Project Cost

Accounting is a systematic process of identifying, recording, summarising, and communicating financial information. The Accounting is a skill or activity of keeping records of the money earns and spends.

Accounting Control is the methods or procedures for safeguarding of assets and recording of financial transactions that is the integrity of internal financial information and accuracy of financial reports.

Accounting System is a set of principles, methods and procedures used by organisations for an accurate and timely recording and reporting financial information for management decisions. The Accounting System includes the financial information collecting, interpreting, recording, storing, analysing, and reporting to interested parties including stakeholders, investors, auditors, and tax authorities. A regulatory requires how a particular accounting system is to be maintained. The Accounting System is comprised of manual or computerised records for administering, recording, and reporting on financial transactions.

Accrual Accounting is an accounting method that measures the revenues and expenses when they are incurred, regardless of when cash is exchanged.

Direct Cost (DC) is a directly involved cost in a specific task or project that can be identified a specific cost centre. The Project Direct Cost includes the cost of employees; equipment and materials; and outsourcing contractor's cost, etc., which are directly involved efforts or expenses: project management; engineering; procurement related cost such as transportation and custom clearance; construction management; construction labour; construction consumable materials; sub-contractor's cost, etc.

Direct Field Cost (DFC) is the direct cost for the permanent facilities that consists of equipment, materials, and direct hire or subcontractor labour directly associated with the works, activities, and services at the field for construction.

Home Office Cost is the direct cost, mainly project labour and expenses for the project execution or management by home office based people.

Labour (Labor) Cost is the cost incurred by the employer in the employment of labours that is the amount of employee wages and benefits, plus payroll taxes paid by an employer. The Labour Cost is broken into direct and indirect costs. For the purpose of labour cost statistics, the ILO defined as the statistics concept of labour cost comprises remuneration for work performed, payments in respect of time paid for but not worked, bonuses and gratuities, the cost of food, drink and other payments in kind, cost of workers’ housing borne by employers, employers’ social security expenditures, cost to the employer for vocational training, welfare services and miscellaneous items, such as transport of workers, work clothes and recruitment, together with taxes regarded as labour cost.

Material Handling Cost (or Material Related Cost, MRC) consists of the goods (equipment and material) freight, insurance, custom clearance costs, etc.

Indirect Cost is any cost that is not directly involved in a specific task or project, and can not be accurately attributed to a specific cost centre. The Indirect Cost is the costs of services and materials required in support of the project or business efforts that do not contribute directly to the permanent facility. The main indirect cost of project is the company overhead (operating expenses) and profit. (Opposite of the Direct Cost)

Indirect Field Cost (IFC) is the construction cost other than the Direct Field Cost (DFC) that is not become a permanent part of the project but is required for the completion of the work. An IFC includes but not limited to field office administration, direct management and supervision of construction activities, temporary facilities, construction equipment and small tools, start-up costs, insurances, and taxes, etc. (Refer to the Direct Field Cost (DFC); Indirect Cost)

Overhead (OVHD) Cost is an indirect cost that is regular and necessary costs involved in operating a company business but not assignable to a specific task or project, such as an office building operation and maintenance; company management and supporting staff; insurance; and involved in whole company operation but cannot be applied or traced to a specific cost centre of a work or project.

Office Overhead cost is an indirect cost, not be directly identified with a revenue producing operation.

Allowance is 1) the pocket money; 2) an amount of money that is regularly paying, especially to pay for a particular thing; 3) an incremental resource included in estimate to cover expected further growth such as design development but undefined requirements for individual accounts or sub-accounts. The allowance is a part of the basic estimate.

Hardship Allowance is an additional consideration of a payment that is paid to the employee or contractor for working in difficult conditions such as outside during periods of extremely cold or hot weather.

Contingency is for the unknown or unpredictable know-unknown events that may possibly happen in the future, usually potential risks or causing problems. The Contingency is to cover the currently unforeseen cost element of time and material within the specified scope of works and services such as cost overruns, currency fluctuations, unexpected re-do works, and contractual warranties and guarantees, but the Contingency will not cover any additional scope of works and any unknow-unknow events. The Contingency is in addition to any allowances included in the estimate. The Contingency is estimated based on the previous experiences by the expert or risk simulation analysis results, and company procedures and rules.

Expense is the use or spent of money that is necessary for the completion of a work or project.

Fee is an ​amount of ​money ​paid for a ​particular ​work or ​service that is usually associated with the Contractor's profit.

Indirect Tax is the type of taxes on products, levied on goods and services rather than on income or profits that can be passed to other organisation by increasing the prices of the goods or services. (e.g., customs duty, VAT, etc.)

