Month End Reconciliation Procedures

Before recognizing contract revenue at month-end, you may select to run the following reports:

• Maintenance Contract Over or Under Billed
  This report helps you identify contracts that are unbalanced before you recognize revenue.
• Maintenance Contract Deferred Revenue
  This report allows you to see financial and contract details for the Deferred Revenue GL account during reconciliation. For more information, see Maintenance Contract Deferred Revenue in the SSRS Reports documentation.

Recognizing Maintenance Contract Revenue

If you are using the manual method of revenue recognition, revenue is recognized when the invoice is posted. If you are using the percentage-of-completion or revenue schedule revenue recognition method, invoicing and recognizing revenue are two separate processes.

When you recognize maintenance contract revenue for a specific period, a general ledger batch called RECOGNITION is created.

1. Select Microsoft Dynamics GP > Tools > Routines > Service Management > Maintenance Contract > Recognize Revenue.
2. You can filter by customer, location, and/or contract. This allows you to adjust a single contract if, for example, you have a contract that cannot be renewed or closed until the revenue recognized equals the billed amount.
3. Select an Open Year. The Recognize Revenue window lists open years and the fiscal periods in each year.
4. Select a Period.

5. Before posting, select Print Edit List to print a list of the contracts with the revenue amounts and the posting dates. The Revenue Recognition Edit List prints. You can also print the Maintenance Contract Expiration report. You need to close or renew contracts before recognizing revenue for a contract's last period when using percentage-of-completion. Revenue will not be recognized for a contract if the customer is on hold.

6. Select the period you want to recognize revenue for and select Post.

If you are using the percentage-of-completion revenue recognition method, you receive messages stating that year-end closing should be run before recognizing revenue in subsequent fiscal years and that maintenance contracts ending in the period should be closed or renewed before recognizing revenue. Select Continue in both caution windows. You need to close or renew contracts before recognizing revenue for a contract's final period.

Before printing the Revenue Recognition Posting Journal, you are asked if you would like to print the Maintenance Contract Expiration report. Select Yes. If contracts exist that expire during the period, the Maintenance Contract Expiration report prints after the Revenue Recognition Posting Journal.

If the period has already been posted, you can still print the Revenue Recognition Posting Journal report.

Verifying the General Ledger Amounts

When the revenue recognition routine is run, a Microsoft Dynamics GP General Ledger entry is created and saved under the Batch ID "RECOGNITION."

If you are using percentage-of-completion, two transactions are created: the POC revenue recognition transaction for the period, and a reversing transaction that is saved in the next fiscal period and used to prevent overstating the contract's total revenue earned to date. For example, the equation used to calculate the revenue amount is:

[contract actual costs total to date] / [total forecasted costs] x [contract amount] = [revenue earned total to date]

If $60 is posted in costs for Period 1: $60 / $600 x $1200 = $120

If $80 is posted in costs for Period 2: $140 / $600 x $1200 = $280

Because the amount that is calculated is the total amount of revenue that has been recognized to date, in period 2, this amount ($280) needs to be decreased by the total from period 1 ($120). Without the reversing entry, revenue earned to date would be misstated as $400 ($120 + $280).

After recognizing revenue, view the RECOGNITION transaction entries to confirm that the General Ledger amounts are correct before they are posted.

1. Select Transactions > Financial > General.
2. Select the lookup button in the Journal Entry field. In the Journal Entry lookup window, scroll to locate the entries saved to the RECOGNITION batch, and select the appropriate transaction. The maintenance contract number is listed in the Reference column to help you identify the correct entry.
3. Verify that the correct amounts are being distributed to the correct accounts.