po_accounting_flow in encumbrance environment

Accounting Flow for

Purchase Orders, Receipts and Matched Invoices in an Encumbrance Environment

An Oracle White Paper July 2006

This document details the accounting entries that are expected for purchase orders with Expense or Inventory destinations, receipts and

matched invoices. It also considers the two choices of accrual available for Expense items in an encumbrance-enabled environment.

Expense items can be accrued at a) Period-endb) On Receipt

Inventory Items can ONLY be accrued at a) Receipt

This document consists of the following case studies/scenarios.

Accrue on receipt: (APO)Case 1: Expense Destination/Create, Approve, Reserve/Receive/InvoiceCase 2: Expense Destination/Create, Approve, Reserve/Invoice/ReceiveCase 3: Expense Destination/Create, Approve, Reserve/Receive/Invoice at a price greater than PO priceCase 4: Expense Destination/Create, Approve, Reserve/Receive/Invoice at a quantity greater than PO quantityCase 5: Inventory Destination/ Create, Approve, Reserve/Receive/InvoiceCase 6: Inventory Destination/ Create, Approve, Reserve/Invoice/Receive

Accrue at Period-end: (APE) Case 1: Create PO /Receive PO /Deliver PO /Invoice/Run the period end programCase 2: Create PO /Invoice/Receive PO/Deliver PO/Run the period end programCase 3: Create PO/Receive PO/Deliver PO/Run the period end program/InvoiceCase 4: Create PO/Receive PO/Run the Period end program/Deliver PO/Run the period end program/InvoiceCase 5: Create PO /Receive PO /Deliver PO /Invoice at a price greater than PO Price/Run the period end programCase 6: Create PO /Receive PO /Deliver PO /Invoice at a quantity greater than PO Quantity/Run the period end Program

The following Pages will explain each case in detail:

LEGEND: AOR= Accrue On Receipt, APE= Accrue at Period-End

AOR-Case 1: Assumptions:Accrue on receipt = YDestination type = Expense Item = expense Item

Sequence of actions: Create, Approve, Reserve

PO Receive and Deliver the PO Invoice Validation after

matching Create Accounting for

invoice

Action Accounting entriesTable in which records

exist Flag/nature of entry

1. PO is reservedBudget a/c DR @ PO price (base + NR tax)*

GL_BC_PACKETS Encumbrance

2. Receive the PO

Receiving Inventory a/c DR @ PO price (base + NR tax)++

RRSL/GLI/GL_JE_LINES ActualAP Expense accrual a/c CR @ PO price (base+ NR tax) ^^

3. Deliver the PO

Expense Charge a/c DR @ PO price (base + NR tax)

RRSL/GLI/GL_JE_LINES

ActualReceiving Inventory a/c CR @ PO price (base + NR tax)++

Budget a/c CR @ PO price (base + NRtax)*

Encumbrance

4. Invoice Validation REC Tax and NR tax DR @ tax amount++ GL_BC_PACKETS Encumbrance

5. Create Accounting for Invoice

AP Expense accrual a/c DR @ PO price excluding tax and tax DR @ tax rate separately ^^ AP_AE_LINES_ALL Actual

AP Liability a/c CR @ invoice price

REC Tax and NR tax CR @ tax amount++AP_ENCUMBRANCE_

LINES_ALLEncumbrance

Note: The corresponding offsetting records have the same symbol in

order to more easily identify which debits and credits offset each other. (^, +, *)

PO base price refers to received quantity * unit price in PO Lines.

NR tax refers to Non Recoverable Tax calculated for the (received quantity * PO line unit price)

REC tax refers to Recoverable Tax calculated for the (received quantity * PO line unit price)

RRSL - RCV_RECEIVING_SUB_LEDGER GLI – GL_INTERFACE


Sequence of actions:

Create, Approve, Reserve PO

Invoice Validation after matching

Create Accounting for invoice

Receive and Deliver the PO

Action Accounting entriesTable in which records exist Flag/nature of entry

1. PO is reserved Budget a/c DR @ PO price (base + NR tax) $$ GL_BC_PACKETS Encumbrance

2. Invoice Validation REC Tax and NR tax DR @ tax amount * GL_BC_PACKETS Encumbrance

3. Create Accounting for invoice

AP Expense accrual a/c DR @ PO price excluding tax and tax DR @ tax rate separately +++ AP_AE_LINES_ALL Actual


