For the Cost Engineer, the Financial
Ledgers are time-savers and source of the most current cost data
related to his Project. Without any
need on his part to write and to sort, the cost data are
automatically inserted into the ledgers thanks to the dual-entry
accounting methodology, today supported by the computerized
database.
The structures of Financial Statements in
the Project Accounting is almost identical to that of the Business
Accounting. Data gathered in these ledgers
depend solely on posted Journal Entries. This feature
makes any data editing in the ledgers impossible, what ensures
the full data integrity. Whenever a
Journal Entry is posted, the journal data automatically appears
in the Financial Ledgers. Whenever a Journal Entry is un-posted,
the related data are automatically erased from the Financial Ledgers.
Financial Ledgers are created
automatically (by TECA) at the time of creating the
corresponding Expense Accounts (for Project Participants) and
Project Cost Accounts (for Project Objects).
As far as data input is concerned, the Cost
Engineer needs only take take care for the four Journals
(described in our Article #3), where
his data entry job becomes a relatively easy
task.
In D-E Project Accounting, there are four
types of financial ledgers:
-
Financial Ledger for
all major Project Objects
-
Financial Ledger for
all Project Participants
-
Financial Ledger for
Project Documents
-
Financial Ledgers
showing all Costs as Generic
Today - whether in Business Accounting or in
Project Accounting - all bookkeeping is done using computer
software. Although there are many computer programs for Business
Accounting, for Project Accounting there is so far only one,
TECA, (click here).
Therefore, in our articles all computer program pictures belong
to TECA. Click here
to display the Ledger Menu screen of TECA, showing access
to all ledgers. In any one of the displayed ledger screens,
double click upon the data field
with green background displays instantly the related other
program screen - but this happens in the real program, and not
in our e-mail reports.
1.
Financial Ledgers for all major Project Objects
These
ledgers are Project Cost Accounts. There are two types of
ledgers: Project Account Ledger, and
Project Account Summary Ledger.
PROJECT ACCOUNT LEDGER
comprises accounts of all major Project Objects, identified in
the Code of Accounts as Project Cost Accounts.
Thus, every Project Cost Account - representing some Project
Object - owns one financial ledger. There, the DEBIT column
shows the FORECAST value of that Project Object, that arrives
automatically from posted entries of the Forecast Journal. The
CREDIT column shows the ACTUALS value, and these data arrive
automatically from posted entries of the Expense Journal. Any
negative BALANCE, i.e. DEBIT less CREDIT, shows for the apparent
overrun of that Project Object.
Click
here for an example of the Financial Ledger belonging to the
project object, C004.C - Fabrication, Accommodation Platform.
In the ledger there are 16 records. In the DEBIT column there
are 2 records: the cost estimate of 58,617,600 SR (Saudi Rials),
and one Change Order for 950,000 SR. In the CREDIT column there
are 14 records, showing the cost-progress (defined via Earned
Value converted to Earned Work, according to the
field reports supplied by the Field Engineer). The screen (and
the related report) shows that at the end of Project Period #20,
the forecast is not overrun, and the remaining surplus amounts
to 799,670 SR.
PROJECT ACCOUNT SUMMARY LEDGER
comprises the current financial status of all major Project
Objects, identified in the Code of Accounts as Project
Cost Accounts. Looking on this screen, the Cost Engineer
can instantly assess the financial situation of every Project
Object. He can easily scroll and sort the data, and also
generate current Project Object Status Report for the Project
Management.
Click
here for display of the program screen of the Project
Account Ledger Summary, belonging to the project SOFP -
Safanya Offshore Facilities - Stage #4. In the ledger there
are 39 records, each related to one Project Object (i.e. Cost
Account). Any negative balance indicates the cost overrun of
such Project Object. The total balance figure - displayed at the
bottom left of the screen, shows that at this project stage
there are still remain 19.51%. i.e. 166.796.839 SR of the total
Project Forecast, expected to be spent in the future.
2.
