How Accounting Burden Costs are Processed

Burdening enables you to review the raw cost, burden cost, and burdened cost of each transaction. You control burden accounting options by project type. Create accounting for burden costs in Oracle Fusion Project Costing even when raw costs are accounted in a third-party application.

Settings That Affect Accounting of Burden Costs

When you define the project type, you specify the burden cost accounting options:

• Create burden cost accounting journal entries: Burden cost entries create an entry for the burden amount. If burden cost is created on the same expenditure item, then this is the burden cost amount that was calculated. If burden cost is created on a separate line, burden amount is zero on the source transaction because the raw and burdened costs are the same.

• Create burdened cost accounting journal entries: Burdened cost entries create entries for the burdened amount. If burdened cost is created on same expenditure item, then an additional entry is created for the burdened cost amount. If burdened cost is created as a separate expenditure item, it creates an entry for each source transaction for the same amount as the raw cost. It creates another entry for the burden expenditure items for the burdened cost.

How Accounting Is Performed

Based on the burden cost accounting options, the application performs accounting of burden costs as shown in the following examples.

Note: The Create Accounting process for requisitions and POs creates a single journal header for both raw and burden costs during encumbrance accounting.

Accounting for Burden Costs by Burden Cost Code

Accounting by burden cost code is applicable only when you choose to create separate expenditure items for each burden cost code. You can account for individual burden cost codes to track each in Oracle Fusion Subledger Accounting and Oracle Fusion General Ledger. The following table lists the accounting entries for a labor transaction that has fringe, overhead, and general and administrative burden costs.

Transactions	Accounting Transactions	Debit	Credit
Labor Cost	Labor Expense	300	0
Labor Cost	Payroll Clearing	0	300
Summarized Burden Cost	Project Fringe Expense	250	0
Summarized Burden Cost	Fringe Absorption or Recovery	0	250
Summarized Burden Cost	Project Overhead Expense	300	0
Summarized Burden Cost	Overhead Absorption or Recovery	0	300
Summarized Burden Cost	Project General and Administrative Expense	150	0
Summarized Burden Cost	General and Administrative Absorption or Recovery	0	150

Accounting for Burden Costs

Accounting by burden cost is applicable only when you choose to include burden cost on the same expenditure item as the raw cost. The following table lists the accounting entries for a labor transaction and burden cost amount of 700.

Transactions	Accounting Transactions	Debit	Credit
Labor Cost	Labor Expense	300	0
Labor Cost	Payroll Clearing	0	300
Labor Cost	Work-in-Progress Project Cost	700	0
Labor Cost	Labor Burden Work-in-Progress Transfer	0	700

Encumbrance Accounting for Burden Costs

The burden and burdened costs get actual accounted when you perform encumbrance accounting on burden costs. The offsetting reversals for the reserved for encumbrance and PO obligation entries are recorded based on the liquidation amount of the PO obligation. The following table lists the accounting entries for an overhead transaction with a burden cost amount of 16.

Transactions	Accounting Transactions	Debit	Credit
Overhead Actual	Burdened Cost	66	0
Overhead Actual	Burden Cost	16	0
Overhead Actual	Burdened Cost Clearing	0	66
Overhead Actual	Burden Cost Clearing	0	16
Overhead Encumbrance	Reserve for Encumbrance	16	0
Overhead Encumbrance	PO Obligation	0	16

Note: For separate line burdening you must run the Generate Burden Costs process and then perform accounting to create the encumbrance accounting entries for burden costs.

Accounting for Burdened Cost

You can account for the burdened cost of the items, without distinguishing the amounts by burden cost components. Use this approach to track the burdened cost in a cost asset or cost work-in-progress account. This method is sometimes referred to as project inventory. You can track the work-in-progress cost when you:

• Capitalize burdened cost.

• Track the burdened cost as work-in-progress cost on contract projects and later calculate a cost accrual when you generate the revenue.

The following table lists the burdened cost accounting entries for a labor transaction that has fringe, overhead, and general and administrative costs. The burdened cost amount is 1,000.

Transactions	Accounting Transactions	Debit	Credit
Labor Cost	Labor Expense	300	0
Labor Cost	Payroll Clearing	0	300
Labor Cost	Burdened Cost	1000	0
Labor Cost	Burdened Cost Clearing	0	1000

Accounting for Burden and Burdened Costs

You can also account for the burden and burdened cost of the items. The following table provides an example of burden costs and burdened costs accounting.

Transactions	Accounting Transactions	Debit	Credit
Labor Cost	Labor Expense	300	0
Labor Cost	Labor Clearing	0	300
Labor Cost	Burden Expense	700	0
Labor Cost	Burden Clearing	0	700
Labor Cost	Burdened Cost	1000	0
Labor Cost	Burdened Cost Clearing	0	1000

You can store burden cost on project transactions without an accounting impact by not selecting either of the accounting options in project type.

Note: If you're capitalizing burdened costs, then you must also account the burdened costs.

You must set up account derivation rules so that they derive the same account number for both the debit and the credit. The accounts are derived by subledger accounting. After creating accounting, they're transferred to the general ledger.