REC Tax and NR tax CR @ tax amount *AP_ENCUMBRANCE

_LINES_ALLEncumbrance

4. Receive the PO

Receiving Inspection a/c DR @ PO price (base + NR tax) ^^^^ RRSL/GLI/GL_JE_

LINESActual

AP Expense accrual a/c CR @ PO price (base+ NR tax) +++

5. Deliver the PO



ActualReceiving Inspection a/c CR @ PO price (base + NR tax) ^^^^

Budget a/c CR @ PO price (base + NR tax) $$ Encumbrance

Note: Corresponding offsetting accounts have same symbols PO base price refers to received quantity * unit Price in PO lines

NR tax refers to Non Recoverable Tax calculated for the (received quantity *PO line unit price)

REC tax refers to Recoverable Tax calculated for the (received quantity *PO line unit price)



Sequence of actions: Create, Approve, Reserve POReceive and Deliver POCreate Invoice at higher unit price than POInvoice ValidationCreate Accounting

Action Accounting entriesTable in which records exist

Flag/nature of entry

1. PO is reserved Budget a/c DR @ PO price (base + NR tax) ^^^^ GL_BC_PACKETS Encumbrance

2. Receive the PO

Receiving Inventory a/c DR @ PO price (base + NR tax) $$$ RRSL/GLI/GL_JE_

LINESActual

AP Expense accrual a/c CR @ PO price (base+ NR tax) **

3. Deliver the PO



ActualReceiving Inventory a/c CR @ PO price (base + NR tax) $$$

Budget a/c CR @ PO price (base + NR tax) ^^^^Encumbrance

4. Invoice Validation at higher price

REC Tax and NR tax DR @ tax amount #GL_BC_PACKETS Encumbrance

IPV a/c DB @ difference in price &


AP Expense accrual a/c DR @ PO price excluding tax and tax DR @ tax rate separately **

AP_AE_LINES_ALL ActualAP Liability a/c CR @ invoice price

IPV a/c DR @ difference in price

REC Tax and NR tax CR @ tax amount # AP_ENCUMBRANCE_LINES_ALL

EncumbranceIPV a/c CR @ difference in price &

Note: Corresponding offsetting accounts have same symbols PO base price refers to received quantity * unit Price in PO lines

NR tax refers to Non Recoverable Tax calculated for the (received quantity * PO line unit price)

REC tax refers to Recoverable Tax calculated for the (received quantity * PO line unit price)



Sequence of actions: Create, Approve, Reserve

PO Receive and Deliver PO Create Invoice at higher

quantity than PO Invoice Validation Create Accounting


1. PO is reserved Budget a/c DR @ PO price (base + NR tax) & GL_BC_PACKETS Encumbrance

2. Receive the PO

Receiving Inspection a/c DR @ PO price (base + NR tax) ## RRSL/GLI/GL_JE_

LINESActual

AP Expense accrual a/c CR @ PO price (base+ NR tax) ^^^

3. Deliver the PO



ActualReceiving Inspection a/c CR @ PO price (base + NR tax) ##

Budget a/c CR @ PO price (base+ NR tax) & Encumbrance

4. Invoice Validation for higher quantity

*See additional info below REC Tax and NR tax DR @ tax amount ****



AP Expense accrual a/c DR @ invoice price excluding tax and tax DR @ tax rate separately ^^^ AP_AE_LINES_ALL Actual


REC Tax and NR tax CR @ tax amount ****

AP_ENCUMBRANCE_LINES_ALL

Encumbrance

Note:

Corresponding offsetting accounts have same symbols PO base price refers to received quantity * unit Price in PO line NR tax refers to Non Recoverable Tax calculated for the (received quantity *

PO line unit price) REC tax refers to Recoverable Tax calculated for the (received quantity * PO

line unit price) RRSL - RCV_RECEIVING_SUB_LEDGER GLI – GL_INTERFACE No separate accounting entry for Quantity Variation (#4) will be seen

here

AOR-Case 5: Assumptions:Accrue on receipt = YDestination type = Inventory Item = Inventory Item



