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Revenue Recognition for Loss Project

Feb 19 at 03:45 PM

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Hi,

We are using Cost method based on POC of revenue recognition of project. I want to know what is the process of handling the revenue recognition for loss projects?

Please advise.

Regards,

Vivek

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2 Answers

Ken Melching
Feb 19 at 06:56 PM
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In RA you can set up Reserves for Imminent Loss (Rp<Cp). Make sure you limit recognized revenue to no more then 100% of Rp.

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Vivek Srivastava Feb 20 at 02:44 AM
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Hello Ken,

Thank you!!!

I am learning this process in project system, I have below scenario:

Estimated Rev = $ 61,250

Estimated Cost = $ 49,000

Profit = $ 12,250

The first month below are the actuals

Billing = $ 10,000

Cost = $ 7,500

Based on above figures system calculates the POC as 15.30% and adjust the revenue by $ 625 during settlement, this part if perfectly working fine

Second Month

Business realized the project is in loss, so they revised the cost estimate by loss amount i.e $ 20,000

Estimated Rev =$ 61,250

New Estimated Cost =$ 81,250

Profit = $ (20,000)

There are no actuals posted in the second month, so when I run KKA2 system is calculating revenue recognization as below, the expectation is system should post a loss of $ (21,875) in the second month. How can this be achieved?

Regards,

Vivek


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