Overview of Oracle Project Costing

Overview of Oracle Project
Costing
Overview
Copyright 2007, Oracle. All rights reserved.
Overview of Oracle Project Costing 369032125.doc

Effective 10/31/06 Page 1 of 23 Rev 1
Overview of Oracle Project Costing
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R12 Project Costing Fundamentals
D47868GC10
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document is necessary and that it reflects actual practice.

Overview of Oracle Project Costing

Objectives

Agenda

Oracle Enterprise Project Management Solution
Oracle Enterprise Project Management Solution

You can use Oracle Project Costing to collect, process, and track costs against projects and
tasks. You can enact cost controls and report on costs for all project activities. Oracle Project
Costing is part of the Oracle Enterprise Project Management solution. Oracle Enterprise Project
Management provides a set of applications that help companies deliver global projects by
integrating and managing project information. It enables all persons at all levels of the enterprise
to participate in and collaborate on the projects at appropriate levels in a centralized
environment. Information is available to the project team through personalized and secure role-
based views.

Oracle Project Costing and Integration

Oracle Project Costing imports data from these applications:
Oracle Asset Tracking - Oracle Asset Tracking enables you to provide users with access
to tracking information, without allowing them access to sensitive processes related to
assets and purchasing. You can also track inventory items after you have installed them
and link financial transactions to the physical movement of equipment. Oracle Asset
Tracking enables you to create assets upon receipt in Oracle Purchasing. After you create
the asset, Oracle Asset Tracking performs the changes in the background for any further
physical movement. For example, if you move the asset from one location to the other,
then Oracle Asset Tracking performs the asset cost, distribution, and unit changes without
manual intervention. Oracle Asset Tracking integrates with Oracle Inventory, Oracle
Purchasing, Oracle Project Costing, Oracle Assets, and Oracle Payables, and stores
information collected from them.
Oracle Internet Expenses - Oracle Internet Expenses enables you to enter project-related
expense reports. Once approved, the expense reports are imported into Oracle Payables.
Oracle Payables creates invoices from the expense reports, maintains payments, and
creates subledger accounting entries. In Oracle Project Costing, expense reports are
interfaced as actual costs from Oracle Payables.

Oracle Inventory - You can implement Oracle Inventory to Oracle Project Costing
integration, enabling you to interface costs from Oracle Inventory to Oracle Project
Costing, without installing Oracle Project Manufacturing. When you enter projectrelated
transactions in Oracle Inventory, you enter the project information on the source
transaction. Oracle Inventory and Oracle Project Costing carry the project information
through from the Issue To or Receipt From transaction in Oracle Inventory to the project
expenditure in Oracle Project Costing.
Oracle iProcurement - You can enter project-related purchase requisitions using Oracle
iProcurement. After requisition approval, you can AutoCreate a purchase order in Oracle
Purchasing. Oracle Purchasing copies the project information to the purchase order.
Oracle Payables - In Oracle Payables, you can match a supplier invoice to an existing
purchase order or receiving transaction. Oracle Payables automatically copies the project
information from the purchase order distribution lines when you perform the match. You
can also create non-matched supplier invoices in Oracle Payables and enter invoice
distributions to charge invoice costs to projects. You can use both Oracle Purchasing and
Oracle Payables, or just Oracle Payables. You can set up Oracle Payables to apply
discounts to payments. After you enter a payment with discounts, you interface the
discounts to Oracle Project Costing. Oracle Payables creates subledger accounting entries
for project-related supplier costs.
Oracle Purchasing - When you enter project-related transactions in Oracle Purchasing,
you only need to enter project information on the source document; either the requisition
or the purchase order. The Account Generator automatically creates the account
information, based on the project-related information you enter. You can also use the
Buyer WorkCenter in Oracle Purchasing to enter project-related purchase orders. When a
purchase order shipment is flagged to accrue at receipt and the purchased goods are
delivered to an expense destination, you enter a receiving transaction for the purchase
order in Oracle Purchasing and create subledger accounting for the receiving transaction in
final mode. Next, you interface receipt accruals to Oracle Project Costing.
Oracle Project Manufacturing - Oracle Project Costing acts as a cost repository for
manufacturing-related activities from other products in the Oracle Project Manufacturing
suite. Oracle Project Manufacturing is a type of manufacturing environment where large
projects drive production requirements. You define the Work Breakdown Structure for a
manufacturing project in Oracle Project Costing. You track manufacturing costs by project
and task and use Transaction Import to import them into Oracle Project Costing.
Oracle Time & Labor - Oracle Time & Labor integrates with Oracle Project Costing to
enable employees and contingent workers to enter and submit project-related timecards.
Employees and contingent workers enter their own time, which you can subject to an
approval process according to your business rules. You can transfer approved timecards to
Oracle Project Costing, Oracle Payroll, and Oracle Human Resources. After you import
the timecards into Oracle Project Costing, you cost the timecards and derive the default
accounting using AutoAccounting. During cost processing, the raw cost and any
additional burden cost is calculated. Finally, you generate cost accounting events and
create accounting for the timecards in Oracle Subledger Accounting.


