vas Accouring eros in Oracte Purchasing and Payables | Oracle Eb Gjaan 28th September 2012 Accounting entries in Oracle Purchasing and Payables This document gives in detail different accounts used and the accounting impact of various transactions that take place in Oracle Purchasing and Oracle Payables, Both Standard costing and Average costing methods are considered. The accounts are Oracle Applications specific and might differ from the conventional accounting names. Examples are given wherever required for better understanding of the concept. The sources of these accounts are given PURCHASING: Receiving - For Accrual Process for perpetual Accruals Receipts for inventory purchases are always accrued upon receipt. And also use perpetual accruals for expense purchases you want to record uninvoiced purchase liabilities immediately upon the receipt of the expense goods. Receiving Account (Receiving Account) To record the current balance of the material in receiving and inspection, Where to define in Apps: Define Organization Define Receiving Options Inventory AP Accrual Account Used to accrue your inventory accounts payable liability when you receive your items. This account represents your uninvoiced receipts and is usually a part of your accounts payable liabilities in the balance sheet. Payable relieves this account when the invoice is matched and approved. Where to define in Apps: Define Organization Parameters Expense AP Accrual Account Used to accrue your expense accounts payable liability when you receive your items. This account represents your uninvoiced receipts when your Expense Accrual Option is On Receipt and is usually a part of your accounts payable liabilities in the balance sheet. Payable relieves this account when the invoice is matched craclestlearing begepst.coni2012/0Guhal-are-d feren-acceurs-used- anh wsstats Accouring eros in Oracte Purchasing and Payables | Oracle Eb Gjaan and approved Where to define in Apps: Define Purchasing Options Purchase Price Variance Account To Accumulate purchase price variance for the organization, PPV account is usually an expense account, which you record at the time you receive an item into the inventory and is the difference between the purchase order cost and the item's standard cost, PPV account is not used for average costing. Where to define in Apps: Define Organization Parameters Invoice Price Variance Account To Accumulate invoice price variance for the organization. IPV account is usually an expense account, which is used at the time of creating requisition or PO. When a corresponding invoice is matched and approved, AP uses this account from PO to record the invoice price variance entries. It is the difference between the purchase order price of the inventory item and the actual invoice price multiplied by the quantity invoiced. Where to define in Apps: Define Organization Parameters Exchange Rate Gain or Loss Account To Accumulate purchase exchange rate gains or losses for the organization. This account is usually an expense account, which you use to record the difference between the exchange rate used for purchase order cost and the exchange rate used for invoice Where to define in Apps: Define Financial Options craclestlearing begepst.coni2012/0Guhal-are-d feren-acceurs-used- anh ans.sa13 Accouting otros in Oracle Purchasing ant Payables | Oracio Ebiz Gyaan AccounTinc ENTRIES A). Purchase Order receipt to the Receiving Inspection Location. When the goods are received into Inspection Location When you receive material from a vendor into receiving inspection, Apps uses the quantity received and the PO price to update the following accounts. Accounting Entry Debit Credit Source Receiving inspection account @ PO price Bg At Define Organization/ Receiving Options Inventory A/P Accrual account @ PO price ~ At Organization Parameters (for receiving Inventory Items) Receiving inspection account @ PO price cd At Define Organizations Expense AVP Accrual account @ PO price xx At Define Purchasing Options (for receiving expense items) B). Delivery from Receiving Inspection to Inventory under Standard Costing. Recorded at the time, when the goods are transferred from Receiving Inspection to Inventory With Enter Receiving form, you can move material from receiving inspection to inventory. Case#: If the standard cost is greater than purchase order price then the PPV is favourable and Apps records this expense as a credit (negative expense) Accounting Entry Debit Credit, Source ‘Sub-inventory accounts @ Std. Cost x ‘At Define Sub-inventory Receiving inspection account @ PO price xx At Define Organization Purchase Price Variance Account (Negative xx At Define Organization Expense) Parameters Case#2: If the standard cost is less than the PO price then the variance is unfavourable and Apps record this as a debit (positive expense) Accounting Entry Debit Credit Source ‘Sub-inventory accounts @ Std. Cost xx ‘At Define Sub-inventory Purchase Price Variance Account (Positive xx At Define Organization Expense) Parameters Receiving Inspection account @ PO price xx At Define Organization/ Define Receiving Options (C). Purchase Order receipt to the Receiving Inspection at Average Cost. When the goods are received into Inspection Location at the Enter Receipts form craclesblearing blogspol.comi2012/0awhal-are-feren-accours-used.andhiml atssa13 Accouting otros in Oracle Purchasing ant Payables | Oracio