Revenue generated from and the associated costs of internal sales must be separated from revenue and the costs of external sales and all other activity of the unit. Combining revenue and costs could lead to misinterpretation of fund balance by federal auditors resulting in the unit conducting internal sales activity having to refund additional revenues on external sales to the federal government.
- The separate internal and external sales accounting structures should contain only those operating resources directly related to the provision of goods or services to their respective customers.
- Sales revenues should be recorded in appropriate external sales revenue accounts (5202XX, 5206XX) or internal sales revenue accounts (5001XX) that define the activity. That is, the accounts should be used in a manner that results in a matching of revenues with expenses. Revenue should be coded as such and not as a reduction of expense.
- Sales to non-University customers may be subject to sales tax and/or Unrelated Business Income Tax (UBIT). Refer to related procedure.
Establishing Chart of Accounts Structure in EFS
- Establish a chart of accounts structure for the activity. Use ChartField 2 as the designator for individual (or distinctive) sales activity. External Sales activity should be recorded in Fund 1026 Other Unrestricted and Internal Sales should be recorded in Fund 1150 Recharged Internal Revenue.
- Determine the correct account code for each type of revenue and expense that has been budgeted. If no budget structure exists, prepare a budget journal in EFS.
- Develop the rates based on the budget amounts for the activity. Include annual sales revenue and all anticipated expenses that are planneded as a part of the rate development process.