Recognizing Revenue
You use the icons from the Revenue Recognition folder to generate and edit transactions to recognize project revenue for all projects except those that use the accrual-basis accounting method.
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You use the Create Revenue Recognition Worksheet form to generate entries that recognize revenue for all your projects or for a selected range of projects or project categories. Revenue recognition also closes projects that you have marked Completed.
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The Revenue Recognition Worksheet form lets you edit the account numbers, the debit amount, and the credit amount for each entry that appears on the worksheet. Once you are satisfied that the entries are correct, you post the entries from the Revenue Recognition Worksheet form.
Project and Job Costing lets you select projects for which to recognize revenue in a number of ways. You can recognize revenue for a single contract, a range of contracts, or for all contracts. You can also limit revenue recognition to particular projects, categories, account sets, project types, and accounting methods.
You can also include on revenue recognition worksheets projects to which you have processed no transactions in the period, letting you complete and close a project in a subsequent period after recognizing all revenues for the project.
Project Type and Accounting Method Affect Revenue Recognition
In Project and Job Costing, the project type and accounting method jointly determine how revenue recognition proceeds. Except for projects that use the accrual-basis accounting method, billing and revenue recognition are separate processes that trigger different accounting entries:
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When you post invoices, the program debits Accounts Receivable control and credits the billings account.
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When you create and post a revenue recognition worksheet, the program debits the specified work in progress and cost of sales accounts and credits revenue.
For projects using the accrual-basis accounting method, billing and revenue recognition are simultaneous processes — invoices are posted directly to the Accounts Receivable control and revenue accounts.
For projects using any other accounting method, however, billing and revenue recognition are separate processes. When you post invoices for these projects, the program debits the Accounts Receivable control account and credits the billings account for invoiced amounts. The revenue account is unaffected by billing. For these projects, you use the revenue recognition functions to recognize revenue.
Clearing Billings and Work In Progress Accounts During Revenue Recognition
If you use the option Clear Billings And WIP During Revenue Recognition, the program performs the following operations for completed projects that use a percentage complete accounting method:
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Calculates revenue that has not yet been recognized.
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Sets the project status to Closed.
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Creates general ledger entries to debit the billings account and credit the revenue account for the current revenue, and to debit work in progress and credit cost of sales for the remaining costs.
Timing of Revenues
When you run the revenue recognition functions, the program recognizes the revenue earned since you last ran the function, charging the billings account and crediting the revenue account. It also debits the cost of sales account and credits the work in progress account.
For projects that use the completed project accounting method, you recognize revenue only after you have finished all the work for the project and you have set the project status to Completed.
Expensed Taxes and Revenue Recognition
If you expense taxes separately and you do not expense taxes directly to the work in progress account, you may need to create manual journal entries to debit the work in progress account for separately expensed taxes following revenue recognition.
Multicurrency
Note that in multicurrency systems, the program calculates revenue in functional currency, and then, for projects using a percentage completion accounting method, converts the recognized revenue to the customer currency using the current exchange rate. The recognized revenue is then displayed in the customer currency on the Project Totals tab, on the Contract Maintenance form.
For the billings and costs and completed project accounting methods, the exchange rate is imputed based on the amounts invoiced in source and functional currencies.
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