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

Project Accounting Purchase Accruals

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Posted on by Community Member

Dears,

I have a case where the customer receives and invoices the project purchase order at the initiation of the project, it can be in the first month for a long-term project.

For a fixed price project , when running the estimation the system takes the whole amount and recognize it as cost to the P&L, which is not acceptable. A percentage for the recognized cost should be entered and the amount calculated needs to moved from WIP to P&L.

I appreciate your feedback if there is a workaround for this case, or somebody faced the same scenario while implementing AX.

Best Regards

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  • Verified answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi H G,

    That's the standard behavior of AX.

    Before talking about a workaround, can you specify what you want to achieve exactly in regards to the recognition of costs and revenues?

    As an example, do you recognize a revenue when you invoice the customer or do you want to recognize the revenue with the postings of the estimates?

    If you want to recognize the revenue with the postings of the estimates, what do you expect from AX? How many % of the costs recorded on the WIP accounts should be shifted to the P&L? Note that AX is based on the 'cost-to-cost' method.

    Have you thought about using an alternative cost and Revenue recognition technique, such as the 'Workaround' illustrated here: dynamicsax-fico.com/.../earned-value-analysis

    Best regards,

    Ludwig

  • Community Member Profile Picture
    Community Member on at

    Hi Reinhard,

    I am working with fixed price project and running the estimation for cost and revenue recognition monthly.

    What i need to to have cost recognition similar to the revenue recognition.% of cost to be shifted from wip to P&L and not the total cost.

    Beat Regards

  • Verified answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi H G,

    The standard application does not allow you doing that.

    That is because of the cost-to-cost method, which means that AX compares the actual costs with the budgeted ones to determine the POC, which is then used to calculate the revenue that is accrued.

    I have a lot of customers that post their revenues only based on actual invoices, which has the advantage that this is a realized revenue. The revenue that is accrued through the estimate process is then tracked on 'statistical' accounts that don't influence your P&L but, which are required for measuring how the project is progressing. Maybe that is an alternative that you can also use? If this does not work out for you then you have to think about a system modification.

    Best regards,

    Ludwig

  • Community Member Profile Picture
    Community Member on at

    The customer wants to recognize the cost and revenue monthly regardless of the client or supplier invoices.

    Can you please elaborate more the solution suggested?

    Beat Regards

  • Verified answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi H G,

    If you want to have the revenue posted with the estimate you have to think about an option how to correct the costs that are automatically shifted from the WIP to the P&L accounts.

    One option would be to make an adjustment in a way that an expense journal is filled that debits your WIP account and credits your cost account for the difference between the total costs recorded within a period and the percentage of the costs you want to have realized. In other words, you create an additional transaction that does a correction to the estimate voucher that is created. Making use of a separate transaction that is recorded in a journal has the advantage that you don't change the standard posting logic. Once the estimates are eliminated, all additional postings that are made in the expense journals would have to be reversed to get the WIP balances cleared.

    Hope this gives you an idea about an adjustment that can be realized.

    Best regards,

    Ludwig

  • Community Member Profile Picture
    Community Member on at

    So Out of the box AX doesn't support this functionality.

    I will take into consideration you suggestion during my design.

    Thank you very much,it was nice to discuss this topic with you

  • Verified answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi HG,

    That's right. There is no out of the box support for the accruals and postings you want. If there is nothing else open then it would be great if you could verify the answers and update is here once you have finished your design.

    Many thanks and best regards,

    Ludwig

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