Recognize revenues and expenses in periods other than the period in which the transaction is posted

Hello everyone, I hope your day is going well. My name is Christos Pittis, and I am a Microsoft Dynamics NAV Consultant. In this episode, I am going to show you how to setup and automatically defer revenues and expenses over a specified schedule with the Deferrals feature in Microsoft Dynamics NAV 2016.

Revenues for services or goods delivered over multiple accounting periods are not necessarily recognized in the accounting period in which the sales document is posted, and payment is received.

 

To distribute revenues on the involved accounting periods, you can set up a deferral template for the resource, item, or G/L account that the revenues will be posted for. When you post the related sales document, the revenues are deferred to the involved accounting periods, according to a deferral schedule that is governed by settings in the deferral template and the posting date.

Many companies use Allowed Posting From and Allowed Posting fields to prohibit users from posting transactions outside the accounting year range. If the deferral schedule falls outside that accounting year range you will get the following error:

“Posting Date is not within your range of allowed posting dates.”

Open your Microsoft Dynamics NAV 2016 client go to the Chart of Accounts. In this example, I am creating a new G/L Account under the section “Other Liabilities.” :

Hit the New button on the top so to create a new G/L Account.

 

Find below the data I used for my example in Cronus demo database:

 

No. = 5930

Name = Unearned Revenue/Deferred Income

Income/Balance = Balance Sheet

Debit/Credit = Both

Account Type = Posting

Gen. Posting Type = Sales

Gen. Bus. Posting Group = NATIONAL

Gen. Prod. Posting Group = RETAIL

VAT Bus. Posting Group = NATIONAL

VAT Prod. Posting Group = VAT17

 

Click OK.

 

Do not forget to hit the Indent Chart of Accounts button.

 

We have just created a Deferral Account so to specify the G/L account that the deferred revenues are posted to.

 

Go to the Search bar and search for the Deferral Templates page. Click on it. Click on the New button so to create a new Deferral Template.

 

Find below the data I used for my example in Cronus demo database:

 

Deferral Code = 12M-SALES

Description = 12 Month revenue deferral

Deferral Account = 5930

Deferral% = 100

Calc. Method = Straight-Line

Start Date = Posting Date

No. of Periods = 12

Period Desc. = Revenue Deferral for %4 %6

 

Definition:

%4 = The month name of the period posting date

%6 = The fiscal year of the period posting date

 

Click OK.

 

Go to Departments, Sales & Marketing, and Sales Invoices. Open the Sales Invoices page and create a new one. After completing the Sales Header visit the Sales Lines and make visible the Deferral Code field.

Do not forget to select the newly created Deferral Template Code in the Deferral Code field.

Go to the Line button and hit the Deferral Schedule option.

This page shows how the amounts will be deferred. You can edit the dates and amounts of the deferral schedule after it has been applied to the line.

Click OK to close the page.

You can now post the Sales Invoice.

Go to the Search bar and search for the Sales Deferral Summary report. Click on it. You can review posted deferrals in the Sales Deferral Summary report.

 

Go to the Posted Sales Invoices and find your posted Sales Invoice document. Go to the Posted Documents menu and open the Posted Sales, Invoices page. Find the posted Sales Invoice you’ve just posted, click on it, and hit the Navigate button. Drill down to the G/L Entries. Notice that the amount has been posted to the Unearned Revenue/Deferred Income account. The revenues then recognized over the period of the schedule by moving the balance from the Unearned Revenue/Deferred Income account to the Sales Revenue account.

Voila! Τέλεια!

Thanks for reading this blog post and watching my YouTube video. You can connect with me on LinkedIn https://uk.linkedin.com/in/christospittis or 365 talent portal https://www.365talentportal.com/

 

Microsoft Dynamics NAV 2016 tutorial

Christos Pittis

Microsoft Dynamics NAV/Dynamics 365 Business Central Consultant