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