Financials >  Closing processes >  Accruals  

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The notion of Purchase and Sales Accruals relies on the principle of the independence of the fiscal years. Simply put: It is necessary to review the revenues and costs that have contributed to their achievement with the goal of analyzing the result.
The Purchase Accruals are involved in fiscal year closing. This principle may be applied to the monthly closings.

Purchase Accruals (PA)

In practical terms, it is quite common for the invoicing period to be different from the accounting fiscal year or (period).
If need be, it is necessary to charge off the PA for the period covered by the invoice but not included in the processed fiscal year or period.

For example:
The insurance invoices are generally drawn up once a year but they cover a period that often overlaps two fiscal years since they are dependent on a contract.
If the contract covers the period from 01/04/01 to 31/03/02 for an amount of €120,000, tax excluded, the cycle is as follows:

  • Invoice receipt 01/04/01: classic posting of the cost
  • At the year-end closing on the 31/12/03, it is necessary to register the PA for the amount covering the period 01/01/04 to 31/03/04.
Sales Accruals (SA)

The principle is the same as for the PA but the allocations slightly differ.

For example:
For a long-term payment schedule for which the invoicing is not in phase with the provision of the services.
The accruing expenses (personnel costs, purchase costs …) are not yet committed. It is necessary to put on hold the revenue statement until the services are carried out:

  • Work invoiced on 15/09/01 for an ex-tax amount of €490,000, of which €23,400 for completion services planned for January 2002
  • At the time of the year end closing on 31/12/01, it will be necessary to record a SA for an amount of €23,400.

Purchase accruals and budget closing

Stages of the budget closing:

SEEWARNING The execution of these stages must follow the chronological order above, except:

  • If renewing an annual envelope is not preformed, the carry-forward of commitments and pre-commitments will create a new envelope but the renewal will no longer be possible.
  • The carry-forward of commitments can be carried out before or after processing the invoices to receive by the end of the FY.
  • The carry-forward of multiannual envelopes must be the last stage of budget closing.

Purchase Accruals creation rules

Purchase Accruals (PAs) are generated when the period covered by the service overlaps two periods or fiscal years. Only the posted invoices having lines containing service period dates are retained.

PAs are generated for an excluding tax amount. Purchase and sales invoice footers are not taken into account in the calculation except if they relate to the line in the original invoice/credit note.

For the multiannual envelopes

The envelope and budget always exist. The budget must contain an "Approved" budget line with the same characteristics as the original budget line of the order. In the opposite case, the creation of the PAs will be refused and this will be signaled by a message in the log file.

For the annual envelopes

The envelope can only exist if it has been created by renewal agreement or by carry-forward of unclosed commitments (if they have been created before PA processing).

  • If the envelope does not exist on the new fiscal year, the creation of PAs is impossible.
  • If the envelope has been renewed or carried forward, the creation processing of PAs searches for:
      • the code of the new envelope,
      • the existence of a budget in this envelope,
      • a budget line with the "approved" status corresponding to the original budget line.

SEEINFO If all these elements exist, the PA will be generated. In the opposite case, the creation is refused with a message specifying the origin of the refusal in the log file.

Purchase Accrual creation

Purchase Accruals are not influenced by the carry-forward of unclosed purchase lines. The creation processing of PAs performs the cancellation of an expense related to the accrual amount (relative to the N+1 period) on the accrual fiscal year.

Purchase Accrual discount

Whether the accrual has been reported before or after the carry-forward of unclosed purchase lines, the discount on PAs for the next fiscal year carries out the creation of an expense line with respect to the relative charge at the N+1 period.

Purchase and Sales Accruals management after adding a ledger

When adding a ledger to a company, sales and purchasing documents are not updated. For example, the new ledger currency rate is not updated in the sales and purchasing invoice document.

As a result, when you generate accruals on invoices created prior to adding the new ledger, the currency rate in the new ledger is determined by the rate date for the generated journal entry.

If the Rate type field for the current document type is set to Original date, the currency rate is determined by the Document date in Journal entry, which is the original invoice date.

If the Rate type field for the current document type is set to Document date, the currency rate is determined by the accounting Date field in Journal entry, which is the accruals accounting date.

Prerequisites

SEEREFERTTO Refer to documentation Implementation

Screen management

In order to know the provision to be registered, the period covered by the provided service (start and end date) will need to be specified for each invoice line when entering the invoice.
The revenue or the expense are taken into account by activating the PAs/SAs option. This screen contains the extraction criteria for the invoices impacted by the PAs/SA generation as well as the terms of the journal generation.

