Not yet registered? Create a OverBlog!

Create my blog

A guide to project accounting

Project accounting is used to determine the financial performance of specific projects within an organisation. It is the process of creating financial reports on a project by project basis. It is also used to ascertain which projects are adding value to the organisation and which are those that can be discontinued. It is a management tool which is used to pin-point the performance of each project. The guidelines to project accounting is outlined in this article.

Project accounting financial reports

Project accounting is implemented through the creation of the financial reports of projects namely, the trading account, the profit and loss account, the balance sheet, the financial budgets and the cash-flow statements. Trading an profit and loss account and the balance sheet This shows the gross profit and the net profit generated from each project as well as the budgeted profit. The balance sheet will show how the company resources were spread and allocated to the projects. Cash-flow statement The cash-flow statement will show the actual cash movement per project. It will also show the contribution of each project to the overall performance of the company. How to prepare project accounting reports
Project management financial reports can be easily prepared by using Microsoft Accounting software like the Microsoft Dynamics CRM or Microsoft Dynamics GP.

Importance of project accounting

Decision-making Project accounting is used by the management for decision-making purposes. Ideally, non-profitable projects must be discontinued and must focus on profitable projects. For budgeting purposes It helps in the process of budget formulation and amendments because resource allocation will be guided by the size and life of each project. Determining the performance of each project Job cost accounting helps to determine the performance of each project and its contribution to the overall results of the organisation. It is used to track down the financial progress of each project as well as the adequacy of inputs vis-a-vis the potential income that can be generated if there is a maximum production.

Problems of project management

Allocation of expenses It is difficult to allocate some costs per project, especially fixed costs like light and heating expenses, because they are charged to the company and not per project. Methods of allocation One method is to use working hours to estimate the fixed-costs per project. Another is the use of a project accounting software, such as an expenses software, to come up with the accurate allocation of over-head and fixed expenses. Inadequacy of financial reports for decision-making Other factors like the company’s goodwill and strategic location require consideration as well when making a decision to discontinue non-profitable projects, thus a decision based on financial project reports is not convincing.

Same category articles Accounting

How to get financial aid for single mothers in the UK

How to get financial aid for single mothers in the UK

Being a single mother can really be stressful, especially when you are the breadwinner. There are a lot of financial responsibilities which you need to take care of when you are a single mother. Sometimes, it can also be very difficult for single mothers to get a decent job because they may not have the finances or time to study. The federal and state governments have therefore come up with different programs to help single women financially.
How to use an accounting information system

How to use an accounting information system

An accounting information system is a computer program or system which performs accounting and payroll functions. Accounting information systems can be used to record and process information on tax, payroll and any accounting related data.
How to manage small business accounts

How to manage small business accounts

If you have just started a small business or have gone it alone as a sole trader, you need to look into your business banking options. Business is all about profits. However, as far as the tax man is concerned it is all about you keeping on track of your finances to pay them as much tax as they can claim.
What should be included on a household budget template

What should be included on a household budget template

Do you create a family budget? Have you ever wondered of what happened to the money that seemed to go faster than it came? What you need is a budget and all that it takes are some expenses spreadsheet templates to get you going. Or, you can create a spreadsheet (Excel) budget yourself. Continue reading to learn how best it is to budget your money.