Executing a Down Payment for an Asset under Construction

Objective

After completing this lesson, you will be able to execute a down payment for an Asset under Construction

Prerequisites Asset under Construction Asset Class

Kevin is ready to start making down payments for the assets that are still under construction. However, he needs a bit more direction on how to go about it. He's counting on his colleague Steve, who has years of experience in the area of accounting to guide him through the process.

Down payments in the AuC

Kevin launches the search portal, eager to delve into when the down payment gets reflected in the asset that's in the middle of construction.

The figure outlines the process of handling down payments in a project management context. It begins with creating a Purchase Order (PO) with an Account Assignment Category for a Project (WBS Element) and entering down payment information. Next, the down payment is posted. Upon settlement, the value of the down payment becomes visible in the Asset under Construction (AuC) Master Record. The AuC Master Record includes the WBS Element, AuC Value, and Down Payment Transaction Typ 180.The text below explains the figure text

Purchase Order

In the first step, a purchase order is created for Asset under Construction with account assignment category P. This account assignment category requires a project/WBS element. In our case, this is an investment project.

The down payment is stored in the purchase order, but it is not visible in the asset master record.

Down Payment

The down payment is posted by the financial accounting department - this has no effect on Asset under Construction.

Settlement

The value of the down payment is not visible in Asset under Construction until settlement has taken place. The down payment is posted with transaction type 180 Down Payment. It increases the net book value of the asset by the down payment amount.

Key Takeaways

  • We always see the down payment after settlement. If we want to see the down payments in Asset Accounting in a timely manner, we will therefore have to settle more often and not only at the end of the month.
  • The down payment increases the net book value of the Asset under Construction asset.

Create a Purchase Order with Down Payment

Help Kevin order the flooring by placing the order and linking the down payment. As soon as the down payment is executed, settle the WBS element to the Asset under Construction.

ExerciseStart Exercise

Execute a Settlement and Analyze the Asset Value

ExerciseStart Exercise

Summary

  • Asset Class Configuration: Asset class must allow investment measures and down payments.
  • Link Asset Class: Connect asset class to investment profile for Asset under Construction (AuC).
  • Down Payment Visibility: Down payment visible in AuC after settlement.
  • Settlement Impact: Down payment increases net book value of AuC asset.
  • Frequent Settlements: Settle more often to see down payments timely in Asset Accounting.

Learning

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