Accounting for Burden Costs
You determine if you want to account for the burden costs. You can choose one of the following accounting methods:
- Account for burden costs by burden cost component.
- Account for the total burdened costs.
- Perform no accounting -- calculate burden costs only for use in management reporting with no accounting impact.
Oracle Projects supports all of these accounting methods for burden costs regardless of the method that you choose to store the burden costs, either as a value on the expenditure item or as separate, summarized expenditure items.
There are cases in which you may choose to use both of the methods of accounting for burdened costs, based on different objectives. The sections below explain the objectives of using each method of accounting.
See Also
Storing and Viewing Burden Costs
Example of Accounting for Total Burdened Costs
Table 1 - 47 shows an example of the accounting for the expenditure items used above in Table 1 - 43. The example includes the accounting for both raw cost and total burdened costs.
|
| Transaction
| Item #
| Accounting Transactions
| Debit
| Credit
|
| Labor Cost
| 1
| Labor Expense
| 100
|
|
|
|
| Payroll Clearing
|
| 100
|
| Labor Cost
| 2
| Labor Expense
| 200
|
|
|
|
| Payroll Clearing
|
| 200
|
| Expense
| 3
| Computer Rental Expense
| 500
|
|
|
|
| Payables Liability
|
| 500
|
|
|
|
| Transaction
| Item #
| Accounting Transactions
| Debit
| Credit
|
| Labor
| 1
| Project Cost Inventory
| 300
|
|
|
|
| Labor Burdened Inventory Transfer
|
| 300
|
| Labor
| 2
| Project Cost Inventory
| 600
|
|
|
|
| Labor Burdened Inventory Transfer
|
| 600
|
| Expense
| 3
| Project Cost Inventory
| 500
|
|
|
|
| Computer Burdened Inventory Transfer
|
| 500
|
Note: The Computer Rental expense is included in the total burdened cost accounting, even though it is not burdened. This is done to include the total project cost in the cost WIP accounts.
Setting Up Accounting for Total Burdened Costs
To set up an Account for Total Burdened Costs configuration, you must perform the following step:
- Define AutoAccounting rules for the Total Burdened Costs Debit and Total Burdened Cost Credit AutoAccounting functions. These rules are used to determine the debit and credit GL accounts that will be charged. You must ensure that your AutoAccounting rules handle all transactions charged to burdened projects, not just those transactions that are burdened.
Creating and Interfacing the Accounting for Total Burdened Costs
To create and interface the accounting for the total burdened costs, you run the following processes:
- PRC: Distribute Total Burdened Costs. This process creates the total burdened cost distribution lines for all transactions charged to burdened projects, even if the transaction is not burdened, to account for the total project costs in the cost WIP account.
- PRC: Interface Total Burdened Costs to General Ledger. This process interfaces total burdened cost distribution lines to Oracle General Ledger.
- PRC: Tieback Total Burdened Costs from General Ledger. This process ties back total burdened cost distribution lines from Oracle General Ledger.
You can also use the streamline processes to create distribution lines for burdened costs.
See Also
Implementing AutoAccounting
Distribute Total Burdened Costs
Interface Total Burdened Costs to General Ledger
Tieback Total Burdened Costs from General Ledger
Accounting for Burden Costs by Burden Cost Component
You can account for the individual burden cost components when you want to track the burdening in General Ledger.
Table 1 - 48 shows an example of the accounting for the expenditure items shown in Table 1 - 46. The example includes the accounting for both raw cost and burden costs by component.
