Project Accounting Basics

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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

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Project Costs

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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.

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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!!!!!!