Walkthrough: Calculating work in process for a project
For projects, you can schedule the use of company resources and track their associated costs. Projects involve the consumption of employee hours, machine hours, inventory items, and other types of usage that you should track as a project progresses. If a project runs over a long period, you might want to transfer its costs to a Work in Process (WIP) account on the balance sheet. You can then recognize the costs and sales in your income statement accounts.
About this walkthrough
This walkthrough illustrates the following tasks:
- Calculate WIP.
- Select a WIP calculation method.
- Exclude part of a project from the WIP.
- Post the WIP to the general ledger.
- Reverse a WIP posting.
Each step of the process calculates the value and moves the project transactions to the general ledger. The calculation and posting steps are separated to help you review your data and to make modifications before posting to the general ledger. Therefore, you should make sure that all information is correct after you run the calculation batch jobs and before you run the posting batch jobs.
Roles
This walkthrough uses the project team member (Tricia) as the persona.
Story
This walkthrough focuses on CRONUS International Ltd., a design and consultancy firm that designs and fits new infrastructures, such as conference halls and offices, with furniture, accessories, and storage units. Most of the work at CRONUS is project-oriented and Tricia, a project team member, uses project to have an overview of ongoing and completed projects. Some projects can be lengthy and take months to complete. Tricia can use a WIP account to record the work in process and track the costs throughout the project.
Calculating WIP
CRONUS has taken on a lengthy project that has now extended across reporting periods. Tricia calculates the work in process (WIP) to make sure that the financial statement is accurate.
During this procedure, Tricia selects a specific group of tasks to include in the WIP calculation. On the Project Task Lines page, Tricia specifies the lines in the WIP-Total column.
The following table describes the options.
| Field | Description |
|---|---|
| <blank> | Leave blank if the project task is a part of a group of tasks. |
| Total | Defines the range or group of tasks that are included in the WIP and recognition calculation. Within the group, the WIP total includes any project task with Project Task Type set to Posting, unless its WIP-Total field is set to Excluded. |
| Excluded | Applies only to a task with a Project Task Type of Posting. The task isn't included when WIP and recognition are calculated. |
In the following walkthrough, Tricia applies the Cost Value method, which is their company standard, to calculate WIP. Tricia specifies the part of the project to include in the WIP calculation by assigning WIP-Total values to various project task lines.
To calculate WIP
Choose the
icon, enter Project, and then choose the related link.In the Projects list, select the Deerfield project, and then choose the Edit action. This opens the Project Card in edit mode.
WIP can be calculated based on Cost Value, Sales Value, Cost of Sales, Percentage of Completion, or Completed Contract. In this example, CRONUS uses the Cost Value method.
On the Posting FastTab, choose the WIP Method field, and then select Cost Value.
Choose the Project Task Lines action and set the following values in the WIP-Total field.
Project Task No. WIP-Total Field 1130 Excluded 1190 Total 1210 Excluded 1310 Excluded Choose the WIP action, and then choose the Calculate WIP action.
On the Project Calculate WIP page, select a project to calculate WIP for. On the Project FastTab, select Deerfield in the No. field.
In the Posting Date field, enter a date that's later than the work date.
In the Document No. field, enter 1. You can use this number later for traceability.
Choose the OK button to run the batch job. A message is displayed. Choose the OK button to continue. Close the Project Task Lines page.
Note
The message states that there are warnings associated with the WIP calculation. You'll review the warnings in the next procedure.
On the Project Card page, expand the WIP and Recognition FastTab to see the calculated values. You can also see the WIP Posting Date and the values posted to the general ledger, if any.
Notice that the value for Recog. Costs Amount is 215.60 in the To Post column. This reflects the total costs of two of the items in the group of project tasks 1110 – 1130. The third item was set to Excluded, and therefore isn't included in the WIP calculation.
To review WIP warnings
Choose the
icon, enter Project WIP Cockpit, and then choose the related link.Select the Deerfield project, and then choose the Show Warnings action.
On the Project WIP Warnings page, review the warning associated with the project.
After the accounting period ends, Tricia must recalculate WIP to include the work completed to this point.
To recalculate WIP
On the Project Card page, choose the WIP Entries action to view the WIP calculation.
The Project WIP Entries page shows the WIP entries that were last calculated on a project, even if WIP hasn't yet been posted to the general ledger.
You can follow the steps in the procedure that explains how to calculate WIP to recalculate WIP. Every time WIP is calculated, an entry is created on the Project WIP Entries page.
Close the page.
Note
WIP and recognition are calculated but aren't posted to the general ledger. To post, use the Post WIP to G/L action after you calculate the WIP and recognition.
Posting WIP to general ledger
Now that Tricia has calculated WIP for this project, they can post it to the general ledger.
To post WIP to general ledger
From the Projects list, select the Deerfield project.
Choose the WIP action, and then choose the Post WIP to G/L action.
On the Project Post WIP to G/L page, on the Projects FastTab, select Deerfield in the No. field.
On the Options FastTab, in the Reversal Document No. field, enter 1.
Choose the OK button to post WIP to the general ledger.
Choose the OK button to close the confirmation page.
After you complete the posting, you can view the posting information on the WIP G/L Entries page.
In the Projects list, select the Deerfield project, and then choose the WIP G/L Entries action.
On the Project WIP G/L Entries page, verify that the WIP posted to the general ledger.
Close the page.
Open the Project Card page for the Deerfield project.
On the WIP and Recognition FastTab, notice that in the Posted column, the Recog. Costs G/L Amount field is filled in, which indicates that WIP was posted to the general ledger successfully.
Choose the OK button to close the card.
Reversing a WIP posting
Tricia determines that the project tasks that were excluded from the calculation of WIP should have been included. Tricia can reverse the incorrect postings without having to post new WIP postings.
To reverse a WIP posting
From the Projects list, select the Deerfield project.
Choose the WIP action, and then choose the Post WIP to G/L action.
On the Project Post to WIP to G/L page, on the Project FastTab, select Deerfield in the No. field.
On the Options FastTab, in the Reversal Document No. field, enter 1.
In the Reversal Posting Date field, enter the original posting date. It should be the same date that you used to calculate WIP the first time.
Select the Reverse Only checkbox. This reverses the previously posted WIP, and posts new WIP to the general ledger.
Choose the OK button to run the batch job, and choose the OK button to close the confirmation page.
Open the Project Card page for the Deerfield project.
On the WIP and Recognition FastTab, verify that there aren't any posted WIP entries.
Close this page.
In the Projects list, select the Deerfield project, choose the WIP action, and then choose the WIP G/L Entries action. The WIP entries have the Reversed checkbox selected.
Close this page.
Open Project Task Lines for the project, include the parts of the project that should be in the WIP calculation, and then recalculate and post the new value to the general ledger.
Note
Suppose Tricia calculated and posted WIP for a project with incorrect dates. Following the method that was discussed earlier, Tricia can reverse the incorrect postings, correct the dates, and post to the general ledger.
See also
Business Process Walkthroughs
Walkthrough: Managing Projects
Understanding WIP Methods
Monitor Progress and Performance
Work with Business Central