Hope all is well your way. I Did not get chance to spend time on my blog this month.
We keep hearing a lot of questions on the ledger posting scenarios, revenue recognition etc in case of fixed price projects in Microsoft dynamics AX. Well,I thought, I will explain the various ledger posting scenarios in the life cycle a fixed price project in few of my subsequent posts.
The ledger postings in case of a fixed price project is controlled through the setup done in the Project groups. Based on the these setups, the ledger posting in a FP project can happen in 8 different ways.
We will analyze each one of the setup options one by one and verify the ledger postings. I will name these 8 ways of ledger posting as Scenario 1 to 8. We will analyze the scenario 1 in today’s post.
The 3 parameters in the project groups form which controls these ledger posting are as follows.
- On-account invoicing.
- Revenue recognition accounting rule.
- Matching principle.
Scenario 1 :
|Revenue recognition rule||Completed percentage|
|Matching principle||Sales value|
Refer to screenshot below for the new project group which I have created.
I have created a new cost template and a fixed price project and attached this to the a new project group with above setup.
Take an example where a company owns a fixed bid contract of $500000 and agreed upon with the customer for a milestone based invoicing plan as depicted below screenshot.
Costs are incurred in the project during its progress as indicated in the table below. We will post Estimates for the project at the end of every month and eliminate it in the month of SEP.
|Month||Cost in project|
Take a look at the tables below which shows the P&L and WIP statistics in the Project at each month before and after the estimates are posted.
I am not able to provide the AX screenshots here as I have some issues in my AX environment.
Project Profit & Loss Statement before posting estimates:
|Accrued revenue – sales value||Credit||0||0||0||0||0||0||0|
Project WIP Statement before posting estimates:
|WIP– sales value||Debit||0||0||0||0||0||0||0|
|WIP invoiced on account||Credit||$250,000||0||$200,000||$50,000||0||$500,000|
Note : The project on account invoices appear in the WIP-invoiced On account ledger.
Project Profit & Loss Statement after posting estimates:
|Accrued revenue – sales value||Credit||$58,800||$73,500||$117647||$88,236||$161765||0||~500000|
The values for the accrued revenue are calculated based on the % complete/ Degree of completion in the project as the setup is done to be “Completed Percentage” rule.
You may notice rounding issues in the values above as I have taken random examples.
Project WIP Statement after posting estimates:
|WIP – sales value||Debit||$58,800||$73,500||$117647||$88,236||$161765||-500000||0|
|WIP invoiced on account||Credit||$250,000||0||$200,000||$50,000||-500000|
I hope my explanation of this scenario of posting in the fixed price project was clear. Please post your queries if any pertaining to this.
Till next time !!!!