Progress Payment Accounting

Progress payment processing creates accounting entries when you bill for the progress payment amount, and when you liquidate the progress payment amount.

Progress payments are booked to a liability account instead of a revenue account. When setting up your progress payment terms, you must define either the account distribution code or ChartField set that the system uses to create the accounting entries. When defining the accounting distribution for the liability account, you must use an account code or distribution code that is associated with a contract asset distribution type.

Only one accounting line is created per progress payment request. Project ChartField data specified on the Progress Payment Terms - Accounting Distribution tab is used for accounting purposes and passed to PeopleSoft Billing. You cannot split progress payment liability accounting distributions between multiple projects and activities.

When progress payment request are submitted for processing, the liability account information specified for the progress payment terms is sent to PeopleSoft Billing, creating a debit to billed accounts receivable (AR) and a credit to the progress payment liability account.

When the progress payment amount is liquidated, during regular billing for the contract line items associated with the progress payment terms, the system sends a credit amount to PeopleSoft Billing for the liquidated amount. To create the accounting entries for the billed amount and to relieve the credit liability account for the progress payment; the system creates a debit to billed accounts receivable (AR), a debit to the progress payment liability account, and a credit to revenue. The progress payment liability account is eventually netted out to zero once the progress payment is fully liquidated.

Progress Payment Accounting Example

This example shows the accounting implications for processing a 1,000 USD progress payment amount and its subsequent liquidation using an 80 percent liquidation rate:

Process Step	Accounts Receivable	Progress Payment Credit Liability	Revenue
A 1,000 USD progress payment amount is billed. PeopleSoft Billing creates these accounting entries using the ChartField data sent from PeopleSoft Contracts:	1000	(1000)
A 2,000 USD contract line item is billed that is associated with the progress payment amount. PeopleSoft Billing creates these accounting entries using the ChartField data sent from PeopleSoft Contracts:	1000	1000	(2000)

Note:

In this example, even though the liquidation amount for the bill amount is 1,600 USD (2000 x 80%), the liquidation amount is capped at the amount of the progress payment (1,000 USD). So the bill and credit liability are reduced by this amount.