Ledger Postings Management of Fixed Price projects in Microsoft Dynamics Ax 2012 – Scenario I

Friends,

Hope all is well your way. I Did not get chance to spend time on my blog this month.

We keep hearing a lot of questions on the ledger posting scenarios, revenue recognition etc in case of fixed price projects in Microsoft dynamics AX. Well,I thought, I will explain the various ledger posting scenarios in the life cycle a fixed price project in few of my subsequent posts.

The ledger postings in case of a fixed price project is controlled through the setup done in the Project groups. Based on the these setups, the ledger posting in a FP project can happen in 8 different ways.

We will analyze each one of the setup options one by one and verify the ledger postings. I will name these 8 ways of ledger posting as Scenario 1 to 8. We will analyze the scenario 1 in today’s post.

The 3 parameters in the project groups form which controls these ledger posting are as follows.

• On-account invoicing.
• Revenue recognition accounting rule.
• Matching principle.

Scenario 1 :

On-account invoicing	Balance
Revenue recognition rule	Completed percentage
Matching principle	Sales value

Refer to screenshot below for the new project group which I have created.

I have created a new cost template and a fixed price project and attached this to the a new project group with above setup.

Take an example where a company owns a fixed bid contract of $500000 and agreed upon with the customer for a milestone based invoicing plan as depicted below screenshot.

Costs are incurred in the project during its progress as indicated in the table below. We will post Estimates for the project at the end of every month and eliminate it in the month of SEP.

Month	Cost in project
APR	$20,000
MAY	$25,000
JUN	$40,000
JUL	$30,000
AUG	$55,000
Total Cost	$170,000

Take a look at the tables below which shows the P&L and WIP statistics in the Project at each month before and after the estimates are posted.

I am not able to provide the AX screenshots here as I have some issues in my AX environment.

Project Profit & Loss Statement before posting estimates:

Account	Dr/Cr	APR	MAY	JUN	JUL	AUG	SEP	TOTAL
Accrued revenue – sales value	Credit	0	0	0	0	0	0	0
Revenue		0	0	0	0	0	0	0
Cost	Debit	$20,000	$25,000	$40,000	$30,000	$55,000	0	$170,000
Gross Margin		-20,000	-25,000	-40,000	-30,000	-55,000	0	-170000

Project WIP Statement before posting estimates:

Account	Dr/Cr	APR	MAY	JUN	JUL	AUG	SEP	TOTAL
WIP– sales value	Debit	0	0	0	0	0	0	0
Gross WIP		0	0	0	0	0	0	0
WIP invoiced on account	Credit	$250,000	0	$200,000		$50,000	0	$500,000
Net WIP		-250000		-200000		-50000	0	-500000

Note : The project on account invoices appear in the WIP-invoiced On account ledger.

Project Profit & Loss Statement after posting estimates:

Account	Dr/Cr	APR	MAY	JUN	JUL	AUG	SEP	TOTAL
Accrued revenue – sales value	Credit	$58,800	$73,500	$117647	$88,236	$161765	0	~500000
Revenue		$58,800	$73,500	$117647	$88,236	$161765	0	~500000
Cost	Debit	$20,000	$25,000	$40,000	$30,000	$55,000	0	$170,000
Gross Margin		$38,800	$48,500	$77,647	$58,236	$106765		$1,70,052

The values for the accrued revenue are calculated based on the % complete/ Degree of completion in the project as the setup is done to be “Completed Percentage” rule.

You may notice rounding issues in the values above as I have taken random examples.

Project WIP Statement after posting estimates:

Account	Dr/Cr	APR	MAY	JUN	JUL	AUG	SEP	TOTAL
WIP – sales value	Debit	$58,800	$73,500	$117647	$88,236	$161765	-500000	0
Gross WIP		$58,800	$73,500	$117647	$88,236	$161765	0	~500000
WIP invoiced on account	Credit	$250,000	0	$200,000		$50,000	-500000
Net WIP		-191200	-73,500	-82,353	-88,236	-111765	0	0

I hope my explanation of this scenario of posting in the fixed price project was clear. Please post your queries if any pertaining to this.

Till next time !!!!

Thanks

Keep DAXING