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To be able to link costs to specific cost objects, select the Advanced Product Costing option on the Administration > Settings > Production form and select what objects can be used as cost objects: Customer Order, Project, Project Task, or Item.
Personal
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settings
If you often work with documents related to phased revenue recognition, you can specify the default positions of Projects, Project Tasks, and Customer Orders in Phased Revenue Recognition documents. For this, open the Quick menu > Personal Settings. At the bottom of the form, click Advanced Settings and open the Document Attribute Positions tab. Then, you can select whether you need Project as a field on the Main tab of the documents or as a column on the Items tab. The similar choice you can make for Project Tasks and Customer Orders. For particular documents, you can change these settings by using the Settings button on the document form toolbar.
Also, you can choose where (in heading or in document lines) you need to place a reference to Customer Order, Project, or Project Task in Phased Revenue Recognition documents.
Default GL
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accounts
With the functionality of phased revenue recognition turned on, the following default GL accounts are added to the chart of accounts:
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If multiple currencies involved, consider selecting the Use Exchange Rates on the First Revenue Recognition option. In case this option is selected, the exchange rate used when the first document of revenue recognition was created will be used for all later documents. If the option is not selected, the exchange rate in effect on the day of month-end closing will be used for all documents posted in this month.
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Entering the beginning balances
If you are switching to this ERP software in the middle of your long-term projects or cooperation with customers, you may need to enter the beginning balances of work-in-progress costs and expenses incurred in process of project fulfillment and beginning balances of contract assets, that is, already recognized revenues.
You can specify the beginning balances for such contracts by creating the Accounting > See also > Opening Balances Entering documents with the Contract Assets and Work in Progress transaction types.
Tracing
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work-in-progress costs
For registering the related purchases, you can use Invoices Received with specified Entity, Department, Company, Contract. All purchased materials should be recorded to a Work-in-Progress GL account and assigned to the involved department.
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To allocate costs with no specific Cost Object specified, at the month end you can use the WIP Allocations by Cost Object documents.
Tracing
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labor costs
You can record the labor costs accrued for the employees involved in work for contract or project (project tasks) to WIP GL account by using the following documents: Payroll, Sick Leave, Vacation, End-Of-Service Benefit Calculation, Calculation of Accumulated Vacation Pay.
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Once payroll is calculated, you can allocate the labor costs not associated with any particular cost object to multiple cost objects by using the WIP Allocations by Cost Object document with the Allocation of Labor Costs transaction type. For details, refer to WIP Allocations by Cost Object (Allocation of Labor Costs).
Allocating
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depreciation costs
Fixed assets are used for works on contracts. If a new fixed asset will be used only for such works, then you can select the WIP account as the default depreciation expense account in the Fixed Asset Entry document.
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For allocating the depreciation costs, you can select the source document, Depreciation, and set the criteria for source of costs: specific departments, non-current asset classes, and particular fixed assets. On the Allocation Base tab, you can set the allocation coefficients for Cost Objects involved. Then on the Allocation tab, you can review the depreciation costs distributed between Cost Objects.
Recognizing revenues and costs for a particular phase
When a specific phase of contract or project is completed, that is some works are completed or certain contract obligations are fulfilled as it is acknowledged by the customer, then the entity can recognize the revenue from this completed phase according to core principle of IFRS 15. The costs associated with this phase are also can be recognized. For this, you can create a Phased Revenue Recognition document manually or you can generate it based either on Customer Order or Project Estimates.
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- Work in Progress Balances
- Statement of Work in Progress
- Costs of Completed Works
- Costs of Completed Works by Project
Issuing a final Invoice
When all phases are completed and all obligations are satisfied, you can issue an Invoice that would request payment for all the works within the contract or related to a project. In this invoice you can list the Works and Services involved in the last phase of contract completion and the associated costs. Also, you can include all the Phased Revenue Recognition documents related to the contract or project with all the details. The invoice will include the applicable VAT amounts.
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