Project accounting is the process of dividing your accounting up into separate projects. This gives you a better overview of what you’re spending and earning on projects.
Accounting is the process of keeping detailed records of all the financial transactions in your business. It’s also called bookkeeping.
When you divide your accounting up into separate projects, you can get a better overview of the cost you incur and the revenue that you generate from specific projects. This is called project accounting.
What’s included in project accounting
A good project accounting record should include all transactions that are linked to the project. This includes expenses such as wage costs, the cost of material, and fees for subcontractors.
You should also include essential information such as project codes, client details—such as company name and address—and dates should be included. Same as with your regular accounting, you have to include supporting documents like receipts, timesheets, and invoices to back up the transactions you record.
Why project accounting is helpful
When you do project accounting, you record and separate the costs and revenues associated with a particular project to see how those projects are performing.
Project accounting helps you understand the profitability of different projects, how much—or how little—those projects contribute to your overall income, and it helps you set up budgets and plan new projects more easily.
While it’s not mandatory for most businesses, project accounting can be helpful for any company, particularly those with multiple large concurrent projects.
It’s a requirement in some industries
Project accounting helps organisations monitor and analyse the financial performance of individual projects. This is often used in large projects, for example within the construction, consulting, or event management industry.
In some industries and in some countries you’re required to do separate accounting per project, for example within the construction industry, offshore operations, and shipyards. Additionally, businesses who receive support from the government might also be required to do project-based accounting. However, the requirements will vary from country to country.