Prepaid Accounting

Prepaids have two components: the initial prepaid billing and the utilization of the prepaid balance. Both components have accounting requirements associated with them.

When setting up the prepayment, you must define the contract liability accounting distribution to which the initial prepayment amount is to be booked. This accounting distribution is passed to PeopleSoft Billing. After finalization, PeopleSoft Billing creates an accounting entry to debit billed accounts receivable (AR) and credit contract liability.

Note:

The accounting that is specified in the prepaid table does not depend upon your selection of the contract liability option on the contract line.

Note:

Contract liability can be modified after the prepaid status is set to Ready. However, modifications to the contract liability distribution fields are not tracked with Amendments. Any modifications made to these fields are only applicable to processing performed after the modification is saved.

The system generates accounting entries for utilization in two parts:

1. The first accounting entry occurs in PeopleSoft Billing.

   The accounting distribution on utilization rows that are sent to PeopleSoft Billing is the same contract asset distribution that is found on the corresponding billing row. When the bill is finalized, PeopleSoft Billing creates two accounting entries: one for the billable amount and another for the utilization. The utilization entry debits contract asset and credits billed AR. This entry nets out the billing entry that debits billed AR and credits contract asset. In PeopleSoft Billing and PeopleSoft General Ledger, this nets out if the utilization covers the entire billable amount.

2. The second accounting entry occurs in PeopleSoft Contracts.

   After the bill is finalized, the utilization row is inserted into PROJ_RESOURCE. The rate-based revenue Accounting Rules Engine process (PSA_ACCTGGL) picks up the utilization row and the corresponding billing row (this can occur at separate times) and creates two accounting entries. The utilization entry debits contract liability (as established in the Prepaid table) and credits contract asset. The regular entry debits contract asset and credits revenue.

   Note:

   Because all entries are derived from the source transaction row or prepaid table, you cannot set up accounting distributions for regular utilization (UTL) and utilization adjustments (UAJ) rows on the Accounting Rules page.