Oracle Project Costing sends data to these applications:
Oracle Assets - Using asset capitalization functionality, you can define capital assets and
capture constructioninprocess (CIP) and expense costs for assets you are creating. When
you are ready to place assets in service, you can generate asset lines from the CIP costs and
send the lines to Oracle Assets for posting as fixed assets. You can also define retirement
adjustment assets and capture cost of removal and proceeds of sale amounts (collectively
referred to as retirement costs, retirement workinprocess, or RWIP) for assets you are
retiring that are part of a group asset in Oracle Assets. When your retirement activities are
complete, you can generate asset lines for the RWIP amounts and send the lines to Oracle
Assets for posting as adjustments to the accumulated depreciation accounts for the group
asset that corresponds to each asset.
Oracle General Ledger - Oracle Project Costing integrates with Oracle General Ledger
via Oracle Subledger Accounting so that you can update your general ledger with Oracle
Project Costing activity. You use Oracle Project Costing to collect project cost detail
transactions, and then to generate accounting events that Oracle Subledger Accounting
uses to create the accounting. Oracle Subledger Accounting transfers the final accounting
entries to Oracle General Ledger.

Oracle Subledger Accounting - Oracle Subledger Accounting is an intermediate step
between each of the subledger applications and Oracle General Ledger. Oracle Subledger
Accounting stores a complete and balanced subledger journal entry in a common data
model. Oracle Project Costing uses AutoAccounting, or the Project Budget Account
Generation workflow for integrated budgets, to derive default accounts for transactions.
You submit concurrent programs in Oracle Project Costing to generate accounting events
and create accounting entries in Oracle Subledger Accounting. Oracle Project Costing
predefines setup in Oracle Subledger Accounting so that it accepts the default accounts that
Oracle Project Costing derives without change. Oracle Subledger Accounting transfers the
final accounting to Oracle General Ledger. If you define your own detailed accounting
rules in Oracle Subledger Accounting, then Oracle Subledger Accounting overwrites
default accounts, or individual segments of accounts, that Oracle Project Costing derives
using AutoAccounting.

Agenda

Oracle Project Costing and Project Classes
Oracle Project Costing and Project Classes

You can use Oracle Project Costing to collect costs associated with all of your project activities.
For example, you can use indirect projects to track costs associated with research and
development, non-billable sales proposal activities, or general overhead operational costs for
departments such as purchasing or human resources. Capital projects enable you to capture
construction-in-process (CIP) costs for assets you are creating. You can also use capital projects
to capture the cost of removal and proceeds of sale amounts (RWIP) for assets you are retiring.
You also can track costs associated with contract projects. In conjunction with Oracle Project
Billing, you can generate revenue and customer invoices for contract projects. This enables you
to report on both project costs and revenue.
For additional discussion regarding contract projects, see the course titled R12 Project Billing
Fundamentals.

Overview of Resources In Oracle Projects
Overview of Resources in Oracle Projects

Oracle Projects provides a centralized resource pool as part of the core foundation in which
employees and contingent workers are identified as resources. Each of the applications in the
Oracle Projects suite utilizes this resource pool differently:
Oracle Project Costing: Collects project-related timecard and expense report costs for
resources. Provides resource cost controls and cross-charging for shared resources.
Oracle Project Billing: Generates revenue and invoices by billing labor hours on a project.
Oracle Project Management: Creates a budget for labor costs to plan and manage the
financial performance of projects throughout the project lifecycle.
Oracle Project Collaboration: Allows resources to participate as team members for
communicating progress against assigned tasks by directly accessing the published
workplan, and assigns actions to fellow team members so that the ownership and steps to
resolution are communicated clearly and consistently.
Oracle Project Resource Management: Locates the appropriate resources to staff project
requirements based on competencies and availability. As a resource, you can also search for
requirements that match your particular skills.
Collecting Resource Costs

