Project Accounting

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For several reasons, financial accounting, the method typically used for company-wide operations, doesn't fit well with the realities of serving a specific project. Project accounting is a better fit for shorter timescales and the need to make decisions based on real-time bottom-line information. The process tracks budgets, estimates, costs, bookings, billings, and everything in between.

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Here are three main features of project accounting: 

• The ledger opens and closes based on the life of a project. The beginning date of a project is the opening date of the ledger. When the project wraps up (i.e., deliverables sent to the client, and the fulfillment of contractual obligations), the books close.
• Costs are tied to the project. In project accounting, things like depreciation happen afterward as a part of the company's financial accounting. Here, the focus is on the deliverables and the costs associated with creating them inside the specific project.
• Generally speaking, cost comparisons between projects bear little fruit since projects tend to be of different sizes and scopes. The exception may be when projects are similar as a way of analyzing the spend between the two.