Closing accruals

Accrual is an accounting method where revenues and expenses are recognized on the date of the transaction, not when funds are received or payed out.
Accruals are part of the fiscal year closing, but can also apply to monthly closings.

Expense accruals

It is quite common for the invoicing period to be different from the accounting fiscal year or period.
If needed, you can charge-off the expenses for the period covered by the invoice but not included in the processed fiscal year or period.

Insurance invoices are generally drawn up once a year, but a contract can cover a period that spans 2 fiscal years.
For a contract that covers the period from April 3, 2021 to March 31, 2022 for an amount of $120,000, excluding tax:

  • Invoice received April 3, 2021, you perform a standard posting of the cost.
  • At the year-end close on December 31, 2021, you need to account for the amount covering the period from April 3, 2022 to March 31, 2022.
Sales accruals

The same principle applies, but the allocations differ slightly.

For a long-term payment schedule for which the invoicing is not in the same period or fiscal year when services are provided.
The accruing expenses, such as personnel costs or purchase costs, are not yet committed. You need to put the revenue statement on hold until the services are carried out.

  • Work invoiced on September 15, 2021 for an amount of $490,000 without tax, of which $23,400 for completion services is planned for January 2022.
  • At year-end close on September 30, 2021, you need to record the sales accrual amount of $23,400.

Expense accruals and budget closing

Main steps for budget closing:

  1. Renew the annual envelopes.
  2. Close the purchase request lines and the order lines not to be transferred.
  3. Process receipts, invoices to receive, and expense accruals on fiscal year end.
  4. Process carry-forward unclosed pre-commitments and commitments.
  5. Process carry-forward multiannual envelopes.

Important considerations

  • If you do not review an annual envelope, carrying forward commitments and pre-commitments creates a new envelope and a renewal is no longer possible.
  • You can carry forward commitments before or after processing invoices to receive by the end of the fiscal year.
  • You need to carry forward multiannual envelopes as the last step of the budget closing.

Expense accruals creation rules

Expense accruals are generated when the period covered by the service overlaps 2 periods or fiscal years. Only the posted invoices with lines containing service period dates are retained.

Expense accruals do not include the tax amount. Expense and sales invoice footers are not included in the calculation unless they are related to the line in the original invoice or credit note.

Envelopes

Multiannual

The envelope and budget always exist. The budget needs to have an approved budget line with the same characteristics as the original budget line for the order. If not, you cannot create the expense accrual, which is noted in the log file.

Annual

The envelope can only exist if it was created by renewal agreement or by carrying forward unclosed commitments created before the expense accrual.

If the envelope does not exist for the new fiscal year, you cannot create the expense accrual.

If the envelope was renewed or carried forward, a control ensures that the following conditions exist. If not, the expense accrual process is blocked.

  • The new envelope code
  • The budget for this envelope
  • The approved budget line corresponding to the original budget line

Create an expense accrual

Expense accruals are not affected by carrying forward unclosed purchase lines. Creating the expense accrual cancels an expense related to the accrual amount relative to the N+1 period for the accrual fiscal year.

Expense accrual discount

Whether the accrual has been reported before or after carrying forward unclosed purchase lines, the discounts for the next fiscal year create an expense line with respect to the relative charge at the N+1 period.

Expense 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 the 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 the journal entry, which is the accruals accounting date.

Prerequisites

SEEREFERTTO Refer to the Implementation documentation

Screen management

This section provides field help on each tab or screen for this function.

Entry screen

Criteria

All companies (field ALLCPY)

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

Note: In a multi-legislation environment, this checkbox is not available. You can only process 1 company at a time because the document type and journal for the posting are typically for a single legislation.
Company (field CPY)

Enter a company code to run the process for a single company.
Legislation (field LEG)
Enter or select a legislation.
All sites (field ALLFCY)

Select this checkbox to include all sites.
Site (field FCY)
Enter or select a site to run the process on a single site.
Accrual type (field TYPSVC)

Select the accrual type:

Expense accruals (for purchasing)

Revenue accruals (for sales)
From BP (field BPRDEB)

Enter a range of BPs to filter for those BPs.

To BP (field BPRFIN)
Enter a range of BPs to filter for those BPs.
From invoice (field VCRDEB)
Enter a range of invoices to filter for those invoices.
To invoice (field VCRFIN)
Enter a range of invoices to filter for those invoices.
Starting invoice date (field DATDEB)
Enter a date range.
Ending invoice date (field DATFIN)

Enter a date range.
Reference date (field DATREF)

The reference date refers to the date when the cost or product is taken into account.
Generally, this date is the accounting date for the generated entry. It often is the closing date of the fiscal year or a period end date.

