This chapter contains these topics:
Section 33.1, "Understanding Profit Recognition Journal Entries"
Section 33.1.1, "Recognized Revenue and Cost (Income Statement)"
Section 33.1.2, "Recognized Revenue and Cost (WIP on Balance Sheet)"
Section 33.1.8, "Record User Changes to Projected Final Costs"
The last step in the profit recognition process is to create journal entries for your profit information. The Create Journal Entries program creates journal entries for each profit recognition record you process.
The system creates journal entries for the Account Ledger table. This process results in a batch of documents with document type JE (journal entry).
One type of journal entry contains the entries for cost and revenue to be recognized on the income statement from work in progress on the balance sheet. It also shows the changes to the projected final cost, revenue, and profit or loss for all jobs. The system does not reverse this information in the next period.
Another type of journal entry contains the entries for over/under billings or costs, deferred costs, accrued payables, and recognition of estimated projected final loss. The system reverses this information in the next period.
The following tables identify the types of profit recognition journal entries your system creates. They also show the sources of information that the system uses to construct accounts for profit recognition journal entries. The left column in each table lists the Job Cost element. The right column in each table lists the sequence of accounting sources that the system follows until it identifies the valid element.
Note:
After journal entries are created, the profit recognition record is moved to history and cannot be revised. To change a journal entry, you must post it to the Account Balances table and regenerate the profit recognition record using the Job Rebuild program for the same period. Journal entries that are created in this way include only the incremental change to the original information.The IS and BS AAIs are used to move work-in-progress (WIP) amounts from WIP on the balance sheet to cost of sales and revenue accounts on the income statement.
| Field | Explanation |
|---|---|
| 2. IS series (AAI)
3. Current version in the Profit Recognition History table (F5144) |
|
| Object | IS series (AAI) |
| Subsidiary | IS series (AAI) |
| Subledger | Current version in the Profit Recognition History table (F5144) |
| Subledger Type | Current version in the Profit Recognition History table (F5144) |
The system uses a user defined code (system 51, type IS) to find the AAI to use, instead of IS, to recognize revenue and cost amounts according to different business unit types. If the specified AAI cannot be found, the system uses the IS AAI.
To record specific costs or revenues to different accounts, you define ISXXXX and BSXXXX, where XXXX is the first four digits of the object account from WIP. If ISXXXX is not set up, the object account from the IS item is used. If BSXXXX is not set up, the object account from the BS item is used.
You must set up the IS and BS AAIs only if the object cost type of the original entry is within the account range identified by the GLG2 and GLG5 AAIs. GLG2 and GLG5 are defined in the General Accounting system.
| Field | Explanation |
|---|---|
| Object | BS series (AAI) |
| Subsidiary | BS series (AAI) |
| Subledger | Current version in the Profit Recognition History table |
| Subledger Type | Current version in the Profit Recognition History table |
You overbill when your actual revenue is more than your earned-to-date revenue on a job. The system creates a journal entry for a revenue account. It also creates an offsetting credit for an unearned revenue liability account.
You calculate overbilling amounts if the percent of cost method is used. Costs are adjusted if the percent of revenue method is used.
| Field | Explanation |
|---|---|
| 2. JCCOUA (AAI)
3. Current version in the Profit Recognition History table (F5144) |
|
| Object | JCCOUA (AAI) |
| Subsidiary | JCCOUA (AAI) |
| Subledger | 1. Processing option
2. Current version in the Profit Recognition History table (F5144) |
| Subledger Type | 1. Processing option
2. Current version in the Profit Recognition History table (F5144) |
If you use the percent of revenue method, the debit entry AAI is JCBOUA.
| Field | Explanation |
|---|---|
| 2. Current version in the Profit Recognition History table (F5144) | |
| Object | JCBE (AAI) |
| Subsidiary | JCBE (AAI) |
| Subledger | Blank |
| Subledger Type | Blank |
You underbill when your actual revenue is less than your earned-to-date revenue on a job. The system creates a journal entry for a revenue account, such as Unbilled Revenue. It also creates an offsetting debit for an accrued revenue asset account.