The status of postings in the launch screen must be Definitive when the Actual journal category is selected and when the company meets one of the following criteria:

Entry screen

Fields

The following fields are present on this tab :

Criteria

  • All companies (field ALLCPY)

Select this check box to run the process for all companies. Otherwise, you need to select a company.

Special case

In a multi-legislation environment, this check box is not available. The process can only be run one company at a time because the document type and journal for the posting are likely for a single legislation.

 

When this field is populated with a company code, the inquiry is filtered in order that only those data concerning the selected entity are displayed.

 
  • All sites (field ALLFCY)

Select this check box to run the process for all sites. Otherwise select a site.

         

When this field is populated with a site, the inquiry is filtered in order that only those data concerning the selected entity are displayed.
  • field TYPSVC

These two buttons are used to specify if the processing will be run for the Purchase Accruals (PAs) or the Sales Accruals (SAs).

This field is used to give a start value to the codes to be processed.

This field is used to give a end value to the codes to be processed.

  • From invoice (field VCRDEB)

 
  • To invoice (field VCRFIN)

 
  • Starting invoice date (field DATDEB)

 
  • Ending invoice date (field DATFIN)

 
  • Reference date (field DATREF)

The reference date is the benchmark from which the cost or product are taken into account.
As a general rule, this date corresponds to the accounting date of the generated entry. It often is the closing date of the fiscal year or a period end date.

The processing scans the sales and customer invoices for the Sales Accruals (SAs) and the purchase and supplier invoices for the Purchase Accruals (PAs). Only invoices posted on a date previous or equal to the reference date and with lines including service period dates are kept.
For each invoice line, the reference date (entry on processing launch) is compared to the service start and end dates: the processing only integrates the invoice lines whose reference date is prior to the end date of the service provision.
The calculation is carried out as follows:

  • if the reference date (D1) is lower than the service start date (D2):
    recording of an accrual for the ex-tax invoice line amount,
  • if the reference date (D1) is equal or between the service start date (D2) and the service end date (D3):
    an accrual is defined for an amount equal to:
    (Ex-tax amount of the invoice line * Number of days between D1 and D3) / Number of days between D2 and D3,
    This formula can be simplified to the following expression: (Ex-tax amount of the invoice line* [(D3-D1)] / [(D3-D2)].

Example:
The insurance invoices that cover the period from 01/04/01 to 31/03/02 are for 120,000 EUR ex-tax:

  • fiscal year closing, i.e. the reference date: 31/12/01 (D1),
  • start date of the service: 01/04/01 (D2),
  • service provision end date: 01/03/02 (D3),
  • Calculated as follows: (120000 * 90 days) / (365 days) = 29589 Purchase Accruals for January, February and March.
Summary of the accounting entries:

 

Accounting date

Service provision start

Service provision end

Account

BP

Debit

Credit

Tax

Invoice

15.04.01

01.04.01

31.03.02

401000

AN001

 

143520

 

 

 

 

 

445660

 

  23520

 

001

 

 

 

 

616000

 

120000

 

001

 

 

 

 

 

 

 

 

 

 

Reference date

Accounting date

Reversal date

Account

BP

Debit

Credit

Tax

CCA tax rule

31.12.01

31.12.01

01.01.02

486000

 

29589.04

 

 

 

 

 

 

616000

 

 

29589.04

 001

 

 

 

 

 

 

 

 

 

Reversing Purchase Accrual

 

01.01.02

 

486000

 

 

29589.04

 

 

 

 

 

616000

 

29589.04

 

 001

Generation

  • Generate entries (field GENECR)

Select this check box to generate entries. If this check box is not selected, the process is in simulation mode. It specifies in the log file the invoices found to match the selection criteria and the Purchase and Sales Accruals to be generated.
  • Generation type (field TYP)

The category is set up in the document type.
The accounting document category can take the following values:

Actual

Actual:The actual accounting document can be viewed and printed (GL, Balance, etc.). The document is integrated into the balance when said document is saved.

Active simulation or Inactive simulation

The simulation document, once activated, is also integrated with the inquiries and print-outs. It can be converted into an actual document or de-activated in order to become an inactive simulation document (that is to say it is not visible in inquiries and reports: for instance, the physical stock count postings).
SEEWARNING A period of a ledger type cannot be closed until the simulation postings have been either converted to actual postings or cancelled. The status of the simulation journals is changed using the process of the Accounting functionality.