The process includes a search for sales and customer invoices for the sales accruals and the purchase and supplier invoices for expense accruals. Only invoices posted on a date on or before the reference date and with lines including service period dates are included.
For each invoice line, the reference date is compared to the service start and end dates. The process only includes invoice lines whose reference date is before the end date when the service was provided.

Calculation

If the reference date is before the service start date, the invoice line amount excluding tax is recorded.

If the reference date is on or between the service start date and the service end date,
an accrual is defined for an amount equal to the amount of the invoice line amount excluding tax multiplied by the number of days between the reference and service end dates divided by the number of days between the service start and end dates.

Example

The insurance invoice that cover the period from April 1, 2021 to March 31, 2022 for $120,000 excluding tax:

  • Fiscal year close: the reference date is December 31, 2021
  • Service start date is April 1, 2021
  • Service end date is March 31, 2022
  • The formula would be: (120,000 * 90 days) / (365 days) = 29,589 expense accruals for January, February, and March.

Summary of accounting entries

  Acct.
date		 Service
start		 Service
end		 Account BP Debit Credit Tax

Invoice

Apr. 15,
2021

Apr. 1,
2021

Mar. 31,
2022

401,000

AN001

 

143,520

 

 

 

 

 

445,660

 

23,520

 

001

 

 

 

 

616,000

 

120,000

 

001

 

 

 

 

 

 

 

 

 

 

Ref.
date

Acct.
date

Reversal
date

Account

BP

Debit

Credit

Tax

CCA tax
rule

Dec. 31,
2021

Dec. 31,
2021

Jan. 1,
2022

486,000

 

29,589

 

 

 

 

 

 

616,000

 

 

29,589

 001

 

 

 

 

 

 

 

 

 

Reversing
expense
accrual

 

Jan. 1,
2022

 

486,000

 

 

29,589

 

 

 

 

 

616,000

 

29,589

 

 001

Generation

Generate entries (field GENECR)

Select this checkbox to generate entries. If not selected, the process only generates a log file that lists the invoices that can be generated.

Generation type (field TYP)

If the Generate entries checkbox is selected, you can select the generation type

Actual: The actual journal entry is generated and can be viewed and printed. It is integrated into the balance when the document is saved.

Active simulation: The journal entry is integrated when the journal is recorded. This journal can be deactivated later.

Inactive simulation: The journal entryis not integrated into the journal. It can be activated later. It is not visible in inquiries or reports.

SEEWARNINGA period for a ledger cannot be closed until the simulated postings are converted to actual postings or canceled. You can change the status of simulated postings using theAccounting functionality.

SEEINFO Any recalculation of the same accrual for a period identical to or different from the initial calculation cancels the documents in active simulation mode created at the time of the first calculation. This action generates a new active simulation or actual documents according to the generation type.

Entry status (field STA)

This field is only available when the Generation type is Actual.

Temporary: Most of the information can be changed, with some exceptions:

  • Temporary payment document: The bank line cannot be deleted.
  • Purchase invoice document: The BP line cannot be deleted, and the purchase account and VAT cannot be modified.

Final: 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.

Note: The Entry status needs to be Final when the Generation type is Actual and the company meets one of the following criteria:

Situations that can affect journal entries:

  • Charge accounts with a declared VAT amount
  • VAT accounts that are matched or not matched
Entry type (field TYPPCE)

Use this field to define the document type linked to the journal entry, which matches the original document: customer invoice, miscellaneous operations, collection, and so on.

This information follows management rules relating to the VAT, reminders, and so on.
Based on the setup selected for the document type, the propagation to the manual ledgers can be opened or closed.

The default value comes from the VCRTYPSVC - Accrual journal type (CPT chapter, CLO group) parameter or the TYPACC - Simulation journal type (TC chapter, INV group) parameter. 

SEEWARNING The document type takes precedence and blocks the propagation to other company ledgers for the entry site.

 
Journal (field JOURNAL)

Enter the journal code, up to 5 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 is recorded.

Entry date (field ACCDAT)

This date corresponds to the generation date for the entries. It needs to be in 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 for the generated entries. It needs to be in an open fiscal year or period.
It matches the accounting date on which the accruals need to be reversed. By default, it is the first day of the period following the accounting date.

Log file (field TRACE)

Select this checkbox to generate a log file.

Batch task

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

Specific Buttons

  • Memo: Select this action to save the current settings to a Memo code to be reused later. The memo is linked to your user profile, not to the function or the screen.
  • Recall: Select this action to enter a Memo code to load the settings saved with the code.
  • Delete memo: Select this action to delete a memo code.