This blog post illustrates how you can use the Dynamics AX project module to track the costs of constructions in progress and transfer those costs later on to a fixed asset once the construction is finished.
Before you are able to track the costs of your construction in progress you have to ensure that an investment project group is setup that accumulates all costs on balance sheet accounts as illustrated in the next screen-print.
Once your investment project group is setup, you need to create an Investment project…
… that you use for recording all construction costs. In my case, I recorded hour, expense and item costs that add up to a total of 17300 EUR as shown in the next screenshot.
Once your construction project is finished and provided that all costs have been recorded on your project, you can transfer those costs to a fixed asset by using the estimate function.
The first step required in the estimate form is creating an estimate that accumulates all costs recorded. This can be done by selecting the “set cost to complete zero” cost to complete method.
After the estimate is created you can identify the total costs accumulated in the WIP tab of the estimate form. Example:
The next steps required are (a) specifying the fixed asset to which you want to transfer all costs and (b) posting the estimate.
Please note that posting the estimate does not create any ledger transaction and does not transfer any costs to the fixed asset selected. To do the actual transfer of the costs to the fixed asset, you need to eliminate the posted estimate by using the corresponding functionality.
After the elimination is done, you can identify the costs on the fixed asset selected before.
In the example used, the construction started and finished within a single month. If you are working on long-term construction projects and want to update your “construction in progress” fixed asset in the fixed asset module you need to:
- Post the additional costs that arise in the following months as usual,
- Reverse the elimination recorded previously,
- Create and post and additional estimate,
- Eliminate the estimate.
Those steps need to be repeated every month as long as your project runs.
An alternative to reversing and repeating eliminations recorded before, you can separate your investment project into subprojects that are eliminated successively as the construction progresses.
If you are eliminating your construction projects on a regular basis, those costs are included in your fixed asset module and thus in your fixed asset statement.
If, on the other hand, you are not eliminating your project construction costs on a regular basis, all costs are accumulated in WIP (balance sheet) accounts only and are not included in the standard Dynamics AX fixed asset statement. In order to get your fixed asset statement right, you thus need to include the WIP accounts in your fixed asset statement which requires that you either use the Management Reporter for your fixed asset statement (see the previous post) or that implement a system adjustment.
If you are transferring all construction costs initially to a “in construction” fixed asset, you can move all costs from this “in construction” fixed asset to an ordinary fixed asset by using the standard AX fixed asset reclassification functionality. Example:
Thanks for the post .
It would be really great if you would have explain that which Ledger entries effect with accounts name , how it reverse when it transferred to Fixed assets.’
When it comes to project accounting Major confusion is Ledger posting configuraiton as it has the several options .
I request please post such ledger posting option information for all project types as you sound knowledge .
Thanks in advance.
Ludwig Reinhard said:
Hello Lally, I am currently preparing some posts on the ledger integration for projects, not only for “simple” investment projects but also for advanced fixed price projects. You just have to be a bit patient until I get all together for publication :-). Yet, for “simple” investment projects you can probably just start testing and playing around with the Contoso demo data. They are all pre-setup and should at least help you getting the costs transferred to a fixed asset. Regards, Ludwig
Alihussein Noorbhai said:
I just have one observation that perhaps you can take up with Microsoft considering your in depth knowledge of AX. Just as when creating Project Group with the Project Type being Cost, the Journalizing section presets Post Cost – Hours, Post Cost – Expense and Post Cost – Items to Profit and Loss and locks it. Why can’t the same happen when Project Type is selected to be Investment that All the 3 be preset to Balance and be locked? During testing someone – probably myself – inadvertently changes it to P & L for investment project and all hell broke loose !!!
Ludwig Reinhard said:
Hi Alihussein Noorbhai,
A possible reason why users can change the ledger integration for investment projects are situations where you do not know whether costs are allowed to be capitalized right from the beginning. For reasons of prudence and security, some country legislations require that those costs are posted on P&L accounts first. However, I can see your point and it might be great if you could post an idea on the new ideas website that is managed and controlled by Microsoft. Here is the link to this website: https://ideas.dynamics.com/ideas/
When an asset has been created from the project and additional cost to add life to the asset are incurred in a sub project what is the process for eliminating this to an acquisition adjustment or write-up journal?
Ludwig Reinhard said:
Hello Stacy, Just send you an update to your email. The short answer is that this can’t be done in the standard application and you have to use a workaround by making use for example of a bridging ledger account. Best regards, Ludwig