Month-end accrual for engines in the shop
At month end an engine in the shop has consumed cost that no invoice shows yet. This build uses an invented fleet. It computes the accrual engine by engine, shows what changes it, and rolls the balance forward.
What this shows
- Percent complete, estimate, invoiced to date and the resulting accrual, engine by engine
- What changes the accrual: a revised estimate, a new work finding, a vendor credit
- A roll-forward from opening to closing accrual
- A negative result shown as a prepayment instead of hidden
How I use it
- Booking cost in the month it is incurred rather than the month it is billed
- Explaining a swing in the accrual from one month to the next
- Checking a vendor's progress claim against the estimate
Explore the model below. It uses an invented company and invented numbers.
Explore the model
Illustrative model · Synthetic dataWide tables scroll sideways: swipe inside a table to see every column.
Sample build: month-end accrual for engines in the shop
An invented airline has six engines at three repair vendors. At month end each engine has used up cost that no invoice shows yet. The accrual is percent complete times the total estimate, less what the vendor has invoiced. If the answer is below zero, the vendor has billed ahead of the work, and the build shows a prepayment instead of hiding it.
Invented airline, vendors and figures for illustration. Not any company's data.
What to try
- With ESN 1103 selected, drag its invoices received slider down. The prepayment shrinks, then turns into an accrual.
- Open the "What changes it" tab and switch on the new work found. The prepayment on ESN 1103 shrinks because part of the extra work is already done.
- In the same tab, point the vendor credit at ESN 1104 and raise it until that engine goes below zero. It becomes a prepayment and every check still passes.
Accrued liability
$920,000
Cost incurred that no invoice shows yet
Prepayments
$160,000
1 engine billed ahead of the work
Net accrual
$760,000
Down $75,000 from the last month end
Progress claims to check
2 of 6
Vendor progress is more than 15 points from the share of planned days used
For each engine, cost incurred is percent complete times the total estimate. The accrual is cost incurred less the invoices received so far. Accrued cost is work done with no invoice yet. A prepayment is the reverse: the vendor has invoiced ahead of the work. The two are shown apart and never netted inside an engine. When new work or a credit changes the estimate, percent complete is restated so that the formula still holds.
Month-end accrual by engine. Select an engine to see the working.
| Engine | Complete | Estimate | Cost incurred | Invoiced | Accrued | Prepaid |
|---|---|---|---|---|---|---|
| Vendor A, full restoration$180,000 accrued | 65.0% | $3,200,000 | $2,080,000 | $1,900,000 | $180,000 | none |
| Vendor A, heavy$320,000 accrued | 55.0% | $2,400,000 | $1,320,000 | $1,000,000 | $320,000 | none |
| PrepaymentCheck progressVendor B, heavy$160,000 prepayment | 80.0% | $2,800,000 | $2,240,000 | $2,400,000 | none | $160,000 |
| Vendor B, light$180,000 accrued | 40.0% | $1,200,000 | $480,000 | $300,000 | $180,000 | none |
| Check progressVendor C, full restoration$180,000 accrued | 30.0% | $3,600,000 | $1,080,000 | $900,000 | $180,000 | none |
| Vendor C, light$60,000 accrued | 100.0% | $1,500,000 | $1,500,000 | $1,440,000 | $60,000 | none |
| Total, 6 engines | 59.2% | $14,700,000 | $8,700,000 | $7,940,000 | $920,000 | $160,000 |
Bars below the line are prepayments. The table above carries the same numbers.
Working for ESN 1103
Vendor B, heavy
80.0% complete of a $2,800,000 estimate is $2,240,000 of cost incurred. Invoices received to date are $2,400,000, so $160,000 was billed ahead of the work. That is a prepayment, not a negative accrual.
Day 55 of 100 planned, so 55.0% of the time is used. The vendor reports 80.0% complete, which is ahead of the clock by 25.0 points. Ask for support before booking it.
Three things move the accrual between one month end and the next. Switch each one on to see what it does to the engine it applies to and to the fleet. The size and the engine can be changed first, and the effect shown on each card updates as you go.
Revised estimate
The vendor raises its quote on the scope already agreed, for example because parts cost more.