Financial Ledgers for all Project Participants
These
ledgers are Project Expense Accounts. There are two types
of ledgers: Billing Details, and Billing Summary.
BILLING DETAILS
ledger comprises accounts of all Project Participants, i.e.
Contractors, Suppliers, Engineering Firms, and any other
business entity that supplies services or materials to the
Project. These accounts are identified in the Code of
Accounts as Project Expense Accounts. Thus, every
Project Expense Account - representing some Project Participant
- owns one financial ledger. There, the DEBIT column shows the
EARNED value, that arrives automatically from posted entries of
the Expense Journal. The CREDIT column shows the PAID value, and
these data arrive automatically from posted entries of the
Booking Journal. Any negative BALANCE, i.e. DEBIT less CREDIT,
shows either for possible overpayment of such Project
Participant, or that his work (or his supplied materials) may
become more expensive than forecasted.
Click
here for an example of the Financial Ledger belonging to the
Project Participant, UWAUWA.E - Uwauwa Yokohama Pipes, Japan.
In the ledger there are 38 records. In the DEBIT column there
are 15 records, listing all purchase orders, amounting to
62,894,502 SR, as issued by the Project. In the CREDIT column
there are 23 records, listing all invoices, amounting to
62,870,209 SR, as issued by this Participant. The small positive
balance of 24,293 SR indicates that either the material was
purchased for so much less, or that a future invoice still
should be expected from this Project Participant.
BILLING SUMMARY
ledger comprises the current financial status of all Project
Participants, identified in the Code of Accounts as
Project Expense Accounts. Looking on this screen, the Cost
Engineer can instantly assess the financial situation of every
Contractor, Supplier, Engineering Firm, and any other business
entity that supplies services or materials to the Project. The
Cost Engineer can easily scroll and sort the data, and also
generate current Project Participant Status Report for the
Project Management.
Click
here for display of the program screen of the Participant
Billing Ledger Summary, belonging to project SOFP -
Safanya Offshore Facilities - Stage #4. In the ledger there
are 23 records, each related to one Project Participant (i.e.
Expense Account). Any zero (0) balance indicates the all
invoices have been paid. Any positive balance shows that more
invoices are to be expected, and the adjacent percentage figure
implies the magnitude. The negative balance shows either for
possible overpayment, or that the work (or supplied materials)
of this Participant may cost more that forecasted. The total
balance figure - displayed at the bottom left of the screen,
implies as follows: if positive - so much is still expected to
be paid to Project Participants; if negative - the total
Project Forecast has been overrun already. In our case, the
balance is positive, amounting to 43,828,130 SR, equal 6.3% of
the current total EARNED WORK of this Project.
3.
Financial Ledgers for Project Documents
These
ledgers comprise cost data extracted from various Journal
Entries, either from the DEBIT column, or from the CREDIT
column. There are eight (8) types of ledgers: Estimates and
Change Orders; Earned Value; Earned Work; Bills Paid; Funds
Requested; Funds Released; Funds Available; and Funds Disbursed.
Estimates
and Change Orders
ledger contains all cost figures of the original Project Cost
Estimate and all Change Orders. The data are extracted
automatically from the Debit Column of the Forecast Journal.
Each record shows Account ID and title, cost reference, Forecast
Amount, planned Start and Finish dates, originally assumed
distribution shape factors, and journal entry references. The
displayed data cannot be edited here, and any revision requires
an entry into the Forecast Journal, what ensures the data
integrity.
Click here for an example of this ledger type, belonging to
the project object, C004.C - Fabrication, Accommodation
Platform. In the ledger there are 43 records, with the total
value of 862,057,800 SR, representing to current cost estimate
of this Project.
Earned
Value
ledger
contains all Earned Value cost figures, related to the project
execution process. The data are extracted automatically from the
Credit Column of the Expense Journal. Each record shows Cost
Account ID and title, Journal date and title, and the Earned
Value figure and worth (Earned Work). The displayed data cannot
be edited here, and any revision requires an entry into the
Expense Journal, what ensures the data integrity.
