Revenue and Cost Sharing

In the services industry, employees may work on projects that are outside of their own organization. In such cases, the organization that owns a project and the organization that owns the human resource (the employee), may be two separate entities. To handle these scenarios, use the organizational-sharing method of project accounting to share costs and revenue that the project or activity generates between the entities. You can set up rules and accounting procedures that define the internal agreement between the organization that owns the project and the organization that owns the human resource.

Once you determine the organization and standard accounting procedures, you can assess whether sharing is needed. Use this table to determine if organizational sharing is necessary:

No Organizational Sharing Needed	Organizational Sharing Needed
All project and activity charges follow the resource. Project and activity charges are not shared between the organization owning the human resource and the organization owning the project. Charge backs are not used.	Project or activity charges are shared between the organization owning the human resource and the organization owning the project or activity, either as a rule or on a case-by-case basis.
All charges follow the project, and the accounting for these charges are simple and require little time to maintain.	It is preferable to have a centralized location for assigning a project to an organization. This organization then owns the project.
Accounting for revenue is fairly simple. All transactions of a similar type use the same revenue account.	The organization has complex revenue accounting requirements.
Reporting and visibility needs are simple. Revenue and costs are analyzed by the resource organization, or the project or activity organization, but not by both.	Reporting and visibility needs are complex. Multidimensional visibility of revenue, costs, and expenses are needed for the owners of the projects, activities, and resources. Although revenue follows the resource, the accounting practices require that revenue be moved in and out of the project organization (or vice versa) for the purpose of visibility. Revenue and costs are booked to different accounts based on the relationship between the employee and the project.