This document describes the enhancements for supporting accrual accounting. The accruals accounts are setup for both receivables and payables. The principle behind accrual is that the work has been performed but billing has not been generated or vendor invoices have not been received – primarily actuals have not been entered.


Background


We can have the following scenarios:


Scenario

#

Estimate

Amt

Revision

Amt

Actuals

Amt

Accounting Processes

Accrual Process

Suspense

1

X

X

X

Yes



2

X

X



Yes


3

X


X

Yes



4



X

Yes



5

X





??

6


X



Yes


7


X

X

Yes



8






??


The three processes involved are:

  • When Actuals are available (#1, 3, 4 & 7), the existing Accounting processes pick up the revenue for the activity period, (so no need for accruals.)

  • When revisions are available and actuals are zero (#2 & 6), the new accrual process needs to be implemented

  • When lines are totally empty or only estimates are present (#5 & 6), then corrective action is needed but no accrual can be performed.


The following example will illustrate the logic:


This Example is given for Receivable but the same applies to payable too:

Rev_recog_date:    April 20th


Month End Date

Revised Amount

Actual Amount

Accounting Process

April 30th

10k

10k

Actual Rev = 10k

Accrued Rev = 27k

Total Rev recorded = 37k

12k

0

15k

0





May 30th

10k

10k

Actual Rev = 21k

Accrued Rev adjusted down by 12k

   Accrual balance = 15k

Total Rev recorded = 36k

12k

11k

15k

0





June 30th

10k

10k

Actual Rev = 37.5k

Accrued Rev adjusted down by 15k
Accrual balance = 0k

Total Rev recorded = 37.5k

12k

11k

15k

16.5k



RedSky Design:


The accrual is dependent on entering revision amounts for both expenses and receivables in the system and users populating the normal dates and other information on a timely basis.  


The key components of the functionality are described in the following sections.


Revenue Recognition Date:


This date is key for determining the trigger point for accrual, this field is displayed on the billing screen:




This field will be automatically populated as follows:


For other agent bookings and import shipments >> Actual Delivery Date

Else:                            Actual Load Date


Accrual Processing:


The Finance User will go to Finance >> Accrual Processing and enter the month-end date for processing:


 


The above buttons produce 6 Excel sheets which are used to analyze the amounts to be entered or reversed from the accrual account per company.  The buttons are briefly described below with a sample file:


Button

Purpose

Sample File Name

Payable: Reverse Accrued

Identify payable lines which were accrued earlier and were either actualized or marked for manual reversal

Pay_reverse_mmmddYYYY

Payable: New Accruals

Identify new payable lines for accruals

Pay_New_mmmddYYYY

Payable: Balance

Identify lines that were accrued earlier but never reversed

Pay_Balance_mmmddYYYY

Receivable: Reverse Accrued

Identify Receivable lines which were accrued earlier and were either actualized or marked for manual reversal

Rec_reverse_mmmddYYYY

Receivable: New Accruals

Identify new Receivable lines for accruals

Rec_New_mmmddYYYY

Receivable: Balance

Identify lines that were accrued earlier but never reversed

Pay_reverse_mmmddYYYY


The file created in your directory will look like this:




These files contain the following key information:


Company Division

JOB-Type

SO#

Revision Amount

Actual Amounts

Charge code

Billing Complete Status

Billing Complete Date

Revenue Recognition Date

GL Code


The user can summarize the lines by company division to get the totals on the revision amounts for either entering appropriate amounts via journal entry to the accrual account.


Sample Files in Excel


Pay Reverse



Pay New



Pay Balance



Receivable Reverse



Receivable New



Receivable Balance