Resources can charge time to projects. For labor costs, you can:
Associate each labor expenditure item with a scheduled work assignment and a work type.
Maintain labor cost rate schedules by employee or by job.
Calculate costs based on labor.
Override labor cost rates for individuals.
Define a method for calculating overtime cost.
Maintain burden schedules to calculate additional costs of doing business that support the
raw costs.
Report on actual resource utilization based on actual hours from timecards.
Query expenditure items for specific resources.
Oracle Project Costing integrates with Oracle Time & Labor to capture project-related
timecards for resources.
Resources can also charge expenses to projects. Oracle Project Costing integrates with Oracle
Internet Expenses and Oracle Payables to capture project-related expense reports.
Note: Employees and contingent workers do not have to be scheduleable project resources to
charge time and expenses to projects. Optionally, you can use transaction controls to control
charges to tasks based on the resources assigned to the workplan tasks.
Cross Charge
When projects share resources within an enterprise, it is common to see those resources shared
across organization and country boundaries. Further, project managers can also divide the work
into multiple projects for easier execution and management. Oracle Project Costing provides
cross charge features to enable project managers to view the current total costs of the project,
regardless of who performs the work or where it is performed.
Project Allocations
You can use the allocations feature to distribute cost amounts between and within projects and
tasks, or to projects in other organizational units. You can select resources groups and resources
when you define allocation sources and proration basis methods.

Costing Flow
Costing Flow
Oracle Project Costing enables you to track and account for all project costs. You can enter
transactions directly into Oracle Project Costing using expenditure batches, import transactions
from other Oracle Applications, such as Oracle Time & Labor, or import transactions from
external systems.
Costing Flow Example (Labor Cost)
1. Enter or import expenditures - You can enter pre-approved expenditure batches or
import transactions from other Oracle applications or external applications.
2. PRC: Distribute Labor Costs - Calculates the raw and burden cost amounts for labor cost
expenditure items and uses AutoAccounting to determine the default debit account for
each expenditure item.
3. PRC: Generate Cost Accounting Events - Uses AutoAccounting to determine the default
credit account for expenditure items and generates accounting events for distributed
transactions.
4. PRC: Create Accounting - Creates subledger journal entries for eligible accounting
events. You can run the program in either draft or final mode. Optionally, the program can
post journal entries in Oracle General Ledger.

5. PRC: Transfer Journal Entries to GL - When you run the program PRC: Create
Accounting, if you select No for the parameter Transfer to GL, then you run must the
program PRC: Transfer Journal Entries to GL to send journal entries to Oracle General
Ledger.
6. Journal Import (in Oracle General Ledger - Imports the final accounting entries from
Oracle Subledger Accounting into Oracle General Ledger.

Collect and Manage All Costs
Collect and Manage All Costs

Oracle Project Costing is an integrated cost management solution for all projects and activities
within an enterprise. With Oracle Project Costing you can manage costs across currency and
organizational boundaries. Oracle Project Costing also acts as a central repository of project
transactions, processes project costs, and creates corresponding accounting.
Methods of Entering Expenditures
You can use pre-approved batches to enter expenditures directly into Oracle Project Costing
and Transaction Import to import expenditures into Oracle Project Costing from external
sources. In addition, you can use Microsoft Excel Integration to enter expenditures and then
import the expenditures into Oracle Project Costing. Oracle Project Costing also integrates with
other Oracle applications. You can collect project-related costs in applications such as Oracle
Time & Labor, Oracle Purchasing, Oracle Payables, Oracle iProcurement, Oracle Inventory,
Oracle Project Manufacturing, Oracle Asset Tracking, and Oracle Internet Expenses.

Manage Costs
Manage Costs
After you collect costs, you can perform adjustments as needed. You can also use features such
as cross charge, burdening, project allocations, and asset capitalization to further process the
costs. The adjustment functionality in Oracle Project Costing gives you control over your
project costs. You can adjust your project costs online, create accounting for the adjustments,
and provide a historical audit trail of all activities. You can perform a wide variety of
adjustments - including correcting approved expenditures, changing the capitalizable or billable
status of expenditure items, recalculating raw or burdened costs, splitting expenditure items, and
transferring expenditures to another project.
Cross Charge
A cross charge takes place when the expenditure organization of an expenditure item is different
from task owning organization of the task being charged. These organizations are called the
provider and receiver organizations. The organizations can be within the same operating unit or
belong to different operating units. You may perform additional cross charge processing to pass
costs or share revenues between the provider and receiver organizations. This processing
includes creating borrowed and lent accounting entries or generating intercompany invoices.
Burdening

