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Task

In this part, we’re going to create something somewhat advanced. You’re going to adjust the general ledger from a cash-based accounting approach to an accrual-based accounting approach (more on this on the next slide).

You can duplicate all your work from Part 1. The changes happens before the beginning of your work in Part 1 began. You’re going to be adjusting the general ledger data and then redoing what you did in Part 1 (note: you can duplicate models in Less from the folder overview → three dots → duplicate). You ultimately want an output identical to the below.

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Definitions

Accrual-based is an accounting method that aims to depict a more realistic view of the financial performance. In short, the general ledger doesn’t account for payment terms. Imagine you’re a consulting company and you sell a 2000-hour project. In a cash-based approach, you simply book all of the revenue on the invoice date. In an accrual-based approach, you s p r e a d that revenue out over the duration for which it is generated. In the 2000-hour example you might spread it out over 3 months (2000 hours / 5 consultants working it / 130 billable hours per month ≈ 3 months). You can read more about the differences here.

In the ledger, there is a column called Payment. This column determines whether the amount is paid/expensed for 1, 3 or 12 months. In other words, if a transaction has Payment = “quarterly”, it illustrates that this transaction is covering three months. You will use this column to adjust the ledger from cash-based to accrual-based.

Note that only two accounts - 210 and 260 - have anything in the Payment column. These two accounts are Sales and Commision. You should focus on adjusting these.

You might want to get familiar with the Create Rows and IF Column tool.

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Hints

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Solution File

Download the solution file for the task here. See how to import it below. Remember to import it in a new model.