In this blog post I have explained how the Revenue is Recognized for the Revenue type ‘Project Sales(Time and Material)’ when the accrual method is “Recognize at the point of delivery”.
Project sales include the sale of project-based services and Material but it does not includes the sale of standardized material and services.
Prerequisites
Navigate to Business Configuration > Choose the First Implementation > Click on Edit Project Scope > Under third Step Scoping Make sure that Sell Project-Based Products and Services is in Scope
Under Fourth step Questions > Enable the question “Do you want to use Solution-Supported Revenue Recognition for sales orders?”.
Navigate to Business Configuration > Select the First Implementation > Click on Open Activity list > Search for Accrual Method Determination Activity > Assign the accrual method for the Revenue type Project sales(time and Material) .
Process flow
Navigate to Sales order Workcenter > Create a new sales order by entering all the mandatory details . Under items tab add the Project Based Material and Services and click on Save.
Create a Project from the sales order and ‘Create Project’ field will be enabled only if we add the Project-Based Material and Services in the sales order.
Enter all the mandatory details and click on ok
Project is Created and it is linked to the Sales Order
Release the Sales Order
Navigate to Project Management workcenter > Open the Created Project > Add the team member and Edit Period Plans for the Service under Work tab.
Enabled ‘From Stock’ indicator as I’m going to consume it from own stock for the Material under Materials tab.
Released the project task
Created project stock order for the Material under Products tab.
Choose the Ship From Location and click on finish
Navigate to Outbound Logistics control Workcenter > Search for Created Project Stock Order > Release the Project Stock Order demand
Navigate to Outbound Logistics Workcenter > Delivery Proposal > Search for Project Stock Order > Allocated Material to the Project by clicking on Allocate button.
Choose the Source Logistics area and click on Save
Navigate to the Project Management Workcenter > Open the created Project >Click on Consume in order to Consume the material to the project
By logging into the Employee user, Edit and release the timesheet for the employee
Actual quantity for the material and Service is updated in the Project.
We can see the Journal entry posted for Internal Service Confirmation and Goods Issue for consumption where Cost of sales of Material and Services are posted to the Deferred Costs account. This account is a balance sheet account, which means that the costs are not yet recognized.
Navigate to Cost and Revenue Work Center > Search for Sales Order > Execute Revenue Recognition for sales order before doing Customer Invoice and click on ok
Enter all the Mandatory Details and click on Ok
Here we can see the Journal entry, the run posts recognized revenue from the deferred net value account to the sales revenue account and deferred cost of sales account to the corresponding expense accounts.
Navigate to Project Management Work Center > Search for Created Project > Create a project invoice request
Propose invoice items using sales order items Under third step, then it will propose the line items which are associated in the sales order.
Check the project invoice request for consistency, Finish and release it
Once we release the Project Invoice request, the Customer Invoice Request is automatically created under Invoice Request view of Customer Invoicing workcenter and then Release the Customer Invoice.
Journal entry for customer invoice after revenue recognition ( Service) is posted.
Journal entry for customer invoice after revenue recognition (material) is posted.
Navigate to Cost and Revenue Workcenter > Sales Document items > Search for Sales Order > Execute the Revenue Recognition after Customer Invoice and click on ok
Journal entry for Revenue Recognition after Customer Invoice where “Deferred Revenue” and “Unbilled Receivables” will be cleared when Revenue Recognition is performed subsequently