Ebiz Gyaan If you use average costing, the actual cost is picked from the PO and hence you do not have any PPV. Accounting Entry Debit Credit, Source Receiving inspection account @ PO price cs ‘At Define Organization/ Define Receiving Options Inventory A/P Accrual account @ PO price xx At Organization Parameters (for receiving Inventory Items) (D). Delivery from Receiving Inspection to Inventory under Average Costing. Recorded at the time, when the goods are transferred from Receiving Inspection to Inventory Aiter inspection, you deliver the inventory items to the inventory at the Enter Receiving Transactions form. Accounting Entry Debit Credit Source ‘Sub-inventory accounts @ PO price x ‘At Define Sub-inventory Receiving inspection account @ PO price xx At Define Organisation’ Define Receiving Options (for delivering to the inventory at actual PO cost) To record the actual Landed cost (Average Cost) The goods are received into Landed Organisation first and then are transferred to actual organisations with the addition of landed cost recorded as the transfer charges. This step is performed in Inventory as Inter- organisations transfers and the accounting impact is: Accounting Entry Debit Credit Source Inter-Org Receivable account ~* ‘At Define Inter-Org transfers @ Purchase order cost + actual Landed cost Networks Sub-inventory Material account xx At Define Sub-inventories / @ Purchase order Cost Define Organisation Inter-Org transfer charges account xx At Define Inter-Org transfers @ Amount of actual Landed cost Networks, E). Delivery from Receiving Inspection to Expense. Recorder at the time, when the goods are transferred from Receiving inspection to Expense Destination With Enter Receiving form, you can also move material from receiving inspection to expense destinations Oracle Purchasing uses the transaction quantity and the PO price of the delivered item to update the receiving inspection and expense charge account, Accounting Entry Debit Credit, Source cractostlearning blogspot cori20120S\wratre-eren-acceunts-wsed-nd ink anssits ‘Accouring eros in Oracte Purchasing and Payables | Oracle Eb Gjaan PO distribution charge accounts @ PO price x At individual item level Receiving inspection account @ PO price xx At Define Receiving Options (F). Purchase Order receipt to the Inventory without inspection at Standard Cost. When the goods are received into Inspection Location at the Enter Receipts form and delivered to inventory directly in one step. In this case, Apps performs both receipt and delivery in one step, Purchasing uses quantity ordered and PO price to update the following accounts. At the same time, Oracle Inventory uses the quantity and the standard cost of the received item to update the receiving inspection and the sub-inventory balances (The accounting impact is the same except as the case of inspection & deliver, except this one is arrived with one ‘operation/step). Accounting Entry Debit Credit, Source Receiving inspection account @ PO price xx ‘At Define Organisation! Receiving Options Inventory A/P Accrual account @ PO price xx At Organisation Parameters (for receiving Inventory Items) Case #1 Sub-inventory accounts @ Std. Cost xx At Define Sub-inventory Receiving inspection account @ PO price xx At Define Organisation Purchase Price Variance Account (Negative xx At Define Organisation Expense) Parameters (Delivered into inventory when the Std.cost is more than the PO price) Case #2 Sub-inventory accounts @ Std. Cost xx At Define Sub-inventory Purchase Price Variance Account (Positive xx At Define Organisation Expense) Parameters Receiving inspection account @ PO price xx At Define Organisation! Define Receiving Options (Delivered into inventory when the Std.cost is less than the PO price) (G). Purchase Order receipt to the Inventory without inspection at Average Cost. When the goods are received into Inspection Location at the Enter Receipts form and delivered directly in one step. I you use average costing, the actual cost is picked from the PO and hence you do not have any PPV (The accounting impact is the same except as the case of inspection & deliver, except this one is arrived with one operation/step) craclestlearing begepst.coni2012/0Guhal-are-d feren-acceurs-used- anh stsstats Accounting Entry Receiving inspection account @ PO price Inventory A/P Accrual account @ PO price (for receiving Inventory Items) Sub-inventory accounts @ PO price Receiving Inspection account @ PO price (for delivering to the inventory at actual PO cost) Accounting Entry Receiving inspection account @ PO price Expense account @ PO price (for receiving expense items) PO distribution charge account @ PO price Receiving inspection account @ PO price (for delivering to the expense destinations directly) x > Accouting otros in Oracle Purchasing ant Payables | Oracio Ebiz Gyaan Debit Credit Source ‘At Define Organisation/ Receiving Options xx At Organisation Parameters At Define Sub-inventory xx At Define Organisation/ Define Receiving Options (H). Purchase Order receipt to the Expense destinations without inspection. When the goods are received into Inspection Location at the Enter Receipts form and delivered to inventory directly in one step. Debit Credit Source ‘At Define Organisation/ Define Receiving Options xx At Define Items From Purchase Order x« At Define Organisation/ Define Receiving Options Return to Vendor from Receiving Inspection