Receive and Deliver the PO Invoice Validation after

matching Create Accounting for

invoice



1. PO is reserved Budget a/c DR @ PO price (base + NR tax) # GL_BC_PACKETS Encumbrance

2. Receive the PO

Receiving Inspection a/c DR @ PO price (base + NR tax) **

RRSL/GLI/GL_JE_LINES ActualAP Inventory accrual a/c CR @ PO price (base+ NR tax) %%%

3. Deliver the PO

Material Valuation a/c DR @ std cost

MTL_TRANSACTION_ACCOUNTS

Actual (Account line type-1)

Receiving Inspection a/c DR @ PO price (base + NR tax) **


PPV a/c CR/DR @ difference in priceActual (Account line

type-6)

Budget a/c CR @ PO price (base+ NR tax) #

Encumbrance (Account line type-

15)

4. Invoice Validation REC Tax and NR tax DR @ tax amount $$$$ GL_BC_PACKETS Encumbrance


AP Inventory accrual a/c DR @ PO price excluding tax and tax DR @ tax rate separately %%% AP_AE_LINES_ALL Actual


REC Tax and NR tax CR @ tax amount $$$$AP_ENCUMBRANCE_


Note: Corresponding offsetting accounts have same symbols PO base price refers to received quantity * unit Price in PO line NR tax refers to Non Recoverable Tax calculated for the (received

quantity * PO line unit price) REC tax refers to Recoverable Tax calculated for the (received

quantity * PO line unit price) RRSL - RCV_RECEIVING_SUB_LEDGER GLI – GL_INTERFACE

AOR-Case 6: Assumptions:Accrue on receipt = YDestination type = Inventory Item = Inventory Item



Invoice Validation after matching

Create Accounting for invoice

Receive and Deliver the PO



1. PO is reservedBudget a/c DR @ PO price (base + NR tax) ####


2. Invoice Validation REC Tax and NR tax DR @ tax amount* GL_BC_PACKETS Encumbrance


AP Inventory accrual a/c DR @ PO price excluding tax and tax DR @ tax rate separately @@@ AP_AE_LINES_ALL Actual


REC Tax and NR tax CR @ tax amount*AP_ENCUMBRANCE_


4. Receive the PO

Receiving Inspection a/c DR @ PO price (base + NR tax) ^^^^ RRSL/GLI/GL_JE_

LINESActual

AP Inventory accrual a/c CR @ PO price (base+ NR tax) @@@

5. Deliver the PO

Material Valuation a/c DR @ std cost

MTL_TRANSACTION_ACCOUNTS


Receiving Inspection a/c CR @ PO price (base + NR tax) ^^^^


PPV a/c CR/DR @ difference in priceActual (Account line

type-6)Budget a/c CR @ PO price (base + NR Encumbrance (Account

tax) #### line type- 15)


quantity * PO line unit price) REC tax refers to Recoverable Tax calculated for the (received

quantity * PO line unit price) RRSL - RCV_RECEIVING_SUB_LEDGER GLI – GL_INTERFACE

Accrue at Period EndAPE-Case 1: Assumptions:Accrue on receipt = NDestination type = Expense Item = expense ItemPurchase Encumbrance type and Invoice Encumbrance type are different

Sequence of actions: Create, Approve, Reserve POReceive and Deliver the POInvoice Validation after matchingCreate Accounting for invoiceRun the Period End Program



1. PO is reservedBudget a/c DR @ PO price (base + NR tax) *


2. Receive the PONo Accounting Transactions

N/A N/A

3. Deliver the PO No Accounting Transactions N/A N/A

4. Invoice Validation

Budget a/c CR @ PO price (base + NR tax) *

GL_BC_PACKETS EncumbranceREC Tax and NR tax DR @ tax amount ^^Budget a/c DR @ invoice price excluding NR tax-INV Enc &&&


Expense charge a/c DR @ invoice price excluding tax and tax DR @ tax rate separately AP_AE_LINES_ALL ActualAP Liability a/c CR @ invoice price including NR taxREC Tax and NR tax CR @ tax amount ^^


EncumbranceBudget a/c CR @ invoice price excluding NR tax &&&

6. Run the Period end program No Accounting Transactions

N/A N/A

7. Manual Reversal of Not Required since there are no accrual N/A N/A

journal entry entries


quantity * po line unit price) REC tax refers to Recoverable Tax calculated for the (received

quantity * po line unit price)

APE-Case 2: Assumptions:Accrue on receipt = NDestination type = Expense Item = expense ItemPurchase Encumbrance type and Invoice Encumbrance type are different

