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Apr 04, 2011 at 03:58 AM

To have better understanding in project settlement

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Dear all,

I am new in PS and hopefully I can have a clearer picture of the account entries for the best practise of a project settlement.

This is a customer/sales project. When we post any project related expenses/revenue, we assign a WBS to the line item so that the WBS is able to capture the costs. When we run settlement (CJ88) during the month end, the net of all expenses and revenue will be posted to the system.

1) For example, during month end total expenses is $600 and total progress billing (revenue) is $1000, what will be accounting entries of CJ88? Are the entries below correct?

DR. WIP Settlement 400

CR. BS A/c 400

FYI:

This Balance Sheet A/c (BS A/c) is shown under current asset in the Balance Sheet (t-code F.01).

WIP Settlement is set in settlement profile (or allocation structure to be exact) while BS a/c is set in settlement rule.

The end user is not using COPA. They always settle the costs to a G/L a/c specified in the settlement rule.

2) What if on the 2nd month total expenses is $300 and the progress billing is $200, are the entries below correct?

DR. BS A/c 100

CR WIP Settlement 100

3) In the end of the project, how are the above being settled completely? What happened to the balance in the GL account set in allocation structure (settlement costs element)??

4) This end user chose to settle to a GL a/c so that it will be displayed under current asset in the balance sheet. Is this the only reason to settle to a GL a/c?

5) If the Q1-Q2 above are rather confusing, what would be the best practise for a company without COPA settling the costs/revenues to a G/L?

Thank you.