Accruals in Project Accounting

(0) Share

Report

Posted on by imran ul haq

4,017

Hi All

i have one scenario for the project Accounting, i have a project and through it i created the purchase order, for any service type item. Vendor deliver its service and not yet invoiced, just to trace the cost our accountants are booking the GL entry to the COGS (General) and Accrual expenses (for the purpose of getting the actual income statement) that is not from the project. As we have to put that cost in the project to get the actual cost, is there anyway that i can create the accrual from the project to capture the actual cost and later on i will reverse that journal once we receive the vendor invoice, and invoice the PO (to capture the cost in project).

The type of the project is Fixed Price percentage completion and i am using AX 2012 R2 CU7.

Please advise me on this, thanks in advance

*This post is locked for comments

I have the same question (0)

All responses (7)

Answers (0)

Adam Seaton on at

Like (0)

Report

Hi Imran,

There might be, depending on a bit more detail. There are probably 3 aspects of setup that influence it so can you give a little more information please about:

1. The item model group - is it set to post physical and financial entries (you mention it is 'service')?

2. The project group - is it set to post item cost to the balance accounts?

3. The line property - is it set to allow cost accrual?

Let us know...

Was this reply helpful? Yes No
imran ul haq 4,017 on at

Like (0)

Report

Thanks Adam for your reply.

For your first point, the item is service so once we uncheck the stock, the post physical and financial entry check mark get disable we can not select them.

For the second point, for the cost i choose the P&L account.

And third, i think here u r talking abt the revenue accrual but my question is for Purchase order Accrual or may be i am understanding wrong, can u elaborate it more.

Was this reply helpful? Yes No
Adam Seaton on at

Like (0)

Report

There are several options and factors here and it can be a confusing picture. But a couple of things that might point you in the right direction:

1. When using service items on projects, they only generate project transactions at point of invoice, not receipt, because there is no physical tracking of the product. As you say, you get purchase ledger accrual, but not project accrual on receipt. The only way around this is to have a group of service items that have physical tracking on the item model i.e. treat them as a stock product. If you want to keep them as pure service, then you will only see the project entries after purchase order invoice.

Also be aware that the project entries and timing are different depending on whether the purchase order is direct from the project, or via an item requirement.

2. To get project WIP posting, you need the project group for Post costs - item to point to balance sheet, and the line property attached to the transaction must have Capitalise costs fields checked. If so, AX will look for the posting accounts against project WIP Item - cost and not project cost.

However, all that said, it's important not to confuse the timing of purchase order invoice update with WIP timing on a fixed price project - the two are not really related.

The config choices around this are extensive so difficult to answer in full here, but hopefully the above will give you a steer.

Was this reply helpful? Yes No
imran ul haq 4,017 on at

Like (0)

Report

Thanks Adam for your answer.

What you have explained me here, i am very clear on that and before invoicing i can not incurred the cost in the project and this is the reason why i want to pass the Expense journal which debit the project (Project Category) and credit the accruals and once i will invoice the PO i will reverse this expense journal. But here what the problem is i am using the Budget and i have to define the amount in that category and if not if i put zero, at the time estimation it will not post, show the error of negative cost.

Or if you have any work around or idea by which i can achieve this (at the time of receiving of the PO the accrual credit and project debit)

Was this reply helpful? Yes No
Suggested answer

Community Member on at

Like (0)

Report

Hi Imram.

Here's two possible solutions to your issue.

1. When you create you accruals(Estimates) you can amend these manually to take into account committed cost.

You could expand further on this and create a cost template that doesn't include item categories used for service items, and thus completely preventing a possible double accrual of these.

2. use an item journal instead of the expense journal, to post your pseudo service item, this would allow you to use the correct category, but will still have a budget impact and will potentially stop you from invoicing the PO and creating new PO's

Was this reply helpful? Yes No
imran ul haq 4,017 on at

Like (0)

Report

Hi Jesper

your first point i havnt understand can u ellaborate it a littele more.

And for the second point i can not use the item journal journals for the service type items, it must be stocked item.

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

Of course.

I'm assuming you are using the estimation process to accrue cost on the fixed price project.

In that form you have the option to amend the calculations the system is making, to take into account committed cost or other factors.

It can also accrue committed cost automatically and then recalculate the accruals once the system knows what the actuals are, this is configured under project parameters --> Estimate.

Hope the above help.

Regarding the service items, then it's actually possible to configure a regular item to behave the same way as a service item, allowing you to use it in the journals. (However, this will still mess up your project budgets)

Was this reply helpful? Yes No