Monthly Archives: May 2014

Advanced Project Setup (Part 1)

A little introduction

AX 2012 R2 Project setup can be hard and confusing. If you are trying to set up anything other than a basic project you can get lost pretty fast. In this blog post I have compiled a list of possible advanced project types in AX 2012 R2 and the required correct ledger posting setup for each one. In the next blog posts we’ll talk about other required setups.

The basic project types are:

  • Time and material
  • Fixed-price
  • Internal
  • Cost
  • Time
  • Investment

We will explore advanced project types for time and material, fixed price, internal and investment projects.

The ledger posting setup defaults are set up in Project management and accounting -> Setup -> Posting -> Ledger posting setup

PSOT_004_Ledger_posting_Setup

The same set up can be found in Category groups, Project categories and Project groups which will override the default ledger posting setup.

Advanced Time and Material Projects

There are two types of advanced time and material projects:

  • Time and material projects with Work in Progress (WIP) – Used when there is an extended period of time between when costs are incurred and when the costs are invoiced
  • Time and material projects with accruals (WIP sales)

Time and Material Projects with Work in Progress (WIP)

The following cost accounts need to be set up:
[table]
Cost Account,Ledger,Purpose
Payroll allocation,P&L or Balance,Credit hour costs.
Cost,Profit&Loss,Debit all costs.
WIP cost,Balance,Debit costs. Credit when invoice updating.
Cost item, Profit&Loss,Credit item costs. Debit when invoice updating.
WIP cost items,Balance,Debit item costs. Credit when invoice updating.
[/table]

The following sales/revenue accounts need to be set up:
[table]
Sales Account,Ledger,Purpose
Customer summary account,Balance,Debit on-accounts. Upon invoice updating debit the invoice amount.
Invoiced revenue,Profit&Loss,Upon invoice updating credit the sales value of all costs.
WIP Invoiced – On account,Balance,Credit on-accounts. Upon invoice updating debit on-account.
[/table]

Time and Material Project with Accruals

Set up the following ledger cost accounts to run a time and material project with
accruals:

[table]
Cost Account,Ledger,Purpose
Cost,Profit&Loss,Debit all costs
Payroll allocation,Profit&Loss,Credit hour costs
[/table]

The following sales/revenue accounts need to be set up:
[table]
Sales Account,Ledger,Purpose
Invoiced revenue,Profit&Loss,Upon invoicing credit the sales value of all costs.
WIP – Sales value,Balance,Debit fees and the sales value of costs. Credit when invoice updating.
Accrued revenue – Sales value,Profit&Loss,Credit fees and the sales value of costs. Debit when invoice updating.
WIP Invoiced – On-account,Balance,Credit on-accounts. Debit on-accounts when offsetting on the invoice update.
Customer summary account,Balance,Debit on-accounts. Upon invoice updating – debit the invoice value (sales value of all costs and fees minus on-account transactions).
[/table]

Advanced Fixed-Price Projects

Since the matching between costs and revenues in fixed-price projects is not done directly the set up is more complex. There are two methods of assessment principles used to match costs to revenues in fixed price projects:

  • Completed contract method – Revenue and costs are not recognized until the contract is completed.
  • Completed percentage method – Adds revenue and costs to profit and loss accounts as the work progresses. The revenue recognized is determined by the stage of completion of the contract every time that estimates post.

Both methods can operate in two principles:

  •  Sales value principle: Costs and revenue are matched at the end of  the project with a sales value.
  • Production and profit principle: Costs and revenue are matched with a sales value that is split into realized costs and a calculated profit.

POST_004_Assessment_principle

 Fixed-Price Project with Completed Contract

Set up the following ledger cost accounts for a fixed-price project by using the completed contract method.

[table]
Cost Account,Ledger,Purpose
Cost,Profit&Loss,Debit all hours expenses and items.
Payroll allocation,Profit&Loss or Balance,Credit hour costs.
WIP – Cost value,Balance,Debit hour and expenses.
Cost – Item,Profit&Loss,Credit item costs.
WIP – Cost value – Item,Balance,Debit item costs.
Inventory issue,Balance,Credit item costs.
Expense offset,Balance,Credit expense costs.
[/table]

Set up the following ledger sales accounts for a fixed-price project by using the
completed contract method.
[table]
Sales Account,Ledger,Purpose
Customer summary account,Balance,Debit on-account invoices.
Invoiced on-accounts,Profit&Loss or Balance, Credit on-account invoices. Debit when eliminating.
Accrued revenue sales value,Profit&Loss,Debit on-accounts. Credit when eliminating.
WIP invoiced – On-account,Balance,Credit on-account invoices. Debit when eliminating.
WIP sales value,Balance,Debit on-account invoices.Credit when elimination.
[/table]

 Fixed-Price Project with Completed Percentage

Set up the following ledger cost accounts for a fixed-price project with the
completed percentage method.

[table]
Cost account,Ledger,Purpose
Cost,Profit&Loss,Debit all costs.
Payroll allocation,Profit&Loss or Balance,Credit hour costs.
Inventory issue,Balance,Credit item costs.
Expense offsets,Balance,Credit expense costs.
Cost items,Profit&Loss,Debit item costs.
[/table]

Set up the following ledger sales accounts for a fixed-price project with the
completed percentage method.

[table]
Sales Account,Ledger,Purpose
Customer summary account,Balance,Debit on-account invoices.
Invoiced on-account,Profit&Loss or Balance,Credit on-account invoices. Debit when eliminating.
WIP invoiced – On-account,Balance,Credit on-account invoices. Debit calculated sales value when reaching completion percentage of 100.
Accrued revenue sales value,Profit&Loss,Credit the calculated sales values that are based on the completion percentage. Debit the calculated sales value when reaching the completion percentage of 100 (only when the onaccount posted to profit and loss).
WIP sales value,Balance,Debit the calculated sales values that are based on the completion percentage. Credit the calculated sales value when reaching the completion percentage of 100 and the on-account invoices are posted to profit and loss. Credit during elimination when the on-account invoices are posted to the balance account.
[/table]

Internal Projects with WIP

Set up the following ledger cost accounts for a internal projects with WIP.

[table]
Cost account,Ledger,Purpose
Cost,Profit&Loss,Debit all costs.
Payroll allocation,Profit&Loss or Balance,Credit hour costs.
WIP cost,Balance,Debit costs. Credit when moving costs to profit and loss.
Cost item,Profit&Loss,Credit item costs. Debit when moving costs to profit and loss.
WIP cost item,Balance,Debit item costs. Credit when moving costs to profit and loss.
[/table]

Investment projects

Set up the following ledger cost accounts for a investment project.

[table]
Cost account,Ledger,Purpose
Cost,Profit&Loss,Debit all costs.
Payroll allocation,Profit&Loss or Balance,Credit hour costs.
WIP cost,Balance,Debit costs.
Cost item,Profit&Loss,Credit item costs.
WIP cost items,Balance,Debit item costs.
Accrued loss,Profit&Loss,Debit costs when eliminating.
WIP accrued loss,Balance,Debit costs.
[/table]

This was just one small part of the entire setup, we’ll explore the rest in later posts.

Keep on DAXing!