Click here for an example of this ledger type, named
Global Earned Value - by Project Accounts. In the ledger
there are 386 records, with the total value of 693,133,761 SR,
representing to current sum of all Earned Values of this
Project.
Earned
Work
ledger
contains all Earned Work cost figures, related to the project
execution process. The data are extracted automatically from the
Debit Column of the Expense Journal. Each record shows Expense
Account ID and title, Journal date and title, and the Earned
Work figure. The displayed data cannot be edited here, and any
revision requires an entry into the Expense Journal, what
ensures the data integrity.
Click here for an example of this ledger type, named
Global Earned Work - by Project Accounts. In the ledger
there are 351 records, with the total value of 693,133,761 SR
(the same as that in the Earned Value Ledger), representing the
current sum of all Earned Works of this Project.
Bills Paid
ledger contains all Invoices received from Project Participants
and Credit Memos issued to Project Participants. The data are
extracted automatically from the Credit Column of the Booking
Journal. Each record shows the invoice or credit memo,
Participant's Account ID and title, the amount paid, and the
related Journal ID# and posting date and time. The displayed
data cannot be edited here, and any revision requires an entry
into the Booking Journal, what ensures the data integrity.
Click here for an example of this ledger type, named Paid
- Invoices, Credit Memos, and other Bills. In the ledger
there are 355 records, with the total value of 649,305,631 SR,
representing to current sum of all paid invoices and other
bills.
Funds
Requested
ledger
contains all sums of Cost Estimates and Change Orders
distributed between the Generic Accounts, such as
Construction-Direct, Construction-Indirect, Materials-Direct,
Materials-Indirect, Engineering-Direct, Engineering-Indirect,
and Prorates. The data are extracted automatically from
the Credit Column of the Forecast Journal. Each record shows the
date and title of the Journal Entry, the amount of the fund,
and the Generic Account ID# and name. The displayed data cannot
be edited here, and any revision requires an entry into the
Forecast Journal, what ensures the data integrity.
Click here for an example of this ledger type, named
Funds Requested. In the ledger there are 16 records, with
the total value of 862,057,800 SR (the same as that of
Estimates and Change Orders
ledger),
representing the current cost estimate of this Project.
Funds
Released
ledger
contains all sums of money supplied by the Project Sponsors.
These amounts are shown as distributed between the Generic
Booking Accounts, such as Construction-Direct,
Construction-Indirect, Materials-Direct, Materials-Indirect,
Engineering-Direct, Engineering-Indirect, and Prorates.
The data are extracted automatically from the Credit Column of
the Commitment Journal. Each record shows the date and title of
the Journal Entry, the amount of the fund, and the Generic
Account ID# and name. The displayed data cannot be edited here,
and any revision requires an entry into the Forecast Journal,
what ensures the data integrity.
Click here for an example of this ledger type, named
Funds Released. In the ledger there are 16 records, with the
total value of 862,057,800 SR (the same as that of Funds
Requested
ledger),
representing the amount of money needed by this
Project.
Funds
Available
ledger
contains all sums of money supplied by the Project Sponsors. These
amounts are shown as distributed between the Generic Booking
Accounts, such as Construction-Direct, Construction-Indirect,
Materials-Direct, Materials-Indirect, Engineering-Direct,
Engineering-Indirect, and Prorates. The data are
extracted automatically from the Debit Column of the Commitment
Journal. Each record shows the date and title of the Journal
Entry, the amount of the fund, and the Generic Account ID# and
name. The displayed data cannot be edited here, and any revision
requires an entry into the Commitment Journal, what ensures the
data integrity.
Click here for an example of this ledger type, named
Funds Available. In the ledger there are 175 records, with
the total value of 654,800,004 SR, representing the amount of
money already made available to this Project by the Project
Sponsors.