Sequence of actions: Create, Approve, Reserve POInvoice Validation after matchingCreate Accounting for invoiceReceive and Deliver the PORun the Period end Program



1.PO is reservedBudget a/c DR @ PO price (base + NR tax) ####


2.Invoice Validation

Budget a/c CR @ PO price (base + NR tax) ####

GL_BC_PACKETS EncumbranceREC Tax and NR tax DR @ tax amount***Budget a/c DR @ invoice price excluding NR tax- INV Enc %%

3.Create Accounting for invoice

Expense charge a/c DR @ invoice price excluding tax and tax DR @ tax rate separately AP_AE_LINES_ALL Actual

AP Liability a/c CR @ invoice price including NR tax

Budget a/c CR @ invoice price excluding NR tax %% AP_ENCUMBRANCE_


REC Tax and NR tax CR @ tax amount***

4.Receive the PONo Accounting Transactions

N/A N/A

5. Deliver the PO No Accounting Transactions N/A N/A6.Run the Period end program No Accounting Transactions

N/A N/A

7. Manual Reversal of journal entry

Not Required since there are no accrual entries

N/A N/A

Note: Corresponding offsetting accounts have same symbols. PO base price refers to received quantity * unit Price in PO line NR tax refers to Non Recoverable Tax calculated for the (received


quantity * po line unit price)APE-Case 3: Assumptions:Accrue on receipt = NDestination type = Expense Item = expense ItemPurchase Encumbrance type and Invoice Encumbrance type are different

Sequence of actions: Create, Approve, Reserve POReceive and Deliver the PORun the Period End ProgramInvoice Validation after matchingCreate Accounting for invoice


1.PO is reservedBudget a/c DR @ PO price (base + NR tax) $

GL_BC_PACKETS

Encumbrance

2.Receive the PO No Accounting Transactions N/A N/A

3.Deliver the PO No Accounting Transactions N/A N/A

4.Run the Period end program

Expense Charge a/c DR @ PO Price (base + NR tax) #

RRSL/GLIActualAP Expense accrual a/c CR @ PO Price (base + NR

tax) &

Budget a/c CR @ PO price (base + NR tax) $ Encumbrance

5.Manual Reversal of journal entry (Both actual and encumbrance)

Expense Charge a/c CR @ PO Price (base + NR tax) #

GL_JE_LINES ActualAP Expense accrual a/c DR @ PO Price (base + NR tax) &Budget a/c DR @ PO price (base + NR tax) ++


Budget a/c CR @ PO price (base + NR tax) ++GL_BC_

PACKETSEncumbrance

Budget a/c DR @ invoice price excluding NR tax - INV Enc **REC Tax and NR tax DR @ tax amount ^^


Expense charge a/c DR @ invoice price excluding tax and tax DR @ tax rate separately

AP_AE_LINES_ALL

Actual

AP Liability a/c CR @ invoice price including NR taxREC Tax and NR tax CR @ tax amount ^^ AP_ENCUMBR

ANCE_LINES_ALL

EncumbranceBudget a/c CR @ invoice price excluding NR tax **



quantity * po line unit price) RRSL – RCV_RECEIVING_SUB_LEDGER GLI – GL_INTERFACE

APE-Case 4: Assumptions:Accrue on receipt = NDestination type = Expense Purchase Encumbrance type and Invoice Encumbrance type are different

Sequence of Actions:

Create, Approve, Reserve PO/Receive the PO and Run the Period End ProgramDeliver the PO and Run the Period End ProgramInvoice Validation and Create Accounting


existFlag/nature of

entry1.PO is reserved Budget a/c DR @ PO price (base + NR tax) ^ GL_BC_PACKETS Encumbrance2.Receive the PO No Accounting Transactions N/A N/A

3.Run the Period end program

Expense Charge a/c DR @ PO Price (base + NR tax) +

RRSL/GLIActual

AP Expense accrual a/c CR @ PO Price (base + NR tax) &Budget a/c CR @ PO price (base + NR tax) ^ Encumbrance


Expense Charge a/c CR @ PO Price (base + NR tax) +

GL_JE_LINES ActualAP Expense accrual a/c DR @ PO Price (base + NR tax) &Budget a/c DR @ PO price (base + NR tax) *


