CODE OF ACCOUNTS in D-E Project Accounting 

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 Code of Accounts

This article describes the CODE OF ACCOUNTS used in D-E Project Accounting

Code of Accounts defines individual elements of the total project cost. In the D-E Accounting there are four major types of Accounts: COST ACCOUNTS, EXPENSE ACCOUNTS, BOOKING ACCOUNTS, and COMMITMENT ACCOUNTS. Click here to see the illustrating graph.

COST Accounts and EXPENSE Accounts - well familiar to Cost Engineers - are called PROJECT ACCOUNTS. On the other hand, BOOKING Accounts and COMMITMENT Accounts - rather something new, but required by the dual-entry methodology - are called GENERIC ACCOUNTS.

 All these accounts  - FORECASTS, EXPENSES, BOOKINGS, and COMMITMENTS - have structure similar to that of Business Accounting, utilizing DEBIT and CREDIT columns. The data contents creates the difference among these account types, as defined by the D-E Accounting Network; click here to display the network. However, COST ACCOUNTS are more complex than the remaining ones. Each Cost Account has always one associated Time-Cost Account, and on complex engineering project it may have also another associated account, called gWBS Account. We shall deal with these associated accounts in our future email articles.

All Accounts have common attributes such as:

o        ID# - up to 10 alphanumeric characters, plus dot (.) and one character being Class's 1st dimension: C, E, B or F.
o        NAME
o        CATEGORY
 - Cost, Expense, Booking or Commitment
o        CLASS
o        Current Total DEBIT
o        Current Total CREDIT

CLASS:  This attribute is three-dimensional, identified by three characters:

1st Dimension represents allocation to one of the Account Categories:
C = COST
E = EXPENSE
B = BOOKING
F = COMMITMENT

2nd  Dimension represents allocation to one of Generic Categories:
1 = Engineering
2 = Materials
3 = Construction
4 = Contingency
5 = Prorates

3rd  Dimension represents allocation to one of sub-categories of Generic Categories:
d = Direct
i = Indirect

RETRIEVAL CODE - applicable to Cost Accounts and Expense Accounts only - defines additional attributes that may be required for cost assessment during execution of the Project. In TECA computer program, the code length comprises 8 characters and consists of four Code Words, each comprising two characters, where Each Code Word represents some distinct attribute, such as 'WHERE', 'WHEN', 'WHO' and 'HOW'.

ACCOUNT TYPES:  There are two types of accounts:

GENERIC ACCOUNTS
PROJECT ACCOUNTS

 

GENERIC ACCOUNTS 

        All BOOKING ACCOUNTS and COMMITMENT ACCOUNTS are generic only. Created solely for the needs of the dual-entry accounting, and embedded in the TECA software, the ID Code, Name and Class of any one of the generic accounts must not be modified!

There are eight (8) kinds of GENERIC ACCOUNTS:

o        Engineering Direct
o        Engineering Indirect
o        Materials Direct
o        Material Indirect
o        Construction Direct
o        Construction Indirect
o        Prorates
o        Contingency

Because Generic Accounts must appear in each account type, such as COST, EXPENSE, BOOKING, and COMMITMENT, practically there are 32 Generic Accounts  in the Dual-Entry Accounting. All Generic Accounts are created automatically by TECA, at the project initiation stage; (click here).

Why Generic Accounts must be used in the Dual-Entry Project Accounting? They are necessary for three reasons:

1. To balance CREDIT or DEBIT in all journal entries of Forecast Journal, Booking Journal, and Commitment Journal; (Generic Accounts do not appear in Expense Journal).
2. To demonstrate project costs in the Budget.
3. To appear in several reports, such as Project Cost Statements, where cost must be shown also as generic.

For an example of BOOKING ACCOUNT screen and report, click here. For an example of COMMITMENT ACCOUNT screen and report, click here.

 Because every Project Account is also allocated to a certain Generic Category, any conversion of dollar values of Cost Accounts to equivalent generic values is fully automatic and instant when computer software is utilized, not requiring any calculations on part of the Cost Engineer.

 

PROJECT ACCOUNTS

There are two kinds of PROJECT ACCOUNTS:
o Cost Accounts for all Project Objects, involving Construction, Materials and Engineering.
o
Expense Accounts for all Project Participants, i.e. contractors, suppliers, engineering firms and others who supply services and/or materials to the Project.