Effect on the accrual if switched on
+$124,800
- Estimate on ESN 1101: $3,200,000 to $3,392,000
- Percent complete: 65.0% to 65.0%
- Position on ESN 1101: $180,000 accrued to $304,800 accrued
The vendor raises the estimate on ESN 1101 by 6.0%, which adds $192,000. The work already done costs more too, so 65.0% of the increase, $124,800, lands in the accrual this month.
New work found
Teardown shows extra work that was not in the estimate. Some of it may already be done.
Effect on the accrual if switched on
+$100,000
- Estimate on ESN 1103: $2,800,000 to $3,050,000
- Percent complete: 80.0% to 76.7%
- Position on ESN 1103: $160,000 prepayment to $60,000 prepayment
Teardown finds extra work on ESN 1103 worth $250,000. 40.0% of it is already done, so $100,000 is accrued now and the other $150,000 stays in the estimate for later months.
Vendor credit
The vendor agrees a credit for work already done, such as a part scrapped under warranty. The credit memo has not been posted yet.
Effect on the accrual if switched on
-$90,000
- Estimate on ESN 1102: $2,400,000 to $2,310,000
- Percent complete: 55.0% to 53.2%
- Position on ESN 1102: $320,000 accrued to $230,000 accrued
Vendor A agrees a credit of $90,000 on ESN 1102 for work already done. It lowers cost incurred by the full amount until the credit memo is posted. Then invoices fall by the same amount and the accrual returns.
The three changes as they stand in the numbers
| Change | Engine | State | Estimate | Accrual |
|---|---|---|---|---|
| Revised estimate | ESN 1101 | Off | $0 | $0 |
| New work found | ESN 1103 | Off | $0 | $0 |
| Vendor credit | ESN 1102 | Off | $0 | $0 |
| Net accrual before these changes | $760,000 | |||
| Net accrual now | $760,000 |
The closing accrual is the opening accrual, plus the cost added this month, less the invoices received this month. Cost added is the work done in the month plus any change switched on in the other tab. An invoice does not add cost. It clears an accrual that was already booked.
Fleet roll-forward for the month
| Step | Amount |
|---|---|
| Opening accrual, last month end | $835,000 |
| Work done this month on the opening estimates | +$4,065,000 |
| Revised estimate, catch-up on work done | $0 |
| New work found, already done | $0 |
| Vendor credit agreed | $0 |
| Cost added this month | $4,065,000 |
| Invoices received this month | -$4,140,000 |
| Closing accrual, net | $760,000 |
| Of which accrued liability | +$920,000 |
| Of which prepayments | -$160,000 |
Roll-forward by engine. A negative closing figure is a prepayment.
| Engine | Opening | Added | Invoices received | Closing |
|---|---|---|---|---|
| ESN 1101 | $320,000 | +$960,000 | -$1,100,000 | $180,000 |
| ESN 1102 | -$120,000 | +$840,000 | -$400,000 | $320,000 |
| ESN 1103 | $400,000 | +$840,000 | -$1,400,000 | Prepayment-$160,000 |
| ESN 1104 | $0 | +$480,000 | -$300,000 | $180,000 |
| ESN 1105 | -$40,000 | +$720,000 | -$500,000 | $180,000 |
| ESN 1106 | $275,000 | +$225,000 | -$440,000 | $60,000 |
| Total | $835,000 | +$4,065,000 | -$4,140,000 | $760,000 |
Checks on this month end
- PassOpening plus cost added, less invoices received, equals the closing accrual for the fleet
- PassThe same roll-forward holds for each engine
- PassEngine figures add up to the fleet totals
- PassAccrued liability less prepayments equals the net accrual
- PassEach accrual equals percent complete times the estimate, less invoiced
- PassAn engine billed ahead of the work is shown as a prepayment, not hidden
- PassCost added equals work done plus the three changes
- PassPercent complete is 0 to 100, accrual is no more than the estimate, prepayment is no more than invoiced
At month end the 6 engines carry $920,000 of accrued cost and $160,000 of prepayments, a net accrual of $760,000, which is $75,000 lower than the opening $835,000. ESN 1103 was billed ahead of the work and is shown as a prepayment.