R12 Oracle Project Accounting: Few Basic Concepts


Once we understand the basic terminologies of PA it would be easier to move ahead with the process.

Project: A project is a primary unit of work that can be broken down into one or more tasks.

Task: It is the small unit of work created under the project against which transaction can be created.

Note: we cannot create transaction/expenditure items directly on the project, hence it is mandatory for each project to have at least one task.

 Project Classes:

Oracle PA has provided three pre defined project classes.

  • Indirect projects – Track overhead activities and costs of the organization. Note: Does not generate revenue and invoicing process.
  • Capital projects – Track asset development activities and costs, and costs are capitalized as one or more assets.
  • Contract projects – Contract projects created with external customer to track cost, revenue, and billing.

 Project Type:

The project type controls how Oracle Project Foundation creates and processes projects, and is a primary classification for the projects your business manages. You must set up at least one project type to create projects. You must set up project types for each operating unit.

  •  Examples of Indirect project: Admin Project, Transport Facility etc.
  • Example of Contract project: External Project, Intercompany project etc.

Expenditure category: It is the category created to classify the different types of cost an organization may incur.

Revenue category: It is the category created to classify the different types of revenue an organization may earn.

Expenditure type:It is the identification of cost that is associated to an expenditure item.It is assigned to the expenditure category and revenue category during the setups.

Expenditure class: It is the classification for an expenditure type as how the expenditure type can be used to create transaction. When an expenditure type is classified for a certain type then only those expenditure class transactions are allowed to enter.

 In Oracle Project Costing we have predefined expenditure classes.

 Labor:

Straight Time: For standard time entry. We use the cost rate multiple with number of hours.

Overtime: Labor cost calculated using a premium cost rate multiplied by hours.

 Non-labor project costs:

Expense Reports – Expense reports from Oracle Payables or Oracle Internet Expenses. You cannot enter expense reports directly into Oracle Project Costing. Expense reports that you import into Oracle Project Costing must be fully accounted prior to import.

Usages – You must specify the non-labor resource for every usage item you charge to a project. For each expenditure type classified by a Usage expenditure type class, you also define non-labor resources and organizations that own each non-labor resource.

Supplier Invoices – Supplier invoices, discounts, and payments from Oracle Payables or an external system, and receipt accruals from Oracle Purchasing.

Miscellaneous Transaction – Miscellaneous Transactions are used to track miscellaneous project costs. Examples of uses for miscellaneous transactions are:

  • Fixed assets depreciation
  • Allocations
  • Interest charges

Burden Transaction – Burden transactions track burden costs that are calculated in an external system or calculated by Oracle Project Costing as separate, summarized transactions. These costs are created as a separate expenditure item that has a burdened cost amount, but has a quantity and raw cost value of zero. You can adjust burden transactions that are not system-generated.

Work In Process – You use this expenditure type class for Oracle Project Manufacturing WIP transactions that you interface from Manufacturing to Oracle Project Costing. You can also use this expenditure type class when you import other manufacturing costs via Transaction Import or when you enter transactions via pre-approved batch entry.

 Inventory – This expenditure type class is used for the following transactions:

  • Oracle Project Manufacturing transactions that you import from Manufacturing or Oracle Inventory.
  • Oracle Inventory Issues and Receipts that you import from Oracle Inventory in a manufacturing or non-manufacturing installation.

 Example:

Sr No Expenditure Category Revenue category Expenditure type Expenditure Class
1 Labor Time Labor Revenue Standard_Time Straight Time
2 Vendor Cost Service Revenue Supplier_cost Supplier Invoices
3 Travel Cost Travel Revenue Travel Cost Expense Report & Supplier Invoices
4 Misc Cost Misc Revenue Misc_Transactions Miscellaneous and usages

In the above examples for line number 1, time can be entered for expenditure type “Standard_Time”.

Similarly for line number 2 & 4 the respective expenditure class transactions can be entered.

For line number 3 supplier invoices & expense reports can be entered as it has been classified for two different classes.

Types of Currencies

Transaction amounts are stored in the following currencies:

  • Transaction Currency:The currency in which a project transaction occurs.
  •  Expenditure Functional Currency: The functional currency of the expenditure operating unit.
  • Project Functional Currency: The functional currency of the operating unit that owns the project.
  • Project Currency: The user–defined project currency.

When you enter transactions in a currency that is different from functional currency or project currency, Oracle Project Costing must convert the transaction amount to the functional and project currencies. To convert transaction currencies, Oracle Project Costing must first determine the exchange rate type and exchange rate date.

 Task Type:

  • Billable Item: It is a functionality associated at the task level identifying the expenditure items created against the task to be billed to the client.
  • Non Billable Item: It is functionality associated at the task level identifying the expenditure items created on the task is only to record the cost incurred against it.

Note: We can adjust the task at the expenditure item window to make the non billable as billable and vice versa. This is called as expenditure item adjustments.

Employee/Job bill rate Override: Incase a different rate needs to be updated for a particular job or employee the same can be updated at the project or task level.

The employee name needs to be entered along with the bill rate, currency and period applicable. The rate at the task level overwrites the rates at the project level and the rates at the project level overwrites the rate of the bill rate schedule attached at the project level.

Cost rate: It is the rate defined at the job or employee level to derive at the basic cost for a particular expenditure item. The cost rate scheduled are defined in the OU functional currency.

The cost rate can be defined at two levels:

  • In the setups -> Expenditure -> Rate schedule.
  • Overrides: Labor Costing Overrides

( Navigation: PA Responsibility->Setup->Costing->Labor->Labor Costing Overrides.)

Bill rate: It is the rate defined at the job or employee level to derive at an amount which will be billed to the client.

The bill rate can be defined at two levels:

  1. In the setups -> Expenditure -> Rate schedule.
  2. Overrides: At the project level as employee or job override.
  •  For employee override: Navigation: Project -> Options -> – Bill Rates and Discount Overrides -> Employee Bill Rate and Discount Overrides
  •  For job override: Navigation: Project -> Options ->   Bill Rates and Discount Overrides -> Job Bill Rate and Discount Overrides

Transfer Price Rules and Schedule: Transfer price rules control the calculation of transfer prices for labor and non-labor cross charged transactions. To drive transfer price calculation for cross charge transactions between the provider and receiver, use the Transfer Price Schedule window to assign labor or non-labor (or both) transfer price rules to the provider and receiver pair on a schedule line

ICB: It is a process, where we have different legal entities involved, and the OUs under these LE owns the employees and projects.

  • The OU to which the employee is assigned is called PROVIDER OU.
  • The OU to which owns the project is called RECEIVER OU.

 Note: In ICB process, an internal invoice is generated in provider OU.

Borrowed And Lent: It is a process, where we have one legal entity involved, and the OUs under the LE owns the employees and projects. The employee and project can be in the same OU or different OU but the LE has to be same.

Note: No internal invoice is generated in B&L process, only accounting happens to post cost.

Labor: When an employee enters time on a specific project it is known as charging efforts of the employee on the project for a given time frame. This time further has some cost defined to calculate the actual cost incurred by the employees on the project.

The calculation process of the raw cost for such labor/time entered is called as Labor Cost.

The time can be entered via a third party tool or via the PA pre approved batch.

 Overtime – Labor cost calculated using a premium cost rate multiplied by hours.

 Non labor expenditure types: The expenditure items created via supplier invoices or expense reports are called as non labor expenditure types. The expenditure types created need to be added in the non labor expenditure schedules.

Navigation: PA -> Setups -> Expenditure -> Rate schedule.

 

Thanks.

 

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