Clear Residual Account Balances on Fully Satisfied Contracts

You can identify and automatically write off residual account balances for fully satisfied and expired contracts or for contracts that are fully satisfied due to early termination.

Residual balances in the Contract Asset, Contract Liability, and Contract Discount accounts may arise due to differences in the billing amounts, reallocation due to immaterial change processing, or rounding.

To write off the residual account balances, you first need to identify which contract and accounts have residual balances and then create and post an accounting journal to clear these balances. Once a contract with residual account balances has been written off by this process, the contract is closed for further activity. You can no longer discard, modify, or apply additional billing to the contract. Any future source document version or billing lines applied to the contract will be rejected. Therefore, when identifying which contracts to process, ensure no further billing or activity will occur.

If your organization managed write-off of residual balances externally before enabling this feature and residual balances on a series of contracts were already written off manually, you can exclude these contracts from automatic write-off processing. To exclude these contracts set the Exclude from Automatic Write-Off option to Yes on the Edit Customer Contract page and the contract and its residual balance are excluded from processing.

Only revenue contracts with residual balances that meet the following criteria are eligible for processing by the Residual Account Balance Write-Off process:

• The contract is fully satisfied and has undergone an early immaterial termination, or the contract is fully satisfied and has expired naturally.
• The residual balance adjustment status is Eligible for final adjustment.
• The Exclude from Automatic Write-Off option is set to No or blank in the Edit Customer Contract page.

The Residual Balance Adjustment Status on the Edit Customer Contract page indicates a contract's eligibility for processing by the Residual Account Balances Write-Off process:

• Not eligible for final adjustment: Initial status upon contract identification.
• No residual balance: A contract is marked No residual balance when it's fully satisfied and doesn't have a residual balance in the Contract Asset, Contract Liability, or Contract Discount accounts.
• Eligible for final adjustment: A contract is marked Eligible for final adjustment when it's fully satisfied. A contract is fully satisfied when all the performance obligations in the contract are fully satisfied.
• Final adjusted: A contract is marked Final adjusted after the Residual Account Balances Write-Off process creates write-off journals for the contract.

The Revenue Write-Off account enables you to track the impact of clearing the account balances on revenue. The process uses this account as the offset to the clearing entry for the residual balances. You can then use subledger account rules to identify which General Ledger account you want to post the balances to, such as the Revenue account.

To enable the residual account balance write-off functionality, define the Revenue Write-Off account in the Manage System Options for Revenue Management page. Once completed, you can run the Residual Account Balance Write-Off process.