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Cost recognition of purchases for work orders

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Hi,

 Is there a setting in FO that will recognize the Cost of a PO upon confirmed status and not when paid by AP? I thought I saw something in a MSFT you tube video on this? 

Ideally, we would like PO costing to occur when our work orders are closed or when PO goes into a confirmed state. Costing for POs should not hit our statement when they are paid by AP. 

Thanks

Cindy

  • RE: Cost recognition of purchases for work orders

    Thank you. That makes sense. In terms of our service business though, we typically have already "received" the products when we get them for our work order. We issue PR's and go to the vendor an acquire our materials for the jobs. Thats why we want the costs to recognized upon closing the work order and not when that PO is paid for. So we would need to make all purchases for Service auto receive to accomplish that? Or because of GAAP that's just not a good way to do business and can create more auditing headaches?

  • Frank Hamelly | MVP, MCP, CSA Profile Picture
    Frank Hamelly | MVP... 46,243 Super User 2025 Season 1 on at
    RE: Cost recognition of purchases for work orders

    PO confirmation is not an appropriate time to recognize cost.  What if the vendor doesn't agree to the terms, price, quantity or never ships the product?  From a GAAP perspective, receipt is the first time you should recognize cost unless you have a 'ship in place' agreement with the vendor.

  • RE: Cost recognition of purchases for work orders

    Can you elaborate a little more on this?

    What if we don't want to use product receipt? Its creating other system issues for us which is why we were wanting it to happen when a PO becomes Confirmed.

    Is there no way to have those costs be recognized upon PO creation and not when Accounts payable pays the invoice? We may not get an invoice from a vendor for 30, 60 90 days after we bought the materials and used that on a service work order. So financially our costs are always wrong because our GM$ are not accurate until all PO's have been paid causing a lag in financials.

  • Suggested answer
    BillurSamdancioglu Profile Picture
    BillurSamdancioglu 16,455 Most Valuable Professional on at
    RE: Cost recognition of purchases for work orders

    It depends on your setup.

    If you had setup to post GL during product receipt yes.

    Then you will be able to see the physical cost.

    When you issue the invoice then will see the financial cost.

  • RE: Cost recognition of purchases for work orders

    so in order for us to have cost hit the financial statement when a PR is confirmed is to make them be received? Then it won't matter if the Ap invoice comes in 3 months later, that cost has already been accounted for?

  • Suggested answer
    Ramit Paul Profile Picture
    Ramit Paul 22,297 Most Valuable Professional on at
    RE: Cost recognition of purchases for work orders

    Hi,

    Po cost is booked at the time of receiving the goods in a control account and when the invoice is booked, that time cost will be booked.

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