The use of the work breakdown structure in project accounting is a technique that seeks to establish what the deliverables a project requires so that the project scope, costs, and schedules can be prepared at the start of the project. Using WBS, project components are decomposed into progressively smaller pieces until they are reduced into elemental tasks to which cost, risk, and other values can be assigned.
After breaking down every aspect of the project, the manageable pieces to which the project is resolved using the WBS technique are assigned to project resources in effort to facilitate accounting and planning. As these resources are allocated, project accounting will track the income and expenses of the project so that the project manager will know at every step whether or not the project is profitable.
Project accounting is facilitated through the WBS hierarchy because of the way it isolates every stage of work for its cost in human and material resources. Once the costs are determined, they can be assigned accounting codes for tracking purposes. By tying the WBS together with project accounting, the profitability of the project can be analyzed at every stage, so that adjustments in planning, activities, and resource allocation can be made when necessary.
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