Question

Capitalization of Project Costs monthly

  • 1 December 2021
  • 2 replies
  • 154 views
G
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Hello everyone I hope there is a simple answer to this one.

I have a client that is investing considerable amounts of money into designing and developing a propotype machine which they will eventually produce for sale.

They want to charge the development costs to Intangible assets when they are incurred (monthly would be acceptable), but there will be no revenue associated with the project costs.

Does anyone know the best way to achieve this? I have looked at a project type of Capitalize Expenses, but this defaults to a Revenue Recognition Method of Actual Revenue and requires a Cpntriution Margin to be entered. As there are no revenue transactions should I just enter 0%?

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2 replies

Ieva Rituma
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Userlevel 6
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Hi.

 

It is correct that you’d need to fill out the revenue section, even if there is no revenue planned to be associated with the project. But you’re correct in saying that you’d just set it up to Actual Revenue and 0 in the contribution margin. I’ve used this setup with many customer examples with the same requirement.

 

 

IRituma
T
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Userlevel 7
Badge +18

Hi, 

Another solution could be to just use Cap Rev / EXP.   Assuming you will never create revenue postings this works in the same way, but you don’t need the contribution margin.  My fear for clients is if a user mistakenly enters a percentage (with cap exp)  and then you get undesirable postings.    Not the first time that would happen (user mistake).  

 

Best regards, 

Thomas

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