SUMMARY: This best practice guide explains how to get started using media accruals and how to audit the media accrual accounts for errors.
The Media Accrual feature is designed to automatically “match” costs against billed media orders in the general ledger, in the period of the billing. It does this by automatically accruing costs based on the net amounts on the orders being billed, then reversing these accruals in the period in which the media A/P invoice is entered. Generally accepted accounting principles require “matching” related billings and costs to prevent an over or under statement of income in any given period.
For more information about matching all production costs and billings in C&P X, not only media billings and costs, please refer to the Work in Progress FAQ on this topic.
As well, there is an FAQ on the Media Accrual feature that will cover some of the information discussed below, as well as additional information about media accruals.
Setting Up Media Accruals
First, create two G/L account numbers that will be only used by the media accrual feature. Do not use existing accounts that may receive activity from other sources. To create these accounts, go to Setup > Chart of Accounts. Add a liability account (this account will be credited during the accrual and debited during the reversal) and a job cost account (this account will be debited during the accural and credited during the reversal). Name them in such a way that they will be easily identified as the media accrual accounts. A common naming of these accounts is to name the liability account “Media WIP” and the job cost account “Accrued Media Costs”.
Second, enter these account numbers in Preferences. Go to Setup > Preferences > G/L Accounts. Enter the liability account number in the field for "Media Accruals". Enter the job cost account number in the field for "Media Cost". This tells Clients & Profits X what accounts to use when creating and reversing media accrual entries.
You are ready to turn on the automatic media accrual feature. To do this, go to Preferences > Accounting. Under the Options section, select "Automatically post WIP accrual JEs for media”. Once this option is selected, media accrual entries will be automatically created in the general ledger when Media Billings are posted and reversed when Media Accrual A/P invoices are posted.
How it works
When a media order is billed, either by Pre-Billing it from the order itselfor by entering a Media Billing in Accounts Receivable, a special journal entry is generated in the general ledger when the billing is posted. The reference number of this journal entry will be WIP# followed by the A/R invoice number. For example, if you created a media billing using A/R invoice number 1000 the invoice will post with reference number AR#1000 as normal, but an additional journal entry will be generated with reference number WIP#1000. This journal entry will debit the Accrued Media Cost job cost account and credit the Media WIP liability account. The debit and credit amounts on WIP#1000 will be equal to the net amount of the billed order (which in theory should equal the net amount of the media A/P invoice when it arrives) and have the same accounting period as the media billing, thus matching the billing and costs in the same accounting period per generally accepted accounting principles.
The WIP# entry is reversed when a Media Accrual A/P invoice is entered referencing the billed media order. Because C&P X tracks on which A/R invoic e each media order line item was billed (double click a n order’s line item to see this), when a Media Accrual A/P invoice is added against a billed order line item and posted itknows which WIP# journal entry to reverse. For example, when the Media Accrual A/P invoice is posted it will post a normal AP# journal entry into the general ledger , in addition it will append the WIP# journal entry with a reversing entry, but this time into the period of the A/P invoice. This is the difference between a Job Cost A/P invoice and a Media Accrual A/P invoice, the Media Accrual A/P invoice makes the reversing entry when it’s posted. Therefore, only use Media Accrual A/P invoices if you have the media accrual feature turned on and you’r e entering an A/P invoice against an order that was billed after the feature was turned on. From an accounting point of view, this does the following: Income in the period of the A/P invoice is not changed, since the Accrued Media Cost account is credited during the reversal and the real Media Cost account per the A/P invoice is debited. As well, the WIP# reference number now has offsetting entries that can be cleared during a G/L reconciliation (see below) which is one way to audit the media accruals.
TIP: One G/L reference number can have activity in multiple accounting periods. To see this, click on a journal entry line item and note the period at the top of the window. For the WIP# journal entries you’ll notice the period of the accrual entries is the same as the period of the A/R invoice, but the period of the reversal entries on the WIP# journal entry is the same as the period of the A/P invoice.
Example of the Workflow and Journal Entries
1. Insertion Order #1000, line 1, is entered for a net amount of $850.00 and a billable amount of $1000.00.
2. Insertion Order #1000 is billed on A/R# 2000 in period 8. The A/R invoice is posted to AR#2000 in the general ledger with a debit to Accounts Receivable for $1,000 and a credit to Media Income for $1,000, as normal. The accrual entry is simultaneously posted to WIP#2000 with a debit to the Accrued Media Costs account for $850.00 (the net amount of the order) and a credit to the Media WIP account for $850.00, also into period 8.
