Project Accounting refers to a specific project management practice that identifies, monitors, and summarizes costs incurred in a project to provide an overview of the project’s financial state and cost performance. It is a mechanism of connecting the financial system of an organization with project activities in which the organization is involved. Project accounting aims to ensure that project costs are estimated and accounted as part of the corporate expenses.
Project accounting is a standalone process that is performed in a certain project environment to track financial progress of particular projects. It helps project managers to accurately assess activity expenses, develop project budgets, and ensure that costs are fully covered by allocated financial resources. A project manager is enabled to quickly detect and address any cost overruns and revise budgets appropriately.
For organizations, the process establishes a mechanism of unifying corporate finance management with project cost management. It helps accurately assess ROI of individual/portfolio projects, calculate funding advances, estimate revenues, and determine project benefits. Project accounting also provides valued information necessary for making project investment decisions.