Burden costs are costs of doing business that support raw costs. For example, you can define a
burden cost code of G&A to burden specific raw costs with general and administrative overhead
costs. You can create subledger accounting for burden cost and post the accounting to Oracle
General Ledger.
Project Allocations
The allocations feature in Oracle Project Costing can distribute amounts between and within
projects and tasks, or to projects in other organizational units. For example, you can allocate
amounts such as salaries or administrative overhead across several projects and tasks.
Your allocations can be as simple or elaborate as you like. You identify the amounts you want to
allocate (source) and then define the targets, the projects and tasks to which you want to
allocate the source amounts. Optionally, you can offset the allocations with reversing
transactions. The system gathers source amounts into a source pool, and then allocates to the
targets using the basis method that you specify in the allocation rule. You can use a basis
method of Spread Evenly to divide the source pool amount equally among all the chargeable
target tasks included in the rule. Alternatively, you could select Prorate as the basis method to
use the attributes set in the Basis window.
When you allocate amounts, you create expenditure items whose amounts are derived from one
or more of the following sources:
Existing summarized expenditure items in Oracle Project Costing
A fixed amount
Amounts in an Oracle General Ledger account balance
Asset Capitalization
Using asset capitalization functionality, you can define capital assets and capture construction
inprocess (CIP) and expense costs for assets you are creating. When you are ready to place
assets in service, you can generate asset lines from the CIP costs and send the lines to Oracle
Assets for posting as fixed assets. You use capital projects to capture the costs of capital assets
you are building, installing, or acquiring.
You can also define retirement adjustment assets and capture cost of removal and proceeds of
sale amounts (collectively referred to as retirement costs, retirement workinprocess, or
RWIP) for assets you are retiring that are part of a group asset in Oracle Assets. When your
retirement activities are complete, you can generate asset lines for the RWIP amounts and send
the lines to Oracle Assets for posting as adjustments to the accumulated depreciation accounts
for the group asset that corresponds to each asset.
You can also calculate and record capitalized interest for capital projects. Capitalized interest
(also referred to as Allowance for Funds Used During Construction) is an estimate of the
interest cost that enterprises incur when they invest in longterm capital projects. Subject to
accounting rules and regulatory guidelines, enterprises can capitalize interest as part of the total
cost of acquiring and constructing assets that require an extended amount of time to prepare for
their intended use.

View Accounting: Transaction Details
View Accounting: Transaction Details

From Oracle General Ledger, you can drill down to subledger details from the Account Inquiry,
Enter Journals, or View Journals windows for journals that have specific journal sources
assigned to them. For example, you can select a labor cost journal entry line with the source
Projects and select the Line Drilldown button to view the details in Oracle Subledger
Accounting. Next you can choose to either view the subledger journal entry or to view the
transaction. When you choose to view the transaction, the system drills down to Oracle Project
Costing and queries the individual expenditure items that make up the subledger journal entry in
expenditure inquiry.
You can also perform inquiries directly in Oracle Subledger Accounting to view transaction
details for accounting events. When you view a transaction for a cost accounting event, Oracle
Subledger Accounting drills down to Oracle Project Costing and automatically opens and
queries information in expenditure inquiry. Similarly, you can drill down to other subledger
applications to view transaction information for the accounting events that originated in those
applications. In Oracle Subledger Accounting, you can query accounting events, journal entries,
and journal entry lines based on multiple selection criteria.

View Accounting: Final Subledger Accounting Entries
View Accounting: Final Subledger Accounting Entries

You can use expenditure inquiry in Oracle Project Costing to view final subledger accounting
entries for expenditure items. Use the View Accounting option from the Tools menu to review
accounting entries. You must create accounting in final mode for the accounting events
associated with the expenditure item to view accounting entries.
Note: For both historical (prior to Release 12) expenditure items not migrated to Oracle
Subledger Accounting, and transactions accounted in an external system and interfaced into
Oracle Project Costing, the View Accounting option displays accounts from the cost
distributions table in Oracle Project Costing.

View Expenditure Item Details
View Expenditure Item Details

You can also use expenditure inquiry to view detailed information for each expenditure item.
Depending on the expenditure item, you can:
View cost distribution line information for each expenditure item, including the default
accounting entries that Oracle Project Costing derived using AutoAccounting, the PA and
GL period, and the accounting event generation status.
View the revenue distribution lines for billable expenditure items (contract projects).
Drill down to Oracle Payables if the supplier cost expenditure item was interfaced to
Oracle Project Costing from Oracle Payables.
Drill down to the Receipt Transaction Summary window in Oracle Purchasing for receipt
accrual expenditure items.
Drill down to view purchase order details in Oracle Purchasing for contingent worker
labor cost expenditure items that are associated with a purchase order.

Summary


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Copyright 2007, Oracle. All rights reserved.