3. Media Accrual A/P Invoice #3000 is entered against insertion order #1000 into period 9 with a net amount of $850 and a gross amount of $1,000, per the order. The Media Accrual A/P invoice is posted to AP#3000 in the general ledger with a credit to Accounts Payable for $850 and a debit the Print Media Cost account for $850, as normal. When postiing the A/P invoice, it will automatically reverse WIP#2000 debiting the Media WIP account for $850.00 and crediting the Accrued Media Costs account for $850.00, also into period 9. These reversing entries are added onto the bottom of WIP#2000 so that the original accrual and the reversal all show up under the same reference number in the general ledger. Note that there are offsetting debits and credits to job cost accounts in period 9 when the Media Accrual A/P invoice was posted, so there is no impact to income in period 9. This is becaue the cost was originally recognized via the accrual (Step 2) into period 8.
Transitioning into Using the Media Accrual Feature
Once the media accrual feature is turned on you must begin billing your media orders either from the order itself or via a Media Billing in Account Receivable. No longer wait for the media A/P invoice to arrive then progress bill the job ticket for this cost. Then you’ll enter Media Accrual A/P invoices against these billed orders when the media vendor’s invoice arrives. Maintaining this order of workflow is important to ensure both the accrual and reversing entries are properly made.
It is possible, especially during transition into using this feature, to have the accrual entry made but not the reversing entry, and vice versa, the reversing entry can be made but not the accrual entry. For example, if you try to enter a Media Accrual A/P invoice against an order that has not been billed the system will notify you that the order has not been billed and you will be told to enter a Job Cost invoice instead. If you do this, do not later bill this order via a Media Billing, otherwise it will create the accrual entry, but the reversing entry will not be made (since the A/P invoice was already added as a Job Cost invoice). Likewise, if you have media orders that were billed before the media accrual feature was turned on do not enter a Media Accrual A/P invoice against these billed orders otherwise when posting the A/P invoice it will make the reversing entry, but the original accrual entry was never make (since the orders were billed before the feature was turned on). Just be aware of these two conditions when transitioning into using the automatic media accrual feature. If you make a mistake, it can be caught via the auditing steps below , then fixed via manual journal entries.
Be aware that the entire amount of an order line is reversed when a Media Accrual A/P invoice is posted against it, regardless if the amount on the A/P invoice matches the amount of the order ‘s line. This can happen if the media vendor did a partial run, and then later sends you a partial A/P invoice tha t ran fewer placements or spots than what the order specified. Therefore, if a second A/P invoice is sent from the vendor that references this same order line, you will not be able to reference this order line again, since C&P X checks to make sure the same order line is not referenced twice on Media Accrual A/P invoices to prevent double reversing the same line item.
Auditing Media Accruals
TIP: If you need to add multiple vendor invoices to a single media order line, enter the first A/P for the actual amount of the vendor invoice as a Media Accrual A/P, which will then make the reversing entries to the corresponding WIP# journal entry. Then enter the following A/P invoices for that media order line as Job Cost A/P’s. Job Cost A/P’s do not make the reversing entries.
The purpose of auditing media accruals is to ensure the accuracy of every WIP# journal entry. This can be done by comparing the total of all open billed media orders (orders that have been billed to the client but have not yet been invoiced by the vendor) to the ending balance of the Media WIP liability account (see how to print these two reports below) These two totals should agree, because in theory the only media orders that would create a balance in the Media WIP liability account are those that have yet to be reversed (netted to zero) by a media accrual A/P invoice. If the totals do not agree then there are one or more problem WIP# journal entries that need to be manually fixed.
Compare the amounts from the following two reports:
Media Accrual/Open Orders WIP Summary: This report is located in Accounts Receivable > Print A/R Reports > Summaries. Choose All Periods for a wide enough date range to capture all billed orders that have yet to receive a vendor A/P invoice. An order is closed when an A/P is applied against it for the full amount of the order. This report lists billed order line items that do not reference an A/P invoice. The order lines will be listed by the A/R invoice number on which they were billed and subtotaled based on the order’s net amount. Write down the total of this report.
TIP: The Media Accrual/Open Orders WIP Summary report has a pop-up option to “Show Closed & Billed Orders”. Clicking ‘Yes’ to this option will include media orders that were billed but manually closed (since no A/P invoice is listed on the billed order’s line items it must have been manually closed). What this means is the accrual entry would have been made, but the reversing entry was not made (since a Media Accrual A/P invoice was never applied against it to reverse the accrual). You may find you need to manually reverse those accrual entries made to the additional orders that show up on this report when clicking ‘Yes’ to the prompt (if they were billed after the media accrual feature was turned on).
Balance Sheet or Trial Balance: Print your Balance Sheet or Trial Balance for the latest period in your database. The Media WIP liability account should match the total of the WIP Summary report above.
