Chapter 8: Internal Cost Project

CHAPTER 8: INTERNAL COST PROJECT

Objectives
The objectives are:

• Provide a Description and Setup of the Three Internal Project Types

• Provide an Example of a Cost Project
• Provide an Example of a Time Project
• Provide an Example of an Investment Project

Introduction
Here we describe the accounting principles involved with operating simple
internal projects in Microsoft Dynamics AX® Project. There are three types of
internal projects. This lesson provides specific examples of using them all.

Microsoft Official Training Materials for Microsoft Dynamics ® 8-1

Your use of this content is subject to your current services agreement
Project Accounting I in Microsoft Dynamics® AX 2009

Internal Projects
Characteristics Internal projects provide management with a planning tool to
structure resource consumption. Examples of internal projects include the
following:

• Preparing advertising brochures

• Time management in connection with creating an employee policy
manual
• Product development

There are unlimited possibilities for using internal projects and company policies
on what to disclose are the only determining factor.

It is not possible to invoice update or record revenues on this project type

because internal projects are only for registering transactions. Instead, they are
used to track internal costs.

In Microsoft Dynamics AX, there are three specific types of internal projects in
addition to the standard internal project.

• Time - Gathers hours without ledger postings. For example, use this
for registering holiday hours.
• Cost - Post all costs expenses and items to a Profit and Loss account
that cannot be capitalized.
• Investment - Uses an estimate system to capitalize the costs of
hours, expenses and items during the project. On a monthly basis,
costs are moved to work-in-progress (WIP) accounts. On
elimination, the WIP value can be posted to a:
o Fixed asset
o Ledger account
o New project as an expense transaction

This table shows how costs for hours, expenses and items post using the three
new project types.

Time Project Cost Project Investment

Project
Hours Costs Registered, not Posted to Profit Posted to WIP
posted. and Loss
Expense Costs No Posting Posted to Profit Posted to WIP
and Loss
Items Costs No Posting Posted to Profit Posted to WIP
and Loss

8-2 Microsoft Official Training Materials for Microsoft Dynamics ®

Your use of this content is subject to your current services agreement
 Chapter 8: Internal Cost Project

Ledger Accounts
Set up the following ledger accounts to run any internal project:

Account Ledger Purpose

Cost Profit and loss Debit costs
Payroll allocation Profit and loss or Balance Credit hour costs (Cost
offset account)
Inventory Issue Profit and loss or Balance Credit item costs (Costs
offset account)

WIP accounts must be set up for Investment projects.

Ledger Principles
When setting up a project group to handle a standard internal project, costs post
to either Balance or Profit and Loss accounts. Hourly costs can post to a ledger
account or not post to the GL. However, the No Ledger option for expenses or
items cannot be selected.

Processing Internal Projects

Posting for the various internal projects works as follows:

• Cost - The system automatically posts the amounts to the profit and
loss accounts set up when posting items, hours and expenses to the
project.
• Time - No hours actually post, instead use them to track hours. For
example, if using a Time project to track holiday hours, employees
must register hours outside the project.
• Investment - Transactions post into a WIP account using the
estimate system. Costs are applied to a ledger account, fixed asset or
a new project at the time of project elimination.

Cost Project Example

Cost projects can be used to track short term internal projects. The following is
an example of a small internal cost project, and the graphic displays the actual
posting on the ledger accounts.

Base the example on the following transactions:

Transaction type Amount

Hour consumption (cost price) 2000
Expenses (cost price) 800
Item consumption (cost price) 1000

Microsoft Official Training Materials for Microsoft Dynamics ® 8-3

Your use of this content is subject to your current services agreement
Project Accounting I in Microsoft Dynamics® AX 2009

Debit Credit
Costs (Hours) 2,000 USD
Costs (Expense) 800 USD
Costs (Item) 1,000 USD
Payroll Allocation 2,000 USD
Expense offset 800 USD
Inventory Issue 1,000 USD

Hour Consumption
Hours on a Cost project post from either an hours journal or the time entry screen
of the Enterprise Portal.

On a standard Cost project, the Cost posts to the GL. However, this can be
altered with a standard internal project group, if necessary.

FIGURE 8.1

To access this click Project, click Project, click Transactions, click Hours, and
then click Voucher to view the voucher.

The payroll costs post to the GL.

8-4 Microsoft Official Training Materials for Microsoft Dynamics ®

Your use of this content is subject to your current services agreement
 Chapter 8: Internal Cost Project

Expense Consumption
Expenses are posted through an expense journal or AP Invoice journal.

FIGURE 8.2

To view the voucher for the transactions click Project, click Project, click
Transactions, click Expense, and then click Voucher.

Item Consumption
Process items similar to other types of projects through the item task button on
the project form or through an item journal. Since this transaction is a purchase
made through a vendor, there is a payables transaction with an offset.

FIGURE 8.3

Invoicing Because this is an internal project, there is no invoicing.

Microsoft Official Training Materials for Microsoft Dynamics ® 8-5

Your use of this content is subject to your current services agreement
Project Accounting I in Microsoft Dynamics® AX 2009

Lab 8.1 - Create a Cost Project

Create a cost project and charge hours to it.

Scenario

The marketing director for Contoso wants to track the costs for a new marketing
campaign. To do this, create a new project to track the internal costs. Then
charge 40 hours of the type Sales for employee 7100 Benjamin Martin.

Challenge Yourself!
Create a new cost project with a Project ID of “Marketing” and a Project Name
of “Marketing Campaign.” Then charge 40 Sales hours to the project.

Need a Little Help?

When creating the project, ensure the project type is Cost.

Step by Step

1. Click Project, and click Project Details. Press CTRL+N to create a

new project.
2. Change the project type to Cost and select Cost for the project group
3. Give the Project a project ID of Marketing and and a project name of
Marketing Campaign.
4. Click Project, select Journals and click Hours. Click the Create
New button to create a new Hours journal.
5. Enter 40 sales hours for employee 7100.
6. Click Post to post the journal.

8-6 Microsoft Official Training Materials for Microsoft Dynamics ®

Your use of this content is subject to your current services agreement
 Chapter 8: Internal Cost Project

Time Project Example

The following example shows a time project created to track sick days among
employees. In one week, five employees use a sick day.

Hour Consumption
Time projects are used to track time associated with a specific activity. They do
not post to the ledger. An example would be creating a project to track sick time
for employees. Time projects can only have hour transactions. Use an hours
journal to register these hours to the project.

As soon as these hours are registered they appear in the project transactions, but
they do not have a voucher transaction. Employees must charge hours to the
appropriate category outside the project to get the hours posted.

Invoicing

There is no invoicing of a time project because it is an internal project.

Investment Project Example

The investment project is typically used for long term internal projects in which
the costs need to be capitalized. An example of an investment project would be a
long term research and development project in which the cost incurred is meant
to be capitalized into a fixed asset.

The investment project uses advanced project functionality like the estimate
project.

Summary
Here we outlined the use of the three internal project types:

• Cost
• Time
• Investment

These are to be used when a company wants to track costs of any project that is
not being billed to a customer. Now that the internal projects have been covered,
next we will discuss the use of a basic time and material project.

Microsoft Official Training Materials for Microsoft Dynamics ® 8-7

Your use of this content is subject to your current services agreement
Project Accounting I in Microsoft Dynamics® AX 2009

Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from this
chapter:

1.

2.

3.

8-8 Microsoft Official Training Materials for Microsoft Dynamics ®

Your use of this content is subject to your current services agreement