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Schedule and Cost Control Techniques: - Essay Example

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These are percentage of completion method and completed contract method. In the percentage of completion method, revenues are recognized as the project develops and costs are expensed as the project…
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Project management approaches to accounting methods and tracking project spend at the project vs. corporate levels There are two commonly used project management approach to accounting methods. These are percentage of completion method and completed contract method. In the percentage of completion method, revenues are recognized as the project develops and costs are expensed as the project progresses. The realization of revenue and recognition of cost are acknowledged on periodic basis (Bevilacqua, 1987). The percentage of completion accounting method allows project managers to report income on the project as the works progresses and being done. This method is ideal for projects that are long-term whose output or job completion is predictable (Rachui, 1974).
Completed contract method on the other hand differs on its treatment of both revenue and costs because they are only realized and capitalized only at the completion or end of the project. This accounting method is a good alternative to projects which are considered irregular where it would be difficult to estimate the amount of work completed at a given time (Rachui, 1974).
To effectively track costs spent at projects being done and corporate level, costs are being segregated as direct and indirect cost. Costs associated or specific on project such as delivery order, task order, contract, etch which are directly related to the project. Indirect costs can be broken down further into labor and travel expense (of the subcontractor). On the other hand, costs that are not directly related to a project and incurred at the corporate level are treated as indirect cost such training of project managers. They are usually divided into logical groupings such as general and administrative expense, overhead and fringe costs. Indirect costs are more difficult for project managers to track because they exercise very little control over it (Lundsten and Zimmermann, 2006).
My views over these two concepts
Financial management is an indispensable tool in project management that allows project managers to track project cost and deliver the desired results to its client. Between the two accounting methods of percentage of completion method and completed contract method, I am more incline to prefer the percentage of completion method. It is because such accounting method is more accurate and provides the project manager a timely assessment of the actual cost and revenue.
It has to be noted that financial statements are supposed to aid its users in their economic decision and percentage of completion method serves that purpose than the completed project method because it provides the project manager more accurate information about the project. He or she can determine efficiency during the course of the project and could apply adjustments depending on the information provided by percentage of completion method. Completed contract method does not allow tracking of the cost and revenue of the project because everything is just acknowledged and realized when the project already ended. In a way, it can be said that the financial information during the duration of the project is inaccurate using the completed method because it did not factor in the costs that are already incurred and the work that actually done. Thus, the project manager will only know whether he made profit or incurred loss when the project is already done which is not a good business practice.
Bevilacqua, F. (1987). The best accounting method: Completed contract or percentage of completion. The National Public Accountant, 32(6), 24-24. Retrieved from
Lundsten, D. J., & Zimmermann, S. E. (2006, The financial aspects of project management. Contract Management, 46, 14-16,18-22. Retrieved from
RACHUI, C. (1974). Percentage of completion accounting. Management Accounting, 56(6), 41-41. Retrieved from Read More
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