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During this Microsoft Project 2016 advanced training tutorial video, we will talk about how cost accrual works.
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Welcome back to our course on Project 2016 Advanced.
In this section I’m going to take a look at Cost Accrual. This may well be something that you’re very familiar with if you’ve been using Project for a while, but for some people who perhaps aren’t very familiar with accounting practices Cost Accrual can seem a little bit of a mystery.
So what I’ve done for this section is to create a sort of dummy project. It’s just got five tasks in it and I’ve also created a few resources as well. The resources have different accrual methods. So resources 1 to 3 are prorated, resource 4 accrues at the start, resource 5 accrues at the end.
Now when a cost accrues that’s basically the point in time at which the accounting function associated with a project recognizes that the cost has been incurred. And although generally speaking people recognize how cost accrual works, for example in terms of labor costs. So you would normally prorate labor costs over the course of the task in which the labor is employed. There are exceptions. And with some of the less usual costs associated with a project it’s important to recognize exactly when the accrual will occur, particularly as some of the costs might be quite large figures.
So it’s not possible for me or indeed anybody else to say costs are always accrued in this way or that way. But what it is important to understand is how cost accrual actually works with Project 2016. So when you enter a task or a resource or you set up a resource assignment it’s important to understand the consequences of the accrual method that applies in that case.
Now at the moment as you can see I have no costs incurred at all on this project. In fact there are no costs associated with the project. I haven’t assigned any fixed costs or resources to it. So the first thing I’m going to do is to assign a fixed cost for Task A. And the fixed cost for Task A is going to be $100. And the accrual method for that is going to be at the start. Now notice that the actual is still zero. Now for Task B I’m also going to have a fixed cost. That’s also going to $100 and that is going to be prorated. Now what I’m going to do is to go to the Project tab and set the status date on this project to today. So that’s Monday, July 4th. And I’m going to click on Update Project and update the project to say that the work is complete up to today according to schedule for the entire project and then I’m going to click on OK.
Now what you’ll see is that Task A is now in effect 20% complete. So one-fifth of the work is done. But the actual cost there of course is the full amount of the fixed cost, which is accrued at the start of Task A. So the actual cost for Task A is currently $100. The remaining cost is $0. And basically what happens with a cost that is accrued at the start is that as soon as the task has an actual start date, so as soon as you record any progress which causes an actual start date to be recorded then that cost is accrued, all of that cost is accrued.
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