TIP: Some agencies utilize the G/L Reconciliation feature. This is located under General Ledger > Edit > G/LTools > G/L Reconcilation. This feature allows you to clear the debits and credits in an account. Because WIP# refernce numbers will have offsetting debits and credits to the Media WIP liability account ( and the Accrued Media Costs account), you can perform the G/L Reconciliation on the Media WIP liability account and check off the credit (from the accrual) and the debit (from the reversal) to reconcile this account. Those WIP# journal entries that don’t clear over time may be problem entries that need to be manually fixed.
If the two reports do not agree, then you’ll need to find and fix the problem WIP# journal entries through the following steps:
Print the G/L Media Reconciliation report. This report is located in General Ledger > Print G/L Reports > Analysis. Enter the Media WIP liability account as the ‘from’ and ‘to’ account, for All Periods, using the same date range as the Media Accrual/Open Orders WIP Summary above. This report is sorted by the WIP# journal entry numbers (so you potentially will see activity from multiple periods under one number), and only lists WIP# journal entries that have a balance (if the debits and credits net to zero, it won’t print on this report). By listing only the entries with a balance to the Media WIP liability account you can get an item by item balance that should equal the total for the corresponding A/R invoice number on the Media Accrual/Open Orders WIP Summary. In other words, the subtotal for each A/R invoice on the Media Accrual/Open Orders WIP Summary report should match the balance of the Media WIP liability account on the corresponding WIP# journal entry (which will be WIP# followed by the A/R invoice number). Note items that are different or missing from one of the reports. These are the items that need to be researched and corrected in order to make the Media Accrual/Open Orders WIP Summary report agree to the Media WIP liability account balance.
TIP: When adding a journal entry, you can reference an already existing journal entry number (in this case a WIP# number). It will append to the bottom of this journal entry. Then post all unposted journal entries to post only these additional lines that were added to an existing journal entry. Contact the Clients & Profits helpdesk if you need additional assistance fixing problem WIP# journal entries.
Below are two principles that will help you understand the content of the Appendix. These principles are already mentioned directly or indirectly above, just restated here for convenience:
Orders will ONLY show up on the Media Accrual/Open Orders WIP Summary report IF an order’s line items reference an A/R invoice number but do not reference an A/P invoice number. This can be seen by double clicking on an order’s line numbers to see which A/R and A/P invoices are being referenced. If the “Billed on A/R#” field has a value, and the “Invoiced on” field is empty, then this order will show up on the report. Problems in his are normally system error releated (see Issues 1, 2 & second part of 4 below)
A WIP# reference number should net to zero (or balance) if the media accrual feature is turned on, then an order is media billed and the invoice is posted (creating the accrual entry), then a Media Accrual A/P invoice is entered and posted for this order (creating the reversing entry). This will remove it from the G/L Media Reconciliation report. Issues in this area are normally user error related (see Issue 3 & 4 below).
Bellow are issues to be aware of that can cause the Media Accrual /Open Orders WIP Summary report total not to agree to the Media WIP liability account balance.
The Media Accrual/Open Orders WIP Summary report lists a billed order that was applied to a Media Accrual A/P invoice or does not list a billed order that hasn’t had a Media Accrual A/P invoice applied against it.
Because referencing an A/P invoice on the order line items is critical to whether the order shows up on this report or not per the principles above, this field needs to properly reflect the A/P invoices in the system that were applied against this order. Sometimes a system error is experienced where when posting a Media Accrual A/P invoice it doesn’t properly update the order line item with the A/P invoice number, and vice versa, if the A/P invoice was unposted and deleted it didn’t properly remove the A/P invoice number from the order line item. Both situations will cause an inaccurate Media Accrual/Open Orders WIP Summary report total by improperly including or excluding an order on this report. To determine if a system error happened, go to Media > Insertion/Broadcast/Interactive/Outdoor Orders and find the the problem order. Double click an order line number and confirm that the “Invoiced on" field is not accurate. If so, go to Setup > Verify/Recover and verify/recover “Order balances” for that order number. This will update the “Invoiced on” field by either adding or removing an A/P invoice number in this field depending on if an A/P invoice exists or not that references this order line number.
The Media Accrual/Open Orders WIP Summary report does not list an order that was only billed (no A/P yet) or lists an order that was not billed (again, no A/P yet).
