There are several additional General Ledger accounts that are used by Eralis Job, but are only required if the company intends to use the settlement processing within Eralis Job. The settlement processing is intended for companies who have jobs that run for a long period of time. During the period that the job is operating, the company can specify a profitability margin that should be adhered to for each job in profit and loss. If the resulting margin is not the same as the required margin, the system will move cost into or out of the profit and loss statement to balance the margin in the profit and loss to the required margin. This continues until the job is completed, at which stage the system will clear all the adjusting entries to reflect the true margin in the profit and loss. This process requires four General Ledger accounts:
- Settlement WIP (Work-in-progress) account – This account should be placed in the balance sheet under the assets section. Please do not use the WIP General Ledger account that was mentioned in the Required GL Accounts article [Required GL Accounts - WIP GL Account]. This should be a separate General Ledger account.
- Settlement WIP COGS account – This account should be in the income statement under the cost of goods sold section.
- Settlement Accrual account – This account should be placed in the balance sheet under the liabilities section.
- Settlement Accrual COGS account – This account should be placed in the income statement under the cost of goods sold section. It is recommended that you use a separate account and not the same account used for the Settlement WIP COGS account.
The Settlement WIP accounts are used when the actual margin in the profit and loss is less than the required or projected margin. This implies that excess costs have been processed into the profit and loss, and the settlement process needs to return some cost into the balance sheet. The system will generate a journal entry which will debit the Settlement WIP account and credit the Settlement WIP COGS account.
The Settlement Accrual accounts are used when the actual margin in the profit and loss is higher than the planned margin. If this is the case, the process needs to move costs into the profit and loss statement. A journal entry will be processed which will debit the Settlement Accrual COGS account and credit the Settlement Accrual account.
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