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Subcontract in Project Management and Accounting

Hi Folks,

I have created separate WBS called Subcontract where I need to give this activities outside. Therefore, I have created "Project Category with expense type" as Subcontract and tagged with the WBS.

I do not want to book as Direct Expense Journal without placing a PO. Do I need to create a again procurement category? Please let me know how to handle this business scenarios. Please clarify me the GL accounting also.

Thanks

If you do not want to book the expense for your subcontracting activities without a PO, you can create a procurement category that is linked to your project category for Subcontracting. You can set up the procurement category to require a PO for all purchases.

Here are the steps you can follow:

Create a new procurement category in your system. You can name it something like "Subcontracting Procurement Category".
Link the procurement category to your project category for Subcontracting. This will ensure that any expenses recorded against this project category will be linked to the new procurement category.
Set up the procurement category to require a PO for all purchases. This will prevent expenses from being recorded without a PO.
When you need to subcontract work, create a PO for the vendor providing the service. You can record the PO in your procurement system and link it to the project category for Subcontracting.
When you receive the invoice from the vendor, you can record the expense against the project category for Subcontracting and link it to the PO. This will ensure that the expense is correctly recorded against the project and linked to the procurement transaction.

Regarding the GL accounting, the exact accounts that will be affected will depend on your specific chart of accounts and accounting policies. However, in general, when you record a subcontracting expense, you will debit the Subcontracting expense account and credit the liability account for the amount of the PO. When you receive the invoice and pay the vendor, you will debit the liability account and credit the cash or accounts payable account.

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