COST ACCOUNTS

In every engineering project, the majority of Accounts will be COST ACCOUNTS.  Each Cost Account will have its supporting Time-Cost Account (created automatically). In complex engineering projects, some or all Cost Accounts may need to have also their corresponding Global WBS Accounts (each comprising several positions of Cost Estimate), allowing to generate progress figures (Global Earned Value and Global Earned Work) for the corresponding Cost Accounts.

COST ACCOUNT contains figures of FORECASTS and ACTUALS only. FORECAST figures (shown on the DEBIT site) arrive from the initial cost estimate and from subsequent change orders. ACTUALS figures (shown on the CREDIT site) arrive from the reported work progress (EARNED VALUE and EARNED WORK). 

Each Project Cost Account must be also provided with the forecasted START and FINISH dates, as well as two factors F1 and F2 defining the expected forecasted distribution (click here) in the project time frame, identified by Project Periods. The dates must correspond with the dates of the Project Cost Schedule (generated by Cost Engineer) (click here), reflecting the overall Total Project Schedule (generated by Project Scheduler).

An example of one Cost Account attributes; (click here to display the related screen and report):

  • CODE                               C003.C
  • DESCRIPTION               Fabrication, Tie-In Platform
  • CATEGORY                    Construction
  • CLASS                             [C3d]
  • Debit Name                     Forecast
  • Credit Name                   Actuals
  • Current Forecast          $29,308,800
  • Current Actuals             $26,971,624
  • Retrieval Code               12,,,,,,
  • Planned Start Date        03/01/1992
  • Planned Finish Date      11/30/1992
  • Duration in Periods        8
  • Distribution Factor F1   +1
  • Distribution Factor F2   +1

 

EXPENSE ACCOUNTS

Expense Accounts belong to contractors, subcontractors, suppliers, freight firms, engineering firms and any other business-, government-, or other entities that provide services or supply materials to the Project. These accounts contain also additional information, such as addresses, telephone numbers, email addresses, names of key persons, and other comments. There are no Sub-Contractor Accounts in the Project Accounting, and sub-contractors shall be treated as contractors for all bookkeeping purposes.

EXPENSE ACCOUNT contains figures of EARNED WORK and PAID BILLS only. Earned Work figures (shown on the DEBIT site) arrive from the reported work progress (EARNED WORK obtained from EARNED VALUE). Paid Bills figures (shown on the CREDIT site) arrive from the information obtained from received invoices (confirmed by Project Accountant).

An example of one Expense Account attributes; (click here to display the related screen and report):

  • CODE                               MORGON.E
  • DESCRIPTION               Morgohou Wei Constructrion Group, Co., Ltd
  • CATEGORY                    Expense
  • CLASS                             [E3d]
  • Debit Name                     Earned
  • Credit Name                    Paid
  • Current Forecast           $258,551,490
  • Current Actuals             $215,459,786
  • Retrieval Code                ,,,,18,,
  • Address                            3450 Shan Shoe, Chunking 456-00, China
  • Telephone                        79-467-9000 or 56-678-5778
  • Contact Person               Jao Young, P.E.
  • Email address                 jao.young@ajaing.com.chi
  • Remarks                           See meeting notes HGF-98/03, dated 04/12/2004

 

How to generate Code of Accounts

        Code of Accounts of any complex engineering project may require several hundred Project Cost Accounts (major project objects) and Project Expense Accounts (contractors, suppliers and engineering firms). In TECA, there are two procedures for creating the Code of Accounts: Manual and Batch.

MANUAL METHOD:  In  this method, data are entered using either a single screen (click here), or a listing screen (click here).

BATCH METHOD: In this method, data are entered into an EXCEL worksheet (click here), and this worksheet is used as the input form to the TECA computer program. TECA generates not only the CODE OF ACCOUNTS, but also the FIRST FORECAST Journal entry (click here), as well as all supporting TIME-COST Accounts (click here). This method shall be used in the project initiation stage, after all Global WBS Accounts have been created.

In the D-E Project Accounting the cost data are inserted into the accounts automatically, based solely on posted Cost Entries made in the Journals. Hence, after the project accounting has been initiated, the Cost Engineer needs only to maintain the four Journals, and also to deal with the cost progress assessment (by utilizing gWBS Accounts where applicable). The posted data automatically appear in the many Ledgers, making possible an instant assessment of project financial progress, as well as generating reports, illustrated by histograms and S-Curves.

   


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