SEEINFO Any recalculation of the same Purchase Accrual/Sales Accrual, for a period identical to or different from the initial calculation, will cancel the documents in active simulation mode created at the time of the first calculation, and will generate new active simulation or actual documents according to the generation type chosen.
  • Entry status (field STA)

In the event of an actual generation, the status of the journal can be:

  • Temporary
  • Final

The entry status for entries must be Final when the requested generation type is Actual and the company meets one of the following criteria:

SEEINFO The status defines your ability to modify the document. Once final, the modifications of the journal are only for information purposes or concern the analytical postings. The date, amounts, accounts, VAT code, and other purely accounting information can no longer be modified.

In temporary mode, most of the information displayed on the journal can be modified. The modification options can vary based on:

  • The nature and the origin of the accounting document:
    • Temporary payment document: bank line that cannot be deleted
    • Purchase invoice document: BP line that cannot be deleted, purchase account and VAT that cannot be modified
  • The management events that have an impact on the account document are:
    • Charge account with a declared VAT amount
    • Matched VAT account or not

This field is used to define the type of the document that is being generated.
The value submitted by default comes from the VCRTYPSVC - Accrual journal type (CPT chapter, CLO group) parameter or the TYPACC - Simulation journal type (TC chapter, INV group) parameter. 

Each accounting document entered is linked with a given type. The document type matches the nature of entry: customer invoice, miscellaneous operations, collection, etc.
This information comes with management rules relating to the VAT, reminders, etc. It is one of the key elements of document entry.
Based on the setup selected for the document type, the propagation to the manual ledgers can be opened or closed.
SEEWARNING The document type prevails and interrupts the propagation to the other ledgers of the company of the entry site.

 

Enter the journal code (one to five alphanumerical characters) for which the entries generated by the calculation are recorded.
The journal can be initialized by default based on the type of document chosen. It corresponds to the accounting journal in which the entry will be recorded.
  • Entry date (field ACCDAT)

This date corresponds to the date of the generated accounting postings. It must belong to a fiscal year or period that is open for all the ledger types.
It is the reference date by default.
  • Reversal date (field EXTOURNE)

This date matches the reversal date of the generated accounting entries. It must be part of an open fiscal year or period.
It matches the accounting date on which the Purchase Accrual/Sales Accrual must be reversed. By default it is the first day of the period following the accounting date.
  • Log file (field TRACE)

Select this check box to generate a log file after running the process.

Close

 

Batch task

This function can be run in batch mode, but no dedicated standard task is delivered to run it.

Specific Buttons

The following fields are included on the window opened through this button :

  • Memo code (field CODE)

You use a memo code to save the criteria applied to an entry screen. Use this field to find out if a memo code has already been saved for the current screen values.

Use the following buttons to manage memos:

Recall: Recall a previously defined and saved memo.

Memo: Save the current values of the screen in a memo file with a code to be specified.

Del. Memo: Delete a previously saved memo.

If a memo named STD (standard) is associated with the screen, it is loaded when opening the function.

Close

SEEREFERTTO Refer to the description of the [Memo] button for further information.

SEEREFERTTO Refer to the description of the [Memo] button for further information.

Limits

The log file only takes into account the sign of the invoice line/credit note line when the – TYPGNRSVC - Accrual generation type (CPT chapter, CLO group) parameter is set to 1 document per BP. When the TYPGNRSVC - Accrual generation type parameter is set to 1 document per invoice, the sign is not considered.

Error messages

In addition to the generic error messages, the following messages can appear during the entry :

Validity limit exceeded, envelope not renewed

This blocking occurs when the envelope does not exist for the new fiscal year. The creation of the invoice to be received is not possible.

Journal type prohibited  with 'actual' status

Change the Journal type or select the Actual journals check box at the level of the Journal type setup.

Journal type prohibited with 'simulation' status

Change the journal type or select the Simulation journals check box at the level of the Journal type setup.

Journal type with VAT management

Change the Journal type or clear the VAT management/debits  and  VAT management/collection check boxes at the level of the Journal type setup. The Purchase and Sales Accrual journals are generated for an ex-tax amount; the Expense and Revenue accounts have a VAT code but no VAT line is generated.

The posted documents will have the 'Final' status for the company

If the processing is launched for a given company and this company has selected Conformity DGI no. 13L-1-06, i.e., the FRADGI - French fiscal regulation (TC chapter, CPT group) parameter is set to Yes, the documents generated by the processing will have the status  Final.

The posted documents will have the 'Final' status for one or more companies

The processing is launched for all companies or a group of companies, and if at least one of the companies chose Conformity DGI no. 13L-1-06, i.e., the FRADGI - French fiscal regulation (TC chapter, CPT group) parameter is set to Yes, the documents generated by the processing will have the status Final.

Tables used

SEEREFERTTO Refer to documentation Implementation