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.

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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

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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

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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

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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

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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.

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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

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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 run, depending upon the type of expenditure. Some imported expenditures are already cost distributed when you import them and do not require further cost distribution processing. 3. Generate Cost accounting events. The program PRC: Generate Cost Accounting Events collects cost distribution lines in Oracle project costing and uses Auto accounting to determine the default liability accounts for raw and burden costs. It also generates cost accounting events for oracle sub ledger accounting. 4. Create Accounting in Oracle sub ledger accounting and transfer the accounting entries to Oracle General Ledger.

Auto Accounting Rules

Auto Accounting: Generation in GL Accounts according to rules using Data Captured in the Project

- Project - Expenditure Type - Task - Project Type

Rules are created in Auto Accounting to specify the default accounts that the distribution programs generate

- It is used to specify how to determine the correct account for each cost distribution line. - It creates many different account transactions throughout the business cycle

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Project Status

Transfers final Project Accounting Transactions to Oracle General Ledger

Here are the set of programs that are executed to integrate PA transaction with Oracle General Ledger

– PRC: Generate Cost Accounting Events – PRC: Generate Cross Charge Accounting Events – PRC: Generate Revenue Accounting Events – PRC: Sweep Transaction Accounting Events – PRC: Create Accounting – PRC: Transfer Journal Entries to GL

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Integration of PA with Other modules like AP/AR

Another illustration of Integration of PA with other modules.

Oracle Project Accounting

Match PO to Invoice

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Sn upplier Invoices Purchase Requisition o i t a

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Human Resources Oracle Projects o Oracle inventory s t s

Project Costs Customer Invoice & Revenue

General Ledger Oracle Receivables

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Project Accounting and PO/AP Module

Based on some setups one can integrate PA and purchasing. Oracle Projects integrates with Oracle Purchasing to allow you to report committed costs and obligations against your projects. Using Oracle Purchasing, you can enter project-related requisitions and purchase orders, and then report committed costs of requisitions and purchase orders that are outstanding against your projects in Oracle Projects.

Project Purchase Requisitions

If a Requisition lines containing Project details it can be termed as Project Requisitions. The charge account is generated based on the auto accounting set up in PA in line with the supplier invoice account generator. The PO_DISTRIBUTIONS_ALL table contain the Project_id and Task_id details.

Project Invoices

If Invoices contains a project number in the invoice distributions can be classified as a Project Invoices. The invoice distribution account code combination is formed based on the auto accounting set up in PA in line with the supplier invoice account generator. Once these invoices are approved and validated in AP.

The program PRC: Interface Supplier Invoices from Payables when this Program is executed in PA, retrieves all eligible posted, project-related supplier invoices from Oracle Payables and interfaces them to Oracle Projects. Another program PRC: Interface Supplier Costs Process is run from PA which interfaces the costs to PA.

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The interrelationship between the relevant Payables and Projects tables are as follows:

Project Accounting and Receivables Module

When this Program PRC: Interface Invoices to Receivables is executed in PA, collects all eligible draft invoices in Oracle Projects and interfaces them to the Oracle Receivables interface tables.

Integration of Project Accounting with Oracle Fixed Assets

Projects that are defined as “Capital Projects” integrates to Oracle assets. Capital projects enable you to capture construction-in process (CIP) costs for assets you are creating. Oracle Projects integrates with Oracle assets, allowing you to manage Capital Projects in Oracle Projects and update your fixed assets records when assets are ready to be placed in service.

- You collect CIP (Construction in Process) and expense cost for each asset you are building. - When an Asset is ready to be placed in service, we use Oracle Projects to collect all eligible CIP cost, summarize them and create capital asset line. - We can review and make changes to the asset lines before interfacing them to Oracle Assets.

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List of Profile that needs to be set for Project Related activities:

Please feel free to suggest any comments. Thanks You!!!!!!

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