Milestone Payments - Proper Accounting Treatment

Our Deferred Revenue Account is an offset to Inventory (WIP) and as we
ship the recoupment is applied to the Deferred Revenue Account.

Sandy Morse
BVR Technologies Company
815-874-2471 x112
I am struggling with Vantage 6.1 Milestone Payments and how best to
integrate it with the General Ledger.

As I understand it, Milestone Invoices are applied to the Deferred
Revenue Account that you set up in the Accounts Receivable
Configuration. Work in Progress on the job accumulates as per normal
until the job is shipped. It is then that the Deferred Revenue plus
the final payment amount posts to Sales and WIP posts to Cost of Sales.

My first thought was that Deferred Revenue Account should be a
Liability Account to offset AR or the Bank Balance, however that still
leaves us accounting for the full value of WIP as an asset when it
should be only the portion of WIP not covered by milestone payments.

Do I understand this correctly and how are others coping with this
dilemma?

Thanks
Bob Findlay
Bob,
Your thought that the Deferred Revenue Account is a liability account
is correct. With most accounting issues that I struggle with, I go
back to the basics. Most companies record the sale and related Cost
of Sale upon shipment (there are some instances where you can use the
percentage of completion method, if that is what your company is
doing,let me know) and therefore the Matching Principle of Accounting
would require you to record all job costs in WIP and then match the
costs to the Sale upon shipment. The milestone invoices you send
become an asset in the AR Account and a liability in the Deferred
Revenue Account. The full value of WIP is an asset until you ship.
I hope this helps.
Brian W. Larcom, CFO
Metallized Carbon Corporation
Ossining, NY

--- In vantage@yahoogroups.com, "bakerprovan" <bfindlay@t...> wrote:
> I am struggling with Vantage 6.1 Milestone Payments and how best to
> integrate it with the General Ledger.
>
> As I understand it, Milestone Invoices are applied to the Deferred
> Revenue Account that you set up in the Accounts Receivable
> Configuration. Work in Progress on the job accumulates as per
normal
> until the job is shipped. It is then that the Deferred Revenue
plus
> the final payment amount posts to Sales and WIP posts to Cost of
Sales.
>
> My first thought was that Deferred Revenue Account should be a
> Liability Account to offset AR or the Bank Balance, however that
still
> leaves us accounting for the full value of WIP as an asset when it
> should be only the portion of WIP not covered by milestone
payments.
>
> Do I understand this correctly and how are others coping with this
> dilemma?
>
> Thanks
> Bob Findlay