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Production accounting can refer to bookkeeping surrounding film production, broadly speaking, or specifically about accounting practices in Hollywood, the famous home for movie production in the U.S. Accounting practices in film production have earned their own name in part because of some less-than-transparent financial accounting methods that take place in the movie industry. There are efforts that target bringing these practices into the mainstream to meet similar standards as the rest of the finance world.
Movie production requires large sums of money to cover the costs of making the movie, paying talent and crews, and sharing profits with investors and others who may be due royalty fees and the like. The cycle seems unending, and just as in any industry, sometimes those responsible for production accounting may cut corners. For those looking to pursue a career, it may prove helpful, and even necessary, to begin in this field with some kind of internship or working as an apprentice to an experienced bookkeeper.
As it relates to films, production accounting includes the cost of producing a movie. Aspects of this type of bookkeeping that have historically proven controversial include the amount of hours worked by a production staff and expenses for certain intangible items, including medical coverage. Software programs for production accounting help bookkeepers in the process to properly record expenses. Even when working smoothly, production accounting can be ominous because the film industry can quickly and easily spend beyond a budget.
One way in which production accounting can be skewed is to overstate the degree of expenses on a financial statement. By making profits more modest, less money needs to be distributed based on any financial agreements relating to the profitability of the project. Costs relating to movie production, movie distribution, as well as marketing and advertising, are all items that may be subject to interpretation. The gray areas in production accounting are what make understating profits a possibility, and this practice could spur legal action.
Even with the uncertainties surrounding production accounting, there is some structure to this line of work. Professionals looking to break into this type of bookkeeping may begin as entry-level accounting clerks and advance through the ranks to assistant accountant positions. Typically, there is one production accountant assigned to payroll given the breadth and scope of this task. Compensation can be lucrative because of the importance of this role and also the complex financial details tied to handling payroll that must be tended to with accuracy.