Because referencing an A/R invoice on the order line items is critical to whether the order shows up on this report or not per the principles above, this field needs to properly reflect the A/R invoices in the system that billed this order. This is the same problem from a technical point of view as issue 1 above where a system error can cause the “Billed on A/R#” field not to be accurate (instead of the “Invoiced on” field as in Issue 1). To determine if a system error happened, go to Media > Insertion/Broadcast/Interactive/Outdoor Orders and find the problem order. Double click an order line number and confirm that the "Billed on AR#" field is not accurate. If so, go to Setup > Utilities > Verify/Recover and verify/recover “Order Balances” for that order number. This will update the “Billed on AR#” field by either adding or removing an A/R invoice number in this field depending on if an A/R invoice exists or not that references this order line number.
The G/L Media Reconciliation report lists an out of balance WIP# journal entry for an order that does not appear on the Media Accrual/Open Orders WIP Summary report.
Per the principles above, an order will not show up on the Media Accrual/Open Orders WIP Summary report if both an A/R and A/P number are referenced in the line items of the order. There are a few user errors that can cause this to happen and create out of balance WIP# journal entries at the same time.
One is where you’ll see the reversing entries, but not the accrual entries. This is typical when the media accrual feature was turned on after an order was already media billed, then a Media Accrual A/P invoice was accidentally entered against this order instead of a Job Cost A/P invoice. Only orders that were media billed after the media accrual feature was turned on should have a Media Accrual A/P invoice added against the order, those billed before the feature was turned on should have Job Cost A/P invoices applied against them.
Another is where you’ll see the accrual entries, but not the reversing entries. This can happen when a Job Cost A/P invoice, instead of a Media Accrual A/P invoice, was applied against a billed order. Go to Media > Insertion/Broadcast/Interactive/Outdoor Orders and find the order. Double click the order line number to determine the A/P number that references this order. Then find the invoice in Accounts Payable to confirm that it is a Job Cost invoice (when it should have been a Media Accrual A/P invoice). Job Cost invoices will not automatically make the reversing WIP entries. You will need to manually reverse the WIP# journal entry with a debit to the Media WIP liability account and a credit to the Accrued Media Costs account in the correct period. Use the actual WIP# reference number for the journal entry number so that the entries append to the bottom of this journal entry. Then post all unposted JE’s to post these new journal entry lines.
Not as common is that the media accrual feature was accidentally turned off. While it was turned off, any media billings would not have made accrual entries. You’ll normally know this happened because when a user goes to add a Media Accrual A/P invoice they’ll receive a screen prompt telling them the media accrual feature is turned off. This is a tip off that you may have some media billings that did not have the accrual entries made. You’ll then need to make the accrual entries manually to the WIP# journal entry with a debit to the Accrued Media Costs account and a credit to the Media WIP account. If the feature was turned off, then back on, before a Media Accrual A/P invoice was added to tip you off that it was turned off, you still could have some billed orders without the accrual entries being made, again, make the se accrual entries manually.
And last, you may have some billed orders that were manually closed (vs. being closed because an A/P invoice for the full amount of the order was applied against the order). These will not show up on the Media Accrual/Open Orders WIP Summary report if you clicked ‘No’ to the prompt to included ‘Billed and Closed’ orders on this report. Print this report by clicking ‘Yes’ then ‘No’ to this prompt to determine which orders were Billed, then closed without an A/P invoice being applied against the order. Fixing this depends on the situation. If it was accidentally closed, then reopen the order. If the billing was paid by the client and will just be applied against future billing for this client, then you’ll need to manually reverse the accrual entries since a media vendor A/P invoice will never arrive to reverse them automatically.
The G/L Media Reconciliation report does not list a n out of balance WIP journal entry for an order showing up on the Media Accrual/Open Orders WIP Summary report.
Per the principles above, an order showing up on the Media Accrual/Open Orders WIP Summary has only been billed, but no A/P invoice has been applied against it, so the G/L Media reconciliation should also list an out of balance WIP# journal entry with only the accrual entries at this time, but in this case it’s not.
This is the typical situation transitioning into using the media accrual feature. Normally, you’ll have some billed orders that had yet to receive a media vendor A/P invoice. These billed orders will list on the report, but of course, since they were billed prior to turning on the media accrual feature, they won’t have an accrual entry. These eventually will come off the report one the vendor invoice is applied against these orders, just make sure a Job Cost A/P invoice is applied against them (so that reversing entries are not made).
In very rare situations, a system error can happen where the WIP# journal entry simply is not made into the general ledger when a media billing is posted (after the media accrual feature is turned on). In this case, you’ll need to make it manually adding a journal entry with a reference number of WIP# followed by the A/R invoice number into the period of the A/R invoice and a debit to the Accrued Media Costs account and a credit to the Media WIP account. The reversing entries will append to this journal entry automatically, since they’ll see which A/R invoice the order lines were billed on and when the Media Accrual A/P invoice is posted it will apply the reversing entries to this journal entry number.