Project accounting is a form of financial tracking that allows people to monitor costs and revenues associated with a specific project. This allows people to keep projects on budget, keep track of changes in expenses, and identify areas of concern so they can be addressed as the project moves forward. This type of accounting differs from other kinds of accounting because rather than covering a whole company or a specific department for a set time period, it addresses all costs associated with a project, for as long as it takes.
An example can be seen in production accounting, where people track expenses associated with film and television production. Movie studios want to track expenses by project because they provide a meaningful way of assessing performance at the box office and controlling costs. Accountants stay with the film throughout production, pulling in data from every department, from marketing to wardrobe. They generate regular accounts to keep people informed when it comes to how much money is being spent, and how well the film is meeting budget targets.
Project accounting is required by law in some cases. Government contractors completing projects on behalf of the government must be able to document their expenses clearly and in detail, providing a breakdown of project-specific expenses. In other cases, like with construction, it can be a helpful way of looking at expenses and managing accounting matters. Contractors, for example, need to be able to provide accurate estimates to clients, and they use project accounting from previous jobs to generate reasonably close predictions of how expensive a given project will be.
A project accounting team can be large, especially for something spanning multiple departments within a company and taking months or years to complete. A head accountant is responsible for supervising support personnel including other accountants, clerks, and administrative assistants. They may need to provide information at a moment's notice, and sometimes handle accounting for multiple projects, depending on the structure of an organization.
A project manager, the person who acts as a point of contact and coordination for a project, relies on project accounting to keep projects close to their original budget estimates, and also uses other departments to make sure projects are completed within a given time frame. If problems arise, the project manager must be able to explain things like delays and expense overruns to the satisfaction of supervising personnel, who may be accountable to investors, government officials, and other interested parties.