Revenue and Cost Recognition Policy

Overview

The Revenue and Cost Recognition module allows you to:

• Recognize WIP (Work In Progress) for estimated revenue before actual billing
• Recognize Accruals for estimated costs before actual vendor invoices
• Automatically adjust WIP and Accruals when actual transactions are posted
• Close recognition entries when jobs are completed

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1. Setup

1.1 Create Recognition Policy Settings

Navigate to: Job Management > Recognition Policy Settings > New

Basic Configuration

Field	Description
Company	Select your company (required)
Cost Center	Leave blank for company-wide default, or select specific cost center
Profit Center	Leave blank for company-wide default, or select specific profit center
Branch	Leave blank for company-wide default, or select specific branch
Enabled	Check to activate this policy
Priority	Higher number = higher priority when multiple policies match

WIP Recognition Settings

Field	Description
Enable WIP Recognition	Check to enable WIP recognition for matching jobs
WIP Recognition Date Basis	When to recognize WIP: ATA, ATD, Job Booking Date, Job Creation, or User Specified
WIP Account	Asset account for Work In Progress (e.g., "Work In Progress - Assets")
Revenue Liability Account	Liability account for deferred revenue (e.g., "Deferred Revenue - Liabilities")
Minimum WIP Amount	Skip WIP recognition if estimated revenue is below this amount

Accrual Recognition Settings

Field	Description
Enable Accrual Recognition	Check to enable accrual recognition for matching jobs
Accrual Recognition Date Basis	When to recognize accruals: ATA, ATD, Job Booking Date, Job Creation, or User Specified
Cost Accrual Account	Expense account for accrued costs (e.g., "Cost Accrual - Expenses")
Accrued Cost Liability Account	Liability account for accrued costs payable
Minimum Accrual Amount	Skip accrual recognition if estimated cost is below this amount

1.2 Setup Examples

Example 1: Company-Wide Default Policy

Create a policy with:

• Company: Your Company
• Cost Center: (leave blank)
• Profit Center: (leave blank)
• Branch: (leave blank)
• Priority: 0

This will apply to all jobs in the company unless overridden by a more specific policy.

Example 2: Specific Cost Center Policy

Create a policy with:

• Company: Your Company
• Cost Center: Air Freight Operations
• Profit Center: (leave blank)
• Branch: (leave blank)
• Priority: 10

This will override the company default for all jobs with "Air Freight Operations" cost center.

Example 3: Branch-Specific Policy

Create a policy with:

• Company: Your Company
• Cost Center: (leave blank)
• Profit Center: (leave blank)
• Branch: Manila Branch
• Priority: 5

This will apply to all jobs from Manila Branch.

1.3 Required Accounts

Before using recognition, ensure these accounts exist in your Chart of Accounts:

Account	Type	Purpose
WIP Account	Asset	Holds recognized revenue before billing
Revenue Liability	Liability	Deferred revenue liability
Cost Accrual	Expense	Accrued cost expense
Accrued Cost Liability	Liability	Costs payable not yet invoiced

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2. Using Recognition on Jobs

2.1 Supported Job Types

Recognition is available on:

• Air Shipment
• Sea Shipment
• Transport Job
• Warehouse Job
• Customs Declaration
• General Job

2.2 Recognition Section on Job Form

After submitting a job, you'll see a Revenue & Cost Recognition section with:

WIP Fields:

• Estimated Revenue
• WIP Amount (current balance)
• Recognized Revenue (amount already closed)
• WIP Journal Entry (link to initial recognition)
• WIP Adjustment JE (link to adjustment entries)
• WIP Closed (checkbox)

Accrual Fields:

• Estimated Costs
• Accrual Amount (current balance)
• Recognized Costs (amount already closed)
• Accrual Journal Entry (link to initial recognition)
• Accrual Adjustment JE (link to adjustment entries)
• Accrual Closed (checkbox)

2.3 Job-Level Overrides

You can override the default recognition settings on individual jobs:

• Enable WIP Recognition: Override company/cost center setting
• WIP Recognition Date Basis: Override default date basis
• Enable Accrual Recognition: Override company/cost center setting
• Accrual Recognition Date Basis: Override default date basis
• Recognition Date: Used when date basis is "User Specified"

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3. Recognition Workflow

3.1 Initial WIP Recognition

When to use: When you want to recognize estimated revenue before actual billing.

Steps:

1. Open a submitted job document
2. Click Recognition > Recognize WIP
3. Enter the recognition date (defaults to today)
4. Click Create

Journal Entry Created:

Dr. WIP Account (Asset)              [Estimated Revenue]
    Cr. Revenue Liability                [Estimated Revenue]

3.2 Initial Accrual Recognition

When to use: When you want to recognize estimated costs before actual vendor invoices.

Steps:

1. Open a submitted job document
2. Click Recognition > Recognize Accruals
3. Enter the recognition date (defaults to today)
4. Click Create

Journal Entry Created:

Dr. Cost Accrual (Expense)           [Estimated Cost]
    Cr. Accrued Cost Liability           [Estimated Cost]

3.3 Adjusting WIP (Upon Actual Billing)

When to use: When you create a Sales Invoice for the job.

Steps:

1. Open the job document
2. Click Recognition > Adjust WIP
3. Enter the adjustment amount (amount billed)
4. Enter the adjustment date (billing date)
5. Click Create

Journal Entry Created:

Dr. Revenue Liability                [Billed Amount]
    Cr. WIP Account                      [Billed Amount]

Note: The actual Sales Invoice posts separately (Dr. Accounts Receivable, Cr. Revenue).