6. Run the Period end program

Expense Charge a/c DR @ PO Price (base + NR tax) +

RRSL/GLIActual

AP Expense accrual a/c CR @ PO Price (base + NR tax) &Budget a/c CR @ PO price (base + NR tax) * Encumbrance


Expense Charge a/c CR @ PO Price (base + NR tax) +

GL_JE_LINES ActualAP Expense accrual a/c DR @ PO Price (base + NR tax) &Budget a/c DR @ PO price (base + NR tax) #


Budget a/c CR @ PO price (base + NR tax) #

GL_BC_PACKETS EncumbranceBudget a/c DR @ invoice price excluding NR tax- INV Enc /////REC Tax and NR tax DR @ tax amount \\\\


Expense charge a/c DR @ invoice price excluding tax and tax DR @ tax rate separately AP_AE_LINES_ALL ActualAP Liability a/c CR @ invoice price including NR taxREC Tax and NR tax CR @ tax amount \\\\


EncumbranceBudget a/c CR @ invoice price excluding NR tax /////


Sequence of actions: Create, Approve, Reserve POReceive and Deliver the POCreate Invoice at higher price than POInvoice Validation after matching Create Accounting for invoiceRun the Period End Program

Action Accounting entries Table in which records existFlag/nature of

entry

1. PO is reservedBudget a/c DR @ PO price (base + NR tax) $$


2. Receive the PO No Accounting Transactions N/A N/A


4. Invoice Validation at higher price

Budget a/c CR @ PO price (base + NR tax) $$

GL_BC_PACKETS EncumbranceBudget a/c DR @ PO price excluding NR tax ***Budget a/c DR @ difference in invoice price ***REC Tax and NR tax DR @ tax amount &


Expense charge a/c DR @ invoice price excluding tax and tax DR @ tax rate separately AP_AE_LINES_ALL ActualAP Liability a/c CR @ invoice price including NR taxREC Tax and NR tax CR @ tax amount &


EncumbranceBudget a/c CR @ invoice price excluding NR tax


N/A N/A



N/A N/A





Sequence of actions: Create, Approve, Reserve POReceive and Deliver the POCreate Invoice at higher quantity than POInvoice Validation after matching Create Accounting for invoiceRun the Period End Program



1. PO is reservedBudget a/c DR @ PO price (base + NR tax) ##


2. Receive the PO No Accounting Transactions N/A N/A


4. Invoice Validation at higher quantity

Budget a/c CR @ PO price (base + NR tax) ##


Budget a/c DR @ PO price excluding NR tax $$

Budget a/c DR @ additional invoice price -INV enc $$REC Tax and NR tax DR @ tax amount ////


Expense charge a/c DR @ invoice price excluding tax and tax DR @ tax rate separately AP_AE_LINES_ALL ActualAP Liability a/c CR @ invoice price including NR taxREC Tax and NR tax CR @ tax amount //// AP_ENCUMBRANCE_LI

NES_ALLEncumbrance

Budget a/c CR @ PO price excluding NR tax

^^^^ Budget a/c CR @ additional invoice price with encumbrance line type as QV ^^^^


N/A N/A



N/A N/A




Important Notes:

1. Accrual entries will be generated /created ONLY when the Received quantity > Billed quantity at the time of running Receipt Accruals-Period end program.

2. Under the cases mentioned above under the Period-end Section, manual reversal of journal entries are not required except for Case 3 and Case 4 since there are NO accrual entries created /generated.

3. For all these cases the account records from receiving will also be inserted into GL_BC_PACKETS, along with the other subledger tables mentioned above. These records in GL_BC_PACKETS can be viewed by querying the max(packet_id), as there are no REFERENCE fields populated for receiving records.

4. Liability a/c which is recorded at invoice price will also include the recoverable and non-recoverable tax rates.

Accounting Flow against Purchase Orders, Receipts and Matched Invoices.JULY 2006Authors: Manighandan Venkatraman & Asha Ravada

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U.S.A.

Worldwide Inquiries:Phone: +1.650.506.7000Fax: +1.650.506.7200oracle.com

Copyright © 2006, Oracle. All rights reserved.This document is provided for information purposes only and the contents hereof are subject to change without notice.This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.Oracle, JD Edwards, PeopleSoft, and Siebel are registered trademarks of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

po_accounting_flow in encumbrance environment

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