Recording Internal Sales, Cost Recovery & Transfers

Purpose

The purpose of this document is to provide PeopleSoft GL users with a standard method of recording internal revenues, cost recoveries, external revenues, and transferring revenue.  When recording internal revenues, cost recoveries or transferring revenue between units (departments, programs, classes, funds or projects) specific PeopleSoft Accounts need to be used so that revenues and expenses are not double counted. This improves consistency and quality of financial reporting for both the University and individual unit. The nature of the revenue or recovery will determine the type of account to be used.

Definitions

Internal Revenue: the sale of a good or service between Queen’s University departmental units with no net impact on the cash flows or the net income of the University.

Cost Recovery: when one Queen’s University unit recovers expenses that were incurred through an external party and then allocated between other Queen’s University departmental units. In this circumstance, the initial expense would result in a net cash outflow to the University, but the cost recovery would not result in a net impact on the cash flows or net income of the University.

Internal Revenue Transfer: when one Queen’s University unit transfers funds to another Queen’s University unit. This transaction would be a non-cash transaction and there would be no net impact on the cash flows or net income of the University.

External Revenue: Funds received from an organization or person external to Queen’s University. External revenue would result in a net impact on cash flows or net income to the University. 

 

Recording Internal Revenue  

When recording internal revenue, it is incorrect to use an external revenue account (all accounts beginning with “4” other than 450100) on one side of the transaction and an expense account on the other side of the transaction because this will inflate Queen’s University revenues and expenses in error, leading to incorrect financial statements.

However, for internal reporting purposes, units that provide goods and services to other Queen’s University units would like to present internal revenue entries as revenues, and conversely, the unit being charged for the good or service from an internal unit would like to see internal charges presented as expenses on their statement of operations. Therefore, a special account has been created that is to be used exclusively to record internal revenues in this type of scenario. The account number is 450100. For the expense side of the transaction, regular expense accounts are to be used. Separate “internal” expense accounts have not been created.  Financial Services will ensure on an annual basis, as part of the year end financial reporting process, that internal revenues offset internal expenses for the purposes of the University’s external Financial Statements.  

Example 1: The physical education centre rents gym space to the school of business Queen’s Executive Development Centre.

	Fund	Department	Account	Program	Amount	Description
Debit:	20000	12003	604016		$5,000	Student Activities
Credit:	10000	18218	450100	11279	-$5,000	Internal Sales & Service

 

Recording a Cost Recovery

All recoveries from a source within Queen’s University, including ancillaries, are recoveries. These recoveries relate to expenses that have been incurred by one unit, to an external party, whereby that unit is now “recovering” part or all of that cost from another unit internal to the University.

The department paying for the expense that was initially recorded because of a transaction with an external party to the University should record the expense to the appropriate expenditure account. A cost recovery account starting with “6990” should be used to record the recovery. When accounting for a cost recovery it is important to identify what account was used to record the original expense. This will determine which cost recovery account to use.

For a complete list of cost recovery accounts, please refer to Financial Services - Account ID Codes on the financial services website.        

Example 1: The fund 10000 department 11170 is recovering photocopy charges from an internal fund 80501 department 11170.

	Fund	Department	Account	Amount	Description
Debit:	80501	11170	606001	$1,000	Printing/Photocopying
Credit:	10000	11170	699017	-$1,000	Cost Recovery - Photocopying

 

Example 2:  PPS, fund 10000 department 44301 is recovering maintenance charges from an internal fund 10000-department 11540.

	Fund	Department	Account	Amount	Description
Debit:	10000	11540	606009	$5,000	Physical Plant Expenses
Credit:	10000	44301	699019	-$5,000	Cost Recovery - PPS

 

Example 3: Overhead is charged to research project 361001, fund 30000, department 11540 and allocated to fund 31000, department 11540, special research project 379001, fund 10000, department 11540 and fund 10000 department 42098. (This will only be done by Research Accounting). 

	Fund	Department	Account	Project	Amount	Description
Debit:	30000	11540	693001	361001	$1,200	Overhead
Credit:	31000	11540	699034	379001	-$400	Cost Recovery - Overhead
Credit:	10000	11540	699034		-$400	Cost Recovery - Overhead
Credit:	10000	42098	699034		-$400	Cost Recovery - Overhead

 

Recording an Internal Revenue Transfer

When an internal decision has been made to reallocate revenue from one unit within Queen’s to another unit within Queen’s, and that source of funding cannot be tied back to an external source, it is appropriate to use Account 480001 – Revenue University Funds.

Examples include research startup or in support of an identified program or project. Similar to a cost recovery, there is no cash impact to the University; this is an internal transfer only. The same account must be used for both sides of the journal entry.  The Internal Revenue Allocation account to be used is:

• 480001 - Revenue University Funds (Funds provided from Internal Queen's University resources).

Example 1: Revenue is allocated from operating fund 10000 department 11540 to fund 10000 department 11600 program 45001 to support a staff appreciation day in that department.

	Fund	Department	Account	Program	Amount	Description
Debit:	10000	11540	480001		$1,000	Revenue University Funds
Credit:	10000	11600	480001	45001	-$1,000	Revenue University Funds

 

Recording External Revenue

Funds received from an organization or person external to Queen’s University are typically revenues. The account used to record or reallocate these revenues must start with a “4”.  

Please note circumstances will arise where there is more than one way to use the general ledger accounts to obtain the appropriate financial reporting result. Please continue to use your Business Officer and the Financial Services Support Centre as resources in determining the most appropriate accounts to use to record transactions.