Definition
Project accounting tracks the revenue and costs of each project, contract or job separately in order to measure its profitability. Instead of opening separate accounts for every project, each entry line carries a project tag, so the income statement can be produced for one project, a group of projects or the whole business from the same books.
How it works
Agencies, consultancies, construction firms and software houses rely on it to answer simple but vital questions: which clients are profitable, which fixed-price jobs overran, and how much of the year's profit came from one contract.
Capture costs at the source: tag supplier bills, expense claims and timesheet-based salary allocations with the project when they are booked. Allocating later from memory is unreliable.
Project accounting complements cost centers: a cost center answers "which department spent it", a project answers "what was it spent on". Ledgeriano records both on every line, along with the party.
Example: profit of one website project
Revenue 24,000 against subcontractor, staff and software costs gives a project margin of 7,500 (31%).
| Line | Project: Client portal |
|---|---|
| Revenue | 24,000 |
| Subcontractors | (9,000) |
| Allocated staff costs | (6,500) |
| Software and hosting | (1,000) |
| Project margin | 7,500 |