|
| Transaction
| Item #
| Accounting Transactions
| Debit
| Credit
|
| Labor Cost
| 1
| Labor Expense
| 100
|
|
|
|
| Payroll Clearing
|
| 100
|
| Labor Cost
| 2
| Labor Expense
| 200
|
|
|
|
| Payroll Clearing
|
| 200
|
| Expense
| 3
| Computer Rental Expense
| 500
|
|
|
|
| Payables Liability
|
| 500
|
|
|
|
| Transaction
| Item #
| Accounting Transactions
| Debit
| Credit
|
| Fringe
| 4
| Project Fringe Expense
| 120
|
|
|
|
| Fringe Absorption/Recovery
|
| 120
|
| Overhead
| 5
| Project Overhead Expense
| 300
|
|
|
|
| Overhead Absorption/Recovery
|
| 300
|
| G&A
| 6
| Project G&A Expense
| 180
|
|
|
|
| G&A Absorption/Recovery
|
| 180
|
Setting Up Accounting for Burden Costs by Burden Cost Component
To set up this configuration, you must perform the following steps:
1. Define AutoAccounting rules for the Burden Transaction Debit (Burden Cost Account) and Burden Transaction Credit (Burden Cost Clearing Account) AutoAccounting functions. These rules are used to determine the debit and credit GL accounts to be charged. You use the expenditure type parameter to distinguish between different types of burden cost components. You also have the AutoAccounting Function Burden Cost Revenue Account to account for revenue.
2. If you have chosen to store burden costs as a summarized value on a separate project and task (as defined by selecting the Burden Cost on the same expenditure item indicator on the project type), you must perform the following additional steps:
- Define a project and appropriate tasks, which will be used as a storing bucket for summarized, burden transactions used for accounting for the individual burden costs. You typically would not do project reporting from these collection projects. However, you may choose to perform some analysis for burden absorption using these projects. After you account for the burden costs to General Ledger, you can perform additional analysis within General Ledger.
- Specify the above project and task on the project type. This project and task are used for collecting the summarized burden transactions that are used only for the burden accounting.
Creating and Interfacing the Accounting for Burden Costs by Burden Cost Component
To create and interface the accounting for the burden transactions, you run the following processes:
- PRC: Create and Distribute Summarized Burden Component Items. This process summarizes the burden costs, creates the expenditure items for the burden transactions, and runs the distribution process. The burden transactions are created on different projects depending on the method you use to store burden costs. If you store burden costs as separate, summarized burden transactions, the burden transactions are created on the same project that incurred the costs. If you choose to store burden costs as a value along with raw cost on the expenditure item on the project that incurred the transactions, the burden transactions are created on the collection project and task used for collecting burden transactions intended for accounting by burden cost components only.
- PRC: Interface Usage and Miscellaneous Costs to General Ledger. This process interfaces the burden transactions to Oracle General Ledger. Based on the expenditure type class you enter as a process parameter, this process will interface only those transactions that match the parameter. If no parameter is entered, then this process picks up all Burden Transactions, Miscellaneous Transactions, Usage Transactions, Inventory Transactions and WIP Transactions for processing.
- PRC: Tieback Usage and Miscellaneous Costs from General Ledger. This process ties back all transactions processed in the PRC: Interface Usage and Miscellaneous Costs process.
You can also use the streamline processes to create distribution lines for burdened costs.
Accounting for Total Burdened Costs
You may choose to account for the total burdened costs of the items, without distinguishing the amounts by burden cost components. This is typically done when you track the total burdened costs in a cost asset or cost WIP (work in process) account. This method is also sometimes referred to as project inventory. You may track cost WIP when you:
- capitalize total burdened costs
- track the total burdened costs as project inventory (also known as cost WIP) on contract projects and later calculate a cost accrual when you generate the revenue.
Note: You must run the appropriate processes to create and interface total burdened costs distribution lines if you are capitalizing burdened costs for capital projects or are using burdened costs for the cost accrual calculation during revenue generation.
See Also
Capital Projects
Revenue-Based Cost Accrual
Storing Burden Costs with No Accounting Impact
You can choose to calculate the burden costs for project transactions for management reporting without an accounting impact.
If you store burden costs as a value on the expenditure item, you have no extra setup to perform and no accounting processes to run on the burden costs.
If you store the burden costs as separate, summarized expenditure items and perform the accounting in Oracle Projects (rather than importing the accounting), you must set up AutoAccounting for those burden transaction expenditure items to post the debit and the credit to the same GL account. Oracle Projects requires that you interface the cost distribution lines of these expenditure items to Oracle General Ledger.
