenditure also exists for each supplier invoice transferred to Oracle Projects from Oracle Payables PA_EXPENDITURE_BATCHES_ALL stores groups of expense reports. The Distribute Expense Reports process creates a batch for all expenditures that it processes in a run. Oracle Projects transfers the entire batch of expense reports to Oracle Payables so that all the expenditures in a batch are transferred together. All batches are automatically created as 'RELEASED' A Project could be closed only once The entire agreement amount is billed. Revenue is totally recognized to the extent of the contract amount. Expenditures have been incurred fully and budgets are made equal to the actual costs. SURYAKANTH GUNTI 6 Project Accounting Basics Costing Concepts in Oracle PA The following concepts are associated with costing: 1. Raw Cost 2. Burden Cost 3. Total Burdened Cost Raw Cost: Cost directly attributed to work performed. Examples of raw costs are salaries and travel expenses Burden Cost: This is Overhead or Indirect Cost. Cost of doing business that supports raw cost and cannot be directly attributed to work performed. Examples of Burden costs are fringe benefits, utility expenses, office space and general and administrative costs Total Burdened Cost = Raw Cost + Burden Cost Overview of Project Costing process Project Costing includes following steps. 1. Enter and approve expenditures through Oracle project costing user interface, or import transactions. Some of the expenditures are Labor, Non-Labor, Supplier Costs etc. a. OTL Timecard = time x rate = amount b. Burdening for the project = burden cost c. Total burdened cost SURYAKANTH GUNTI 7 Project Accounting Basics d. PO = PO Quantity x PO Price e. AP Invoice = Line Quantity * Line Price (amount comes from AP) f. Expense report = entire amount entered in i-expense brought forward to Project costing g. Usage batches – non oracle application – transaction import – hours of utilization of non-labour resources * rate = amount 2. Distribute Costs and derive default accounting. Cost distribution is the act of calculating the cost and determining the cost accounting for an expenditure item. Oracle project costing has set of cost distribution programs that you
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