The Contracts and Settlements processing within Eralis Job are very specific forms of processing which allow the company to control the revenue recognition in the income statement associated to processing in Eralis Job.
The Contracts process allows the company to separate the invoicing and revenue recognition process into two separate processes which can occur independently of each other.
The Settlements process allows the company to balance the margin reflected in the income statement based on a predetermined margin until the job is completed.
The Contract Control Account is a balance sheet liability account which is used with all posting associated with the contract. Depending on the nature of the processing within the contract, the account can reflect a deferred income balance, or an income earned in advance balance. There are three main transactions that will impact this account during contract processing.
- Contract invoicing which generates a journal entry that will:
- Debit A/R control
- Credit contract control No revenue is raised in the income statement based on the contract invoice.
- Contract revenue recognition which generates a journal entry that will:
- Debit contract control
- Credit income
- Contract completion processing which clears any outstanding balance from the contract control account. The journal entry could be a debit or credit to the contract control account depending on the nature of the contract processing. The other side of the journal entry will be posted to an Over/Under Recovery account inside the income statement.
The Profit Recognized Account is a balance sheet account that is used to reflect the value of adjustments that are processed to the accrued revenue associated to contract processing. These adjustments are used to reflect a point in time assessment of where the contract stands and what will be involved to complete the contract.
The Extended Contract Features adds additional functions to the contract processing screen to allow for recurring contract invoicing.
The Allow Negative Contract Phases allows a company to enter contract phase lines with a negative value. These phase lines cannot be invoiced out at this stage.
The Settlement WIP Account is a balance sheet account used to transfer expenses back into the balance sheet as work-in-progress, where an excess expense amount has been processed through and recognized inside the income statement.
The Settlement WIP COGS Account is an income statement account that is credited with the excess expenses being transferred out of the income statement back into the balance sheet (into the Settlement WIP Account) during settlement processing.
The Settlement Accrual Account is a balance sheet account used in situations where insufficient expenditure has been recognized in the income statement and additional expenses need to be accrued to maintain the required provisional margin on the job.
The Settlement Accrual COGS Account is an income statement account that is debited with the additional expenses being accrued to the income statement.