Establishing an Internal Sales Accounting Structure

Introduction

The costs of internal sales need to be separated from the costs of external sales. Combining of costs of internal sales with costs of external sales could lead to misinterpretation of fund balance by federal auditors resulting in the unit conducting internal sales activity having to refund profits on external sales to the federal government. Any department, college, or administrative unit desiring to sell property or services to external customers must obtain appropriate approval and follow all policy and procedures defined for selling to external customers. See link to Selling to External Customers.

NOTE:

• The separate internal sales accounting structure should contain only those operating resources directly related to the provision of goods/ services to internal customers. Funds in these accounts cannot be expended for non-internal sales activities (for example, teaching or research).
• Internal sales revenues and expenditures should be recorded in appropriate accounts. That is, the accounts should be used in a manner that will result in a matching of revenues with expenditures. Revenue should be coded as such and NOT as a reduction of expenditure.
• Sales to University departments are NOT subject to sales tax even if the funding comes from an external source.
• A guarantee account for use in the event of a deficit resulting from internal sales activity must be designed outside of the internal sales accounting structure but within the RRC.

Establishing Chart of Accounts Structure in PeopleSoft

1. Establish a chart of accounts structure for the activity:

   If a new internal sales accounting structure in PeopleSoft is needed, prepare an Internal Vendor Request form. Submit the completed form to Internal Sales Compliance Office.

   NOTE: Internal sales must be uniquely identified in the University financial system.

2. Determine the correct account values for each type of revenue and expense that has been estimated.
3. Determine budget amounts for the activity. Include annual sales revenue and all expenses required to generate the revenue.

If a new program value is required to record the internal sales activity, a new budget expense line will be required. Departments should contact the Budget Office prior to setting up the new budget expense line.