3.4 Adjusting Accruals (Upon Actual Invoice Receipt)

When to use: When you receive a Purchase Invoice for the job.

Steps:

1. Open the job document
2. Click Recognition > Adjust Accruals
3. Enter the adjustment amount (invoiced amount)
4. Enter the adjustment date (invoice date)
5. Click Create

Journal Entry Created:

Dr. Accrued Cost Liability           [Invoiced Amount]
    Cr. Cost Accrual                     [Invoiced Amount]

Note: The actual Purchase Invoice posts separately (Dr. Expense, Cr. Accounts Payable).

3.5 Closing Recognition (Job Closure)

When to use: When a job is completed and you want to close all remaining WIP and Accruals.

Steps:

1. Open the job document
2. Click Recognition > Close Recognition
3. Confirm the action
4. Enter the closure date
5. Click Close

This will:

• Close out any remaining WIP balance
• Close out any remaining Accrual balance
• Mark WIP and Accrual as "Closed"

Automatic Closure: Recognition is also automatically closed when the job status changes to "Closed", "Completed", or "Cancelled".

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4. Accounting Entry Summary

WIP (Revenue Recognition)

Event	Debit	Credit
Initial Recognition	WIP (Asset)	Revenue Liability
Adjustment (on billing)	Revenue Liability	WIP (Asset)
Closure	Revenue Liability	WIP (Asset)

Accrual (Cost Recognition)

Event	Debit	Credit
Initial Recognition	Cost Accrual (Expense)	Accrued Cost Liability
Adjustment (on invoice)	Accrued Cost Liability	Cost Accrual (Expense)
Closure	Accrued Cost Liability	Cost Accrual (Expense)

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5. Reports

5.1 Recognition Status Report

Navigate to: Job Management > Reports > Recognition Status

This report shows:

• All jobs with their WIP and Accrual status
• Filter by Company, Cost Center
• Filter by WIP Status: Not Started, Open, Recognized, Closed
• Filter by Accrual Status: Not Started, Open, Recognized, Closed

Use this report to:

• Monitor open WIP and Accrual balances
• Identify jobs that need adjustment
• Review closed recognition entries

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6. Period Closing

6.1 Manual Period Closing

For period-end adjustments, review all open WIP and Accruals:

1. Run the Recognition Status Report
2. Filter for "Open" WIP and Accrual status
3. For each job with open balances:
   • Review actual revenue/costs posted
   • Create appropriate adjustments
   • Or close if the job is complete

6.2 Automated Period Closing

An administrator can run the period closing process:

from logistics.job_management.recognition_engine import process_period_closing_adjustments

result = process_period_closing_adjustments(
    company="Your Company",
    period_end_date="2024-12-31"
)

This will automatically adjust WIP and Accruals based on actual revenue and costs posted.

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7. Estimated Revenue/Cost Sources

7.1 From Charges Table

The system calculates estimated amounts from the charges child table:

• Estimated Revenue: Sum of estimated_revenue field in charges
• Estimated Cost: Sum of estimated_cost field in charges

7.2 Fallback Calculation

If estimated_revenue or estimated_cost fields are not set in charges:

• Falls back to amount field for revenue
• Falls back to cost field for costs

7.3 Populating Estimates

To ensure accurate recognition:

1. Enter estimated revenue and cost in each charge line
2. Or ensure the amount and cost fields are populated
3. The job's total estimates are auto-calculated on save

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8. Recognition Date Basis Options

Option	Description
ATA	Actual Time of Arrival - uses ata, actual_arrival, or arrival_date field
ATD	Actual Time of Departure - uses atd, actual_departure, or departure_date field
Job Booking Date	Uses booking_date, job_booking_date, or job_open_date field
Job Creation	Uses the document creation date
User Specified	Uses the recognition_date field on the job

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9. Settings Priority

When multiple Recognition Policy Settings could apply, the system uses this priority:

1. Job-Level Overrides (highest priority)

   • Settings directly on the job document

2. Exact Match Policy

   • Policy matching all three: Cost Center + Profit Center + Branch

3. Partial Match Policy

   • Policy matching some dimensions (blank fields act as wildcards)
   • Higher priority value wins when multiple match

4. Company Default (lowest priority)

   • Policy with blank Cost Center, Profit Center, and Branch

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10. Troubleshooting

Issue: Recognition buttons not appearing

• Ensure the job is submitted (docstatus = 1)
• Check that Recognition Policy Settings exists for the company
• Verify WIP or Accrual recognition is enabled in settings

Issue: "Recognition date could not be determined"

• Check the Recognition Date Basis setting
• Ensure the corresponding date field is populated on the job
• Or use "User Specified" and enter a Recognition Date

Issue: "Estimated revenue must be greater than zero"

• Enter estimated revenue in the charges table
• Or populate the job-level estimated_revenue field

Issue: Account not found

• Ensure WIP, Revenue Liability, Cost Accrual, and Accrued Cost Liability accounts are set in Recognition Policy Settings
• Verify accounts belong to the correct company

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11. Best Practices

1. Create a company-wide default policy first - This ensures all jobs have a fallback policy

2. Use specific policies for exceptions - Create policies with higher priority for cost centers or branches that need different settings

3. Set minimum amounts - Use minimum WIP/Accrual amounts to skip recognition for small jobs

4. Regular period review - Run the Recognition Status Report monthly to review open balances

5. Close jobs properly - Ensure job status is updated to "Closed" or "Completed" to trigger automatic recognition closure

6. Document estimates - Enter estimated revenue and costs in charges as early as possible for accurate recognition