Funds
Disbursed
ledger
contains all sums of money already spent. These amounts are
shown as distributed between the Generic Booking Accounts, such
as Construction-Direct, Construction-Indirect,
Materials-Direct, Materials-Indirect, Engineering-Direct,
Engineering-Indirect, and Prorates. The data are
extracted automatically from the Debit Column of the Booking
Journal. Each record shows the date and title of the Journal
Entry, the amount of the fund, and the Generic Account ID# and
name. The displayed data cannot be edited here, and any revision
requires an entry into the Booking Journal, what ensures the
data integrity.
Click here for an example of this ledger type, named
Funds Disbursed. In the ledger there are 136 records, with
the total value of 649,305,631 SR, (the same as that of Bills
Paid
ledger),
representing the amount of money
already spent by this Project.
4.
Financial Ledgers showing all cost as Generic
Generic Cost are such costs that are expressed as
Construction-Direct, Construction-Indirect, Materials-Direct,
Materials-Indirect, Engineering-Direct, Engineering-Indirect,
and Prorates. Because every Project Account is related
by some Class (e.g. C3d) to the Generic Account of the same
class, the conversion is fully automatic,
requiring no involvement on part of the Cost Engineer.
There are two types of ledgers: Generic Account Detail Ledger,
and Generic Account Summary Ledger. Generic expressions of
project costs are required to be shown in the Project Budget (to
be explained in one of our future articles) and in
special cost reports issued to the Project Management and to
Project Sponsors.
Generic Account Details
ledger comprises data extracted automatically from Journal
Entries of three Journals: Forecast Journal, Booking Journal and
Commitment Journal. Generic accounts are identified by the Class
attribute. Although there are 32 Generic Accounts, in this
ledger there are only such accounts that appear in any of the
existing journal entries.
Click here
for an example of the Generic Account Ledger B3d Booked
CONSTRUCTION Direct. In the ledger there are 50 records. In
the DEBIT column there are 25 records, listing all Construction
related expenses made in various Project Periods and amounting to 308,723,950
SR. In the CREDIT column there are 25 records, listing all
monies so far allocated to this account and amounting to
255,210,723 SR. The balance of 53,513,227 SR indicates that
presently this Generic Account is short of money. This means
that
either not all received invoices had been paid, or that the
invoices were paid but using money
originally assigned to another Generic Account. This balance
overrun error should be fixed by making an adjustment Journal Entry
in the Commitment Journal.
Generic Account Ledger Summary
shows the
financial status of all Generic Accounts, identified by the
Class attribute. The Cost Engineer looking on this screen
can instantly assess the financial situation, such as how much
money have been allocated and spent with reference to each
Generic Account, such as Construction-Direct,
Construction-Indirect, Materials-Direct, Materials-Indirect,
Engineering-Direct, Engineering-Indirect, and Prorates.
The total balance figure - displayed at the bottom left of the
screen - shall be always zero (0), as otherwise this indicates
for a data input error. Any unbalance error related to Generic
Accounts can be fixed by making appropriate Journal Entries in
the Commitment Journal.
Click here
for display of the program screen of the Generic Account
Ledger Summary, belonging to project SOFP - Safanya
Offshore Facilities - Stage #4. In the ledger there are 29
records, each related to one Generic Account. Any positive
balance of any record shows for the current cost overrun of such account, and
any negative figure indicates the current surplus on this
account. The total balance figure - displayed at the bottom left
of the screen - is zero (0), that means OK.
However, any unbalance error in any of the Generic Accounts
should be fixed by making appropriate Journal Entries in the
Commitment Journal.
Remarks
The dual-entry methodology of Project
Accounting allows to gather in the ledgers practically unlimited
amount of cost data, all neatly arranged, and that
without any need on part of the Cost
Engineer to do any data retrieval or sorting. On the
other hand, using the single entry accounting method, each
record would need to be created manually, written directly into every
ledger. In such case, the job of gathering the same amount of
cost data - as that are shown in the above described 14 ledgers
- would be enormous, requiring an effort of more than one
person, where in the end nobody would be sure that the data is
100% correct.
The ledgers of
D-E Project Accounting should convince you about the
righteousness of applying the dual-entry accounting method to Project Cost
Planning and Control.