Back to V300: Project Accounting for Construction

Lesson 4: Correcting Bills for Subcontracts

Part 1: Project Commitments

In this lesson, you will learn about correcting of bills that have been prepared for subcontracts.

Correction of a Bill for a Subcontract: General Information

In most cases, a subcontract is considered completed when the services have been provided and the corresponding accounts payable bill has been released to adjust the outstanding balance of the vendor (subcontractor). If the subcontract requires any changes, you may want to correct billed amounts and quantities in the subcontract fully or partially. Because a released accounts payable bill cannot be edited or deleted, to correct the billed amount and billed quantity, you need to process a debit adjustment that decreases the accounts payable balance.

Learning Objectives

In this lesson, you will learn how to do the following:

Create a debit adjustment for an AP bill prepared for a subcontract
Release the debit adjustment
Review how the processed debit adjustment aﬀects the vendor balance
Review the GL and project transactions generated on release of a debit adjustment
Review how the project budget is updated on release of the debit adjustment

Applicable Scenarios

You create a debit adjustment for a bill prepared for a subcontract to decrease the amount you owe to a vendor according to this subcontract.

Debit Adjustment Processing

To decrease the full amount of a bill created for a subcontract, you can reverse the bill by clicking Reverse on the More menu of the Bills and Adjustments (AP301000) form. When you reverse the bill, the system automatically creates a debit adjustment with the same details. To partially decrease the billed amount or billed quantity for a subcontract, you manually create a debit adjustment and specify the needed amount and quantity in the lines that are linked to the corresponding subcontract. You create a debit adjustment on the Bills and Adjustments form. In the Summary area of the form, you specify such settings as the vendor, the vendor location, and the currency used for the transaction. Then you add the subcontract lines for which you need to decrease the billed amount or billed quantity (or both) by clicking the Add Subcontract or Add Subcontract Line button on the table toolbar of the Details tab of the Bills and Adjustments form. In the dialog box that opens, you select the particular subcontract or subcontract lines with a nonzero billed amount or quantity to be added to the debit adjustment. In each subcontract line that you add to the debit adjustment by using the Add Subcontract or Add Subcontract Line dialog box, the system populates the column settings as follows:

The project budget key (Project, Project Task, Inventory ID, and Cost Code, if applicable) is copied from the corresponding subcontract line. The specified project and project task cannot be changed in the debit adjustment line linked to a subcontract line.
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               If the non-project code is specified in a debit adjustment line linked to a subcontract, you can
               change the non-project code to some particular project and specify a project task in this line.
```
The account, subaccount, and tax category are copied from the corresponding subcontract line; you can change these settings, if needed. In the generated project transaction, the system will specify the account group that is linked to the account specified in the debit adjustment line.
The extended cost of the line (Ext. Cost) is copied from the Billed Amount of the subcontract line. You could leave it as is to adjust the full billed amount, or change to adjust the billed amount partially.
The unit cost and quantity are set to zero; you can correct these values, if needed. The quantity in a debit adjustment line cannot exceed the billed quantity in the corresponding subcontract line.
The line discount (Discount Percent and Discount Amount) is set to zero.
The retainage percent and retainage amount are set to zero.
The reference number of the corresponding subcontract is shown in the Subcontract Nbr. column. Aer you have specified the details of the debit adjustment, you remove it from hold by clicking Remove Hold on the form toolbar, and release by clicking Release on the form toolbar. On release of the debit adjustment, a batch of GL transactions is generated to update the account balances in the general ledger; on release of this batch, the system generates the corresponding project transaction to update the values of the project budget. Also, the system automatically updates the billed amount and billed quantity in the lines of the subcontract for which the debit adjustment has been prepared. If a subcontract line had the Closed and Completed check boxes selected at the time of its addition to the debit adjustment, on release of this debit adjustment, the system clears the check boxes in the subcontract line. The clearing of both check boxes indicates that the line is not billed in full now. The released debit adjustment appears on the Checks and Payments (AP302000) form and can be applied to any bills and credit adjustments of the same vendor. For more information on applying debit adjustments, see Debit and Credit Adjustments: General Information.
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        Debit adjustments are always applied to the balance of the main vendor of a bill, which is the same
        vendor as specified in this debit adjustment. That is, if a debit adjustment is prepared for an AP bill
        that has joint payee balances specified, the Amount Paid that you specify on the Documents to
        Apply tab of the Checks and Payments cannot exceed the amount of the bill minus the joint payee
        amounts.
```
Along with correcting billed amounts and quantities, you may need to process a change order for a subcontract to decrease its total amount and quantity. For more information on this, see Change Orders for Commitments: General Information.

Workflow of the Processing of a Debit Adjustment for a Subcontract

The following diagram represents the general workflow of the processing of a debit adjustment for a subcontract. Correction of a Bill for a Subcontract: Process Activity

This activity will walk you through the process of correcting an AP bill for a subcontract.

Story

Suppose that on March 1, 2025, the ToadGreen company hired a subcontractor, Harmon Installation, to build an entrance in the hotel that ToadGreen is building. According to the terms of the subcontract, $10,000 will be paid to the subcontractor for this work, and 10% of each payment will be withheld by the company until the related work is finished. On March 25, 2025, ToadGreen received the first bill for the completed work from the subcontractor. A ToadGreen project accountant entered and released a bill in the amount of $7,000, which includes the $700 retainage amount. Then suppose that the project accountant realized that the bill was entered incorrectly, and the billed amount must be $6,000 for the subcontract. Acting as this project accountant, you will correct the billed amount and quantity in the subcontract by processing the debit adjustment.