Interest is an amount of money that is additionally charged at a particular rate, and paid by a borrower to a lender regularly for the borrowing money or delaying the repayment.

Management Reserve (MR) is an amount of money included in the total budget withheld by management group for future consideration of execution risks. It usually includes current contingency cost.

Maintenance Cost is the cost associated with keeping facilities in good conditions by regularly checking it and repairing it when necessary.

Owner’s Cost is the cost that includes a land, financial cost (funding cost), owner’s third party cost including engineering studies, permits, licensing fees, training, and owner corporate costs etc.

Payroll Burden is the additional incurred costs, such as taxes, benefits and supplies during an accounting period that is the allocation rate at which indirect costs are applied to the direct costs of employees. The Payroll Burden includes payroll taxes, insurances and pension contributions, paid time off, vacation and sick leave and other benefits.

Tax is a compulsory monetary contribution to the government that is based on an income, business profit, occupation, privilege, property, added to the cost of goods or services, etc. The Project related taxes are the various taxes that may be applicable to a specific project or initiative. (e.g., Income Tax; Sales Tax and Value Added Tax (VAT); Property Tax; Excise Tax; Customs Duties and Import Taxes; Employment Taxes; Environmental Taxes; Specialised Industry Taxes; Capital Gains Tax; Incentives and Credits; Local Taxes, etc.)

Value Added Tax (VAT) is an indirect tax on the domestic consumption of goods and services collected in whenever value is added at each stage of the supply chain by enterprises, and which is ultimately charged in full to the final purchasers or end users.

Wage and Labour Cost represents a cost (labour costs) that includes not only the wages and salaries paid to employees but also non-wage costs, mainly social contributions payable by the employer. The cost of labour is broken into direct and indirect costs. Direct costs include wages for the employees that produce a product, while indirect costs are associated with support labour, such as employees who maintain factory equipment.

Actual Cost (AC) is the costs actually incurred and recorded.

Advance Payment (AP) is a pre-payment that is made a payment in advance of actual cost incurred typically covering for the project set-up and initiation period. (Also, called as the Down Payment)

All-in Rate is 1) the total cost of an item including all direct and indirect costs that is a rate by a Contractor to an Owner by which the Contractor collects direct labour cost and indirect cost including benefits and burdens, overhead, expenses, and profit on a per-hour basis. Individual contracts specify what is to be covered in the all-in rate. (e.g., in construction: All-In Labor Rate = (Total Direct Cost of Labor + Total Indirect Cost of Labor) / Total work hours); 2) the total fees and interest included in a financial transaction, or all the expenses and charges related to an operation or service of a company.

As Sold Profitability is calculated in order to provide a measurable financial benchmark for evaluating project performance as the project is being executed. The As Sold Profitability is established at the time of contract award based upon agreement between the project business team and execution management that is the baseline of profit performance expected from the project management.

At Cost is to compensate of the direct cost based on actual invoiced/ paid amount used for a reimbursable contract basis. Indirect cost including company overhead and profit handles separately such as a fixed amount, proportionally compensated, or calculated with incentive program.

Authority for Expenditure (AFE) is a formal approval or authorisation of expenditure for a project by the authorised organisation representative. An AFE is a budgetary document, usually prepared by the business development department that is listed the projected expenses for a particular project or a phase of a project and authorises an individual or group to spend a certain amount of money for that project. Failure to approve an AFE may result in delay or cancellation of the proposed project or subsequent operation.

Average Cost is the total cost of production divided by the total quantity produced.

Back Charge

Abandonment Cost is the cost associated with abandonment of a business venture or investment facility including services. (Refer to the Removal and Abandonment (R & A))

Abatement Cost is the additional expenditure to reduce the negative impact from an undesirable result of a production process. (e.g., air emissions or waste disposal)

Aborted Cost is incurred in connection with the property investment opportunity by price negotiation or the property disposal that does not proceed.

Account is a financial expenditure record or statement for a given aspect of economic life: uses resources, changes in assets and/or liabilities existing at a certain time.

Accounting Basis is the time various financial transactions that is defined by the International Federation of Accountants (IFAC) as the body of accounting principles. The Accounting Basis determines when the effects of transactions or events should be recognised for financial reporting purposes that is related to the timing of the measurement made, regardless of the nature of the measurement.

Accrued Cost is a cost received or incurred during a period, when the lack of a supplier billing forces then it records in the accounts but does not pay in that period.

Authorised Signature List (ASL) is a project personnel list who are authorised to approve a designated project's financial commitments and expenditures that is the specimen signatures list signed by authorised signatories accompanied by evidence of signing authority of the persons named on the list. An ASL is established limits of authority for each person on a project-by-project basis.

Avoidance Cost (or Cost Avoidance)