Contract Liability Accounting
This section discusses contract liability accounting for:
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Amount-based contract lines.
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Rate-based contract lines.
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Recurring contract lines.
Note:
PeopleSoft Contracts books entries to contract liability only for contract lines for which PeopleSoft Contracts is managing revenue. If PeopleSoft Billing is managing revenue, no contract liability is booked in PeopleSoft Contracts. It is recommended that you do not use the contract liability functionality in PeopleSoft Billing for fixed-amount contract lines generated from PeopleSoft Contracts. However, for recurring contract lines, PeopleSoft Billing manages revenue and handles all contract liability information.
Note:
For fixed-amount and recurring contract lines, the default deferred distribution is not specified directly on the distribution set, unlike the revenue distribution. The system retrieves the deferred distribution by default by using the revenue distribution code's associated deferred distribution code. You can edit the existing contract liability accounting distribution or split the distribution across multiple accounting entries.
Amount-based Contract Lines
If you selected contract liability recognition for a contract line, the contract liability accounting distribution is editable for each fixed-amount contract line on the Accounting Distribution page. The GL Unit (general ledger unit) field populates with the PeopleSoft General Ledger business unit associated with the PeopleSoft Contracts business unit of the contract.
Note:
The PeopleSoft General Ledger business unit of the contract liability accounting distribution is not editable.
Note:
Splitting contract liability accounting distribution across PeopleSoft General Ledger ChartFields could result in complex account reconciliation and is not recommended.
When you save the Accounting Distribution page, the system performs combination editing to ensure that the contract liability accounting that you specify is valid for its general ledger (GL) business unit.
The contract line contains a Contract Liability accounting date. When you run the Contract Liability process, you specify a date range for that process run. The system processes any contract lines belonging to active contracts with a Contract Liability accounting date within the range specified and that have not already been processed.
If you enter a Contract Liability accounting date that falls before a contract line's earliest accounting distribution effective date, the system warns you that an effective-dated accounting distribution needs to be defined for the contract liability accounting date. The contract liability process does not generate accounting entries for the contract lines until you do one of these:
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Change the contract line's contract liability accounting date to fall within its accounting distribution's effective time period.
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Change the existing accounting distribution (or add a new one) to cover the time period of the contract line's contract liability accounting date.
For each fixed-amount contract line, the contract liability process creates a credit to the contract liability account that you specified for that contract line, and a debit to the Contract Asset account that you specified for that contract line.
Rate-based Contract Lines
Rate-based contract lines are not associated with contract liability because no known amount is associated with these types of lines. Revenue for rate-based lines is only recognized as work is performed.
Recurring Contract Lines
If you selected contract liability recognition for a recurring contract line, the contract liability accounting distribution is editable on that contract line's Accounting Distribution page. The GL Unit field populates with the PeopleSoft General Ledger business unit associated with the PeopleSoft Contracts business unit of the contract. PeopleSoft Billing handles the contract liability processing for recurring contract lines.