You calculate underbilling amounts if the percent of cost method is used. Costs are adjusted if the percent of revenue method is used.
| Field | Explanation |
|---|---|
| 2. Current version in the Profit Recognition History table (F5144) | |
| Object | JCCE (AAI) |
| Subsidiary | JCCE (AAI) |
| Subledger | Blank |
| Subledger Type | Blank |
| Field | Explanation |
|---|---|
| 2. JCCOUA (AAI)
3. Current version in the Profit Recognition History table (F5144) |
|
| Object | JCCOUA (AAI) |
| Subsidiary | JCCOUA (AAI) |
| Subledger | 1. Processing option
2. Current version in the Profit Recognition History table (F5144) |
| Subledger Type | 1. Processing option
2. Current version in the Profit Recognition History table (F5144) |
If you use the percent of revenue method, the credit entry AAI is JCBOUA.
When the projected final amounts result in a projected loss, the entire loss amount is recorded in the period when the loss occurs. Cost and revenue amounts are adjusted depending on the profit recognition method used. The offset for the provision for loss is recorded to the BSLOSS AAI. If the BSLOSS AAI is not defined, the JCBE AAI is used.
| Field | Explanation |
|---|---|
| 2. JCLOSS (AAI)
3. Current version in the Profit Recognition History table (F5144) |
|
| Object | JCLOSS (AAI) |
| Subsidiary | JCLOSS (AAI) |
| Subledger | 1. Processing option
2. Current version in the Profit Recognition History table (F5144) |
| Subledger Type | 1. Processing option
2. Current version in the Profit Recognition History table (F5144) |
| Field | Explanation |
|---|---|
| 2. JCBE (AAI)
3. Current version in the Profit Recognition History table (F5144) |
|
| Object | 1. BSLOSS (AAI)
2. JCBE (AAI) |
| Subsidiary | 1. BSLOSS (AAI)
2. JCBE (AAI) |
| Subledger | Blank |
| Subledger Type | Blank |
If the number in the Accrual/Deferral field on the Group Job Adjustments and Single Job Adjustments forms is negative, it represents an additional cost. The system uses the JCAPO and JCAPC AAIs to record the accrued cost.
| Field | Explanation |
|---|---|
| 2. Current version in the Profit Recognition History table (F5144) | |
| Object | JCAPC (AAI) |
| Subsidiary | JCAPC (AAI) |
| Subledger | Current version in the Profit Recognition History table (F5144) |
| Subledger Type | Current version in the Profit Recognition History table (F5144) |
The system uses the IS series and BS series AAIs to recognize the accrued cost on the income statement and relief from the balance sheet. These journal entries are automatically reversed out in the following month.
If the account number defined in the JCAPC AAI is on the balance sheet, an entry to the IS and BS AAI journal entries is created.
| Field | Explanation |
|---|---|
| 2. Current version in the Profit Recognition History table (F5144) | |
| Object | JCAPO (AAI) |
| Subsidiary | JCAPO (AAI) |
| Subledger | Blank |
| Subledger Type | Blank |
If the number in the Accrual/Deferral field on the Group Job Adjustments and Single Job Adjustments forms is positive, it represents a deferred cost or stored material. The system uses the JCSMI and JCSMJ AAIs to record the deferred cost.
| Field | Explanation |
|---|---|
| 2. Current version in the Profit Recognition History table (F5144) | |
| Object | JCSMI (AAI) |
| Subsidiary | JCSMI (AAI) |
| Subledger | Blank |
| Subledger Type | Blank |
| Field | Explanation |
|---|---|
| 2. Current version in the Profit Recognition History table (F5144) | |
| Object | JCSMJ (AAI) |
| Subsidiary | JCSMJ (AAI) |
| Subledger | Current version in the Profit Recognition History table (F5144) |
| Subledger Type | Current version in the Profit Recognition History table (F5144) |
If the account number defined in the JCSMI AAI is on the balance sheet, an entry to the IS and BS AAI journal entries is created.
The method of computation should be G (Budget Default - Forced) for all of the accounts that are defined for projected final costs.
| Field | Explanation |
|---|---|
| Object | JCPFC (AAI) |
| Subsidiary | JCPFC (AAI) |
| Subledger | Current version in the Profit Recognition History table (F5144) |
| Subledger Type | Current version in the Profit Recognition History Table (F5144) |
The system uses the same sources for changes to the projected final revenue as it does for the projected final cost. However, it uses JCPFR as the AAI.
The method of computation should be G (Budget Default - Forced) for all of the accounts that are defined for revenue.
The system uses the same sources for changes to the projected final profit as it does for projected final cost. However, it uses JCPFP as the AAI.
The method of computation should be G (Budget Default - Forced) for all of the accounts that are defined for projected final profit.