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Dynamics 365 Community / Forums / Microsoft Dynamics AX (Archived) / Project Accounting - O...
Microsoft Dynamics AX (Archived)

Project Accounting - On account Invoice

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Posted on by lally 8

Hi All,

In the Project Accounting module there is functionality called On account Invoice . What is this functionality?

Generally when the project is completed directly vendor will book the invoice to customer in Ax . In that case what is the difference between Customer and On Account ?

What is the Customer Invoice and On account invoice in Project Accounting module ?

Thanks in advance.

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  • Suggested answer
    Brian Welcker Profile Picture
    Brian Welcker on at

    In general the on-account invoice is used to bill for unearned revenue. Usually this revenue is kept on the balance sheet and later moved to an income statement account. In a time and material project, on-account invoices are generally for pre-payment of services. When the service is delivered and billed to the customer, it will get reconciled with billable amounts. In a fixed price project, the on-account invoice is used for milestone payments. These payments are reconciled with revenue recognized through the estimation process. Some of the UI has changed between 2012, R2 and R3.

  • Community Member Profile Picture
    Community Member on at

    On account invoicing is usually used with fixed price projects. Think of it kind of like a holding tank for customer payments. Your customers will pay you based on the invoice schedule you set up on the project. However, the accounting standards of your country determine when you can recognize revenue (US GAAP, IFRS, ETC.). According to US GAAP, we can recognize revenue two ways; at completion or based on the percentage complete. There are some rules for determining which method to use. One of the criteria for using completed percentage (sometimes longer term projects can span over multiple accounting periods in which the company may want to recognize some of the expense in revenue in each period) is you must be able to reasonable estimate the remaining cost to complete the project, which is where the 'estimate' project comes into play.

    So back to your question. Lets pretend we are using the completed percentage method. We have collected 125,000 out of a total 150,000 from the customer. This means that 125K is sitting on our balance sheet in the 'on account' and 25K is still due from the customer.  For whatever reason (end of accounting period, per the recommendation of auditors, etc) we want to recognize revenue when we reach a completion of 75%. Assuming we meet all criteria from US GAAP (rules change vary depending on deliverables and other variables), when we can reasonably estimate our cost to complete and our completed percentage of 75%, we would move (75% * 150K) 112,500 from the on account to our profit and loss report (which is our revenue), and all of the actual costs to date to the PnL as well (which is our expense). The difference is our margin or profit on the project. We would still have 12,500 sitting in our on account, and when we collect the remaining from the customer we will have 37,500 in the on account. Upon completion and delivery, we would move the remaining on account and project costs to the PnL. Hope this helps.

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