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Project Accounting Basics
SURYAKANTH GUNTI 1
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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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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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 ProjectsHuman Resources
Accounts Payables
General Ledger
Oracle inventory
Purchasing
Oracle Receivables
Supplier Invoices
Match PO to Invoice
Purchase Requisition
Emplo
yee,
Jobs
and O
rganiz
ation
s
Project Costs
&
Revenue
Customer Invoice
Material Costs
Oracle Project Accounting
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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.