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FirstBit provides the functionality of phased revenue recognition that allows each entity to recognize revenue in process of obligation contract obligations completing and based on costs accumulated incurred up to specific dates.
Configuration options
To be able to follow the rules of IFRS15, select the Enable the Phased Revenue Recognition Functionality option on the Administration > Settings > General Settings form. This functionality makes the Phased Revenue Recognition and WIP Costs Adjustments documents available for using.
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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 accounts
With For the functionality of phased revenue recognition turned on,you can use the following default GL accounts on the chart of accounts (COA):
- Work-in-Progress GL account with Item, Project, and Customer Order as dimensions Expense Item as dimension. Cost Object also can be used as dimension if the Advanced Product Costing option is selected on the Administration > Settings > Production form.
- Contract Assets GL account in the Current Assets section of COA
- Contract Liabilities GL account in the Current Liabilities section of COA
- .
You can use the these default accounts or add other accounts to the corresponding sections.
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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. For details, refer to Creating an Opening Balances Entering Document. The Contract Assets tab and Creating an Opening Balances Entering Document. The Work in Progress tab.
Tracing the work-in-progress costs
For registering the related purchases, you can use Invoices Received with specified Entity, Department Warehouse, Company, Contract. All purchased materials should be recorded You can record the purchased services directly to a Work-in-Progress GL account and assigned to the involved department.
Note. If However, the purchased materials were initially assigned to other department, you can and inventory items should be recorded to an intended warehouse, and then you will need to use Inventory Transfers to reassign them to the correct department. All materials and inventory items must be transferred assign the materials to the department ( that executes the project or customer order ) and record them to a Work-in-Progress GL account with the corresponding Cost Object before you can recognize the corresponding revenue based on the costs incurred..
Also, for tracing related costs, you can use the following documents: Debit NoteNotes, Inventory ReceiptReceipts, Other Expenses, bank documents with Other transaction type, and Employee Expense ReportReports. You will need to replace the default account with the Work-in-Progress account and specify the cost object.
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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.
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For this, when creating a document, you need to replace the default expense account with the Work in Progress account. If a particular employee worked only for a specific Cost cost object, you can specify this cost object in any payroll-related document.
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On posting the document, the listed costs are moved from the WIP GL account to the account of Costs of Completed Works ; and the corresponding percent of planned revenue is recorded to the Contract Assets GL account while the remaining planned revenue remains recorded to the Contract Obligations account.
For each subsequent phase, except for the final phase, you can create a new Phased Revenue Recognition document.
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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 the 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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