Internal billings are processed in the accounting system using a transfer voucher or through an interface. A revenue code is used on one side of the accounting entry for the department providing the service and the expense side of the entry is a charge to the department receiving the service. This process does not increase the actual revenue or expense of the University as a whole, but transfers use of funds from one department to another. The Revenue/Expense Adjustment is a means of eliminating double counting of University revenue and expense on the financial statements for transfer vouchers that debit (charge) expense and credit revenue. The adjustment does not affect individual departmental accounts but is coded to a central University account so that the net on total revenue and expense is zero.
Department S (the service provider) provides a service for Department C (the client).
On the transfer voucher, Department S is credited with the revenue and Department C is charged for the service rendered.
The Revenue/Expense Adjustment reverses Department S’s revenue in a central University account so that the effect on total revenue is zero. Revenue is not recognized by the University because no new revenue has been received by the University.
On the expense side, Department C receives a service and is charged for the service. The charge to Department C is reduced in a central University account by an amount equal to the service charge. The net effect on total University expense is zero.
The Revenue/Expense Adjustment does not factor out any add-on expense, e.g. an administrative charge.
Updated: 7/28/08