FINANCIAL LEDGERS 

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 Financial Ledgers 

    This article describes the fourteen (14) Financial Ledgers of the D-E Project Accounting.   

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:

  1. Financial Ledger for all major Project Objects
  2. Financial Ledger for all Project Participants
  3. Financial Ledger for Project Documents
  4. 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.


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