Configuration Overview

In the U100 dataset, the following tasks have been performed to support this activity:

On the Enable/Disable Features (CS100000), the Construction and Retainage Support features have been enabled.
On the Vendors (AP303000) form, the HARMINT (Harmon Installation) vendor has been defined. On the Financial tab, the Apply Retainage check box is selected for this vendor.
On the Non-Stock Items (IN202000) form, the LABOR non-stock item has been created.
On the Projects (PM301000) form, the HOTEL project has been created with multiple project tasks.
On the Subcontracts (SC301000) form, the subcontract for the HARMINT vendor in the amount of $10,000.00 has been entered.
On the Bills and Adjustments (AP301000) form, the partial bill for the HARMINT vendor in the amount of $7,000.00 has been entered and released; the retainage amount $700 is calculated for the bill (which is shown in the Original Retainage box on the Retainage tab).

Process Overview

On the Bills and Adjustments (AP301000) form, you will create a debit adjustment and add the line of the subcontract to this adjustment. Then you will specify the correction amount and release the adjustment. Finally, you will review the billed amount and quantity in the subcontract to make sure that they have been updated.

System Preparation

To prepare to perform the instructions of the activity, in the info area, in the upper-right corner of the top pane of the Acumatica ERP screen, click the Business Date menu button, and select 3/25/2025 on the calendar.

Step 1: Creating a Debit Adjustment You will first create the debit adjustment that will correct the AP bill for the subcontract. Do the following:

On the Bills and Adjustments (AP301000) form, add a new record.
In the Summary area, specify the following settings:

Type: Debit Adj.
Vendor: HARMINT
Date: 3/25/2025
Description: Adjusting overbilled contractor

On the form toolbar, click Save.

Step 2: Adding the Subcontract Line to the Document To add a line of the subcontract to be corrected, while you are still reviewing the debit adjustment on the Bills and Adjustments (AP301000) form, do the following:

On the table toolbar of the Details tab, click Add Subcontract. The Add Subcontract dialog box opens.
In the dialog box, find the line dated 3/1/2025 with the HOTEL project and $10,000 subcontract total. Notice that the Total Billed Amount for the subcontract is $7,000.
Select the unlabeled check box in the line, and click Add & Close. The system adds the subcontract line to the debit adjustment and closes the dialog box. In the Subcontract Nbr. column of the line added to the document, notice that the system has inserted the reference number of the subcontract for which the adjustment is being created.
In the line, change the Quantity to 8 and the Unit Cost to 125. The Ext. Cost in the line is $1,000 (which is the amount by which the billed amount will be adjusted). The retainage percent and retainage amount in the line are zero because the processed debit adjustment does not change the retained amounts.
On the form toolbar, click Save.

Step 3: Releasing the Debit Adjustment and Reviewing the Result To release the debit adjustment and see how this aﬀects the subcontract, do the following:

On the form toolbar, click Remove Hold. The system assigns the debit adjustment the Balanced status.
On the form toolbar, click Release to release the debit adjustment.
On the Subcontracts (SC301000) form, open the subcontract for the HARMINT vendor, for which you have processed the debit adjustment.
On the Details tab, review the billed amount and quantity in the subcontract line, and make sure they have been adjusted for the subcontract, as shown in the following screenshot.
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   Figure: The adjusted amount and quantity in the subcontract line
```
You have corrected the bill for the subcontract. You can now apply the debit adjustment to the AP bill to finish the correction process.

Correction of a Bill for a Subcontract: Generated Transactions

To correct billed amounts and quantities for a subcontract, you create and process a debit adjustment to decrease the balance of a vendor in the system. When the debit adjustment is released, the system generates the transactions and updates the project budget as described in the following sections.

General Ledger Transactions Generated on Debit Adjustment Release

On release of a debit adjustment with one subcontract line, a batch of the following general ledger transactions is generated.

Account                          Project and Project Task     Debit Amount           Credit Amount

Accounts Payable account         X (Non-project code)         Correction amount      0.00

Expense account                  Project and project task     0.00                   Correction amount
                                 in the subcontract line

The batch created on release of the debit adjustment is numbered in accordance with the numbering sequence selected in the Batch Numbering Sequence box on the Accounts Payable Preferences (AP101000) form. The batch number is specified on the Financial tab of the Bills and Adjustments (AP301000) form.

Project Transaction Generated on Debit Adjustment Release

On release of a batch created on release of the debit adjustment, the system generates the project transaction shown in the following table.

Project and Project      Account Group      Cost Code (if     Inventory ID       Debit Account      Amount
Task                                        applicable)

Project and project      Account group      Cost code in      Non-stock item     Expense ac-        –(Amount)
task in the subcon-      mapped to Ex-      the subcon-       in the subcon-     count in the GL
tract line               pense account      tract line        tract line         transaction

You can review the created project transaction on the Project Transaction Details (PM401000) form. In the Selection area of this form, you select the project in the Project box. In the table, you can find the project transaction with the Debit Adjustment type in the Orig. Doc. Type column and the reference number of the debit adjustment in the Orig. Doc. Nbr. column.

Update of the Project Budget Lines

On release of the debit adjustment created for the subcontract, the system updates the corresponding project budget values as follows in the columns on the Cost Budget tab of the Projects (PM301000) form:

Committed Invoiced Quantity is reduced by the quantity in the debit adjustment line.
Committed Invoiced Amount is reduced by the amount in the debit adjustment line.
Committed Open Quantity is increased by the quantity in the debit adjustment line.
Committed Open Amount is increased by the quantity in the debit adjustment line.
Actual Quantity is reduced by the quantity in the debit adjustment line.
Actual Amount is reduced by the amount in the debit adjustment line.
Performance (%) is recalculated based on the updated amounts and quantities.