Program accounting
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Program accounting

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Description of Program Accounting

Description of Program Accounting

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Program accounting Program accounting Presentation Transcript

  • PROGRAM ACCOUNTING
  • PROGRAM ACCOUNTING  Developed by Boeing and other players in aerospace industry in the 1960s  Boeing used for its 7-seiries commercial airplane in 2001  To smooth out costs and revenues which actually rolls during later years
  • PROGRAM ACCOUNTING  An extended version of contract accounting  Contract period is very large  Several contracts undertaken simultaneously  Based on average profitability over the airline program
  • PROGRAM ACCOUNTING  Profitability of the manufactured contract products is realized over multiple contracts and years  Production costs (including overhead), program tooling costs and warranty costs were accumulated and charged to revenue instead of individual units or contracts
  • PROGRAM ACCOUNTING  Mainly 3 estimates done to match the revenue with cost of sales— 1. Number of units to be produced and sold in a program (accounting quantity) 2. The period over which these units could reasonably be produced and 3. Their expected selling prices, production costs, program tooling and warranty costs for the whole program