Walkthrough: Calculating work in process for a project

With project, you can schedule the usage of your company's resources and keep track of the various costs associated with the usage of resources on a specific project. Project involve the consumption of employee hours, machine hours, inventory items, and other types of usage that have to be tracked as a project progresses. If a project runs over a long period, you might want to transfer these costs to a Work in Process (WIP) account on the balance sheet while the project is being completed. You can then recognize the costs and sales in your income statement accounts when it's appropriate.

About this walkthrough

This walkthrough illustrates the following tasks:

  • Calculating WIP.
  • Selecting a WIP calculation method.
  • Excluding part of a project from the WIP.
  • Posting the WIP to the general ledger.
  • Reversing 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.

Prerequisites

Before you can perform the tasks in the walkthrough, the Business Central must be installed on your computer.

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 each ongoing project that CRONUS has started and also the project that are completed. Some of the project can be lengthy and can run over months. Tricia can use a WIP account to record the work in process and to track the costs throughout the project.

Calculating WIP

CRONUS has taken on a lengthy project that has now extended across reporting periods. Tricia, a project team member, calculates the work in process (WIP) to make sure that the financial statement of the company is accurate.

During this procedure, Tricia selects a specific group of tasks that is included in the WIP calculation. On the Project Task Lines page, Tricia can specify these lines in the WIP-Total column.

The following table describes the three 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, any project task with Project Task Type set to Posting will be included in the WIP Total, unless its WIP-Total field is set to Excluded.
Excluded Applies only to a task with 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, 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

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter Project, and then choose the related link.

  2. 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.

  3. On the Posting FastTab, choose the WIP Method field, and then select Cost Value.

  4. Choose the Project Task Lines action and set the following values in the WIP-Total field.

    The following table describes the values.

    Project Task No. WIP-Total Field
    1130 Excluded
    1190 Total
    1210 Excluded
    1310 Excluded

  5. Choose the WIP action, and then choose the Calculate WIP action.

  6. On the Project Calculate WIP page, you select a project to calculate WIP for. On the Project FastTab, select Deerfield in the No. field.

  7. In the Posting Date field, enter a date that is later than the work date.

  8. In the Document No. field, enter 1. This creates a document that you can refer to later for traceability.

  9. 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

    Note:
    The message states that there are warnings associated with the WIP calculation. You will review the warnings in the next procedure.

  10. 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 that have been 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

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter Project WIP Cockpit, and then choose the related link.
  2. Select the Deerfield project, and then choose the Show Warnings action.
  3. On the Project WIP Warnings page, review the warning associated with the project.

After the accounting period ends, Tricia has to recalculate the WIP to include completed work to this point.

To recalculate WIP

  1. 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.

  2. 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.

  3. Close the page.

Note

Note:
WIP and recognition are calculated but aren't posted to the general ledger. To do so, you must run Post WIP to G/L batch job 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

  1. From the Projects list, select the Deerfield project.

  2. Choose the WIP action, and then choose the Post WIP to G/L action.

  3. On the Project Post WIP to G/L page, on the Projects FastTab, select Deerfield in the No. field.

  4. On the Options FastTab, in the Reversal Document No. field, enter 1.

  5. Choose the OK button to post WIP to the general ledger.

  6. Choose the OK button to close the confirmation page.

    After you have completed the posting, you can view the posting information on the WIP G/L Entries page.

  7. In the Projets 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 has been posted to the general ledger.

  8. Close the page.

  9. Open the Project Card page for the Deerfield project.

  10. On the WIP and Recognition FastTab, notice that in the Posted column, the Recog. Costs G/L Amount field is now filled in, which indicates that WIP was posted to the general ledger successfully.

  11. 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 calculated in WIP. Tricia can reverse the incorrect postings without having to post new WIP postings.

To reverse a WIP posting

  1. From the Projects list, select the Deerfield project.

  2. Choose the WIP action, and then choose the Post WIP to G/L action.

  3. On the Project Post to WIP to G/L page, on the Project FastTab, select Deerfield in the No. field.

  4. On the Options FastTab, in the Reversal Document No. field, enter 1.

  5. 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.

  6. Select the Reverse Only checkbox. This reverses previously posted WIP, but does post new WIP to the general ledger.

  7. Choose the OK button to run the batch job, and choose the OK button to close the confirmation page.

  8. Open the Project Card page for Deerfield.

  9. On the WIP and Recognition FastTab, verify that there are no posted WIP entries.

  10. Close this page.

  11. 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.

  12. Close this page.

  13. 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

    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 repost to the general ledger.

Next steps

This walkthrough has taken you through the steps of calculating WIP in Business Central. In larger projects, it might be useful to transfer the costs to a WIP account periodically while the project is being completed. This walkthrough has shown you how to exclude task lines from a calculation. It also shows you when you would have to recalculate. And finally, this walkthrough demonstrates how to post the WIP to the general ledger. An example of how to reverse a WIP posting to the general ledger is also included.

See also

Business Process Walkthroughs
Walkthrough: Managing Projects
Understanding WIP Methods
Monitor Progress and Performance
Work with Business Central

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