Date: 12 May 2013
Accounting Method determines at what project stage revenue will be recognised for a project. There are seven types of accounting methods available in Sage Project and Job costing module. They are Completed Project, Total Cost Percentage Complete, Labor Hours Percentage Complete, Billings and Costs, Project Percentage Complete, Category Percentage Complete and Accrual-Basis. Project type option will determine the accounting method that you can select from.
Let’s look accounting methods in detail:
• Complete Project: If selected then the revenue will be recognized upon the completion of the project.
• Total Cost Percentage Complete: If selected then PJC will use the percentage between total cost incurred and total estimated cost of the project to calculate the revenue automatically.
• Labor Hours Percentage Complete: If Selected then revenue will be calculated on the ratio of Total labour hours incurred and estimated total labour hours.
• Billing and Cost: if selected then revenue will be calculated throughout the project on the basis of amount Billed and actual cost incurred on the project to date.
• Project Percentage Complete: If selected then the revenue will be calculated throughout the project on the ratio of actual cost incurred to estimated cost of the project.
• Category percentage complete: if selected then the revenue will be calculated automatically on the basis of the ratio of actual cost incurred for project category to estimated cost for the project category
• Accrual-Basis: With this accounting method, the program posts transaction directly to the revenue and cost of sales accounts. (You do not need to run the revenue recognition functions to clear amounts from the billings and work in progress accounts.
System will calculate percentage as follows:
Project Percentage = Total actual project costs / Total estimated project costs
Category Percentage = Actual costs for the category/Estimated costs for the category
Labor Hours Percentage = Total actual project labor hours / Total estimated project labor hours
Note: Project and Job Costing removes amounts from the work in progress account and the billings account only when the customer assumes the rights and responsibilities of ownership. The timing depends on the accounting method used for the project.
To be continue…