at Standard Cost. For a return from inspection, Purchasing decreases the receiving inspection balance, and reverses the accounting entry created for the original receipt Accounting Entry Inventory A/P Accrual account @ PO price Receiving inspection account @ PO price (for returning Inventory Items) Expense A/P Accrual account @ PO price Receiving inspection account @ PO price (for returning expense items) craclesblearing blogspol.comi2012/0awhal-are-feren-accours-used.andhiml Debit Credit Source ‘At Organisation Parameters xx At Define Organisation/ Receiving Options At Define Purchasing Options Xx At Define Organizations atssa13 Accouting otros in Oracle Purchasing ant Payables | Oracio Ebiz Gyaan Return to Vendor from Inventory (to Receiving Inspection) at Standard Cost. I you use receiving inspection and delivered material into inventory and if you want to return material from the same inventory, you must first return the material to Receiving Inspection from inventory before you can return to your vendor. For a return from inspection, Purchasing decreases the receiving inspection balance, and reverses the accounting entry created for the original receipt. This is two step process. Case # 1: Incase of Std.cost is less than PO price of the returned item when it was received into the inventory. Accounting Entry Debit Credit Source ‘Step#7: When you return goods from inventory to receiving location Receiving Inspection account @ PO price x ‘At Define Organisation! Define Receiving parameters Sub inventory accounts @ Std. Price xx At Define Sub-inventory Purchase Price Variance x At Define Org. Parameters (for reversing the entry - when the items is returned from SI to Receiving Inspection) ‘Stepi#2: When you return goods from receiving inspection location to the supplier Inventory A/P Accrual account @ PO price x At Organisation Parameters Receiving inspection account @ PO price xx At Define Organisation/ Receiving Options (for returning Inventory items from Receiving inspection to the vendor) Case # 2: Incase of Std.cost is more than PO price of the returned item when it was received into the inventory. Accounting Entry Debit Credit Source ‘Step#7: When you return goods from inventory to receiving location Receiving Inspection account @ PO price ~ At Define Organisation/ Define Receiving parameters Purchase Price Variance ~ At Define Org. Parameters Sub inventory accounts @ Std. Price Xx At Define Sub-inventory (for reversing the entry - when the items is returned from SI to Receiving Inspection) Case #2: When you return goods from the receiving inspection location to the supplier Inventory A/P Accrual account @ PO price x At Organisation Parameters craclestlearing begepst.coni2012/0Guhal-are-d feren-acceurs-used- anh m8stats Accouring eros in Oracte Purchasing and Payables | Oracle Eb Gjaan Receiving inspection account @ PO price Xx At Define Organisation’ Receiving Options (for returning Inventory Items from Receiving inspection to the vendor) (I). Return to Vendor from Inventory when the items are received through Direct Receipt without inspection at Standard Cost. The accounting impact is the same as in the previous inspection case, except all the accounting is done in ‘one step. Case # 1; Incase of Sid.cost is less than PO price of the returned item when it was received into the inventory. Accounting Entry Debit Credit Source Receiving Inspection account @ PO price x ‘At Define Organisation/ Define Receiving parameters Sub inventory accounts @ Std. Price »%x At Define Sub-inventory Purchase Price Variance 2% At Define Org. Parameters (for reversing the entry that is made when the items is received & delivered directly) Inventory A/P Accrual account @ PO price x At Organisation Parameters Receiving inspection account @ PO price Xx At Define Organisation! Receiving Options (for returning Inventory Items from Receiving inspection to the vendor) Case # 2: incase of Standard cost is more than PO price of the returned item when it was received into the inventory. Accounting Entry Debit Credit Source Receiving inspection account @ PO price x ‘At Define Organization/ Define Receiving parameters Purchase Price Variance x At Define Org. Parameters Sub inventory accounts @ Std. Price Xx At Define Sub-inventory (for reversing the entry that is made when the items are received & delivered directly) Inventory A/P Accrual account @ PO price x At Organization Parameters Receiving inspection account @ PO price Xx At Define Organization/ Receiving Options (for returning Inventory Items from Receiving inspection to the vendor) craclesblearing blogspol.comi2012/0awhal-are-feren-accours-used.andhiml atssa13 Accouting otros in Oracle Purchasing ant Payables | Oracio Ebiz Gyaan Same Procedure has to be followed for returning the expense items also. \CCOUNTS PAYABLE Invoice Booking at Standard Costing at Algorithm For Actual Supplier Invoice ‘When matched with the PO both Inventory AP Accrual account and Liability accounts come from the related Purchase order. if it s an unmatched invoice, you have to give the Inventory AP Accrual account and the liability account is defaulted from the supplier definition When the Invoice Price is more than the Purchase order Price Accounting Entry Debit Credit Source inventory AP Accrual account @ PO price Xx Comes from Purchase Order and Entered in the Distributions Invoice Price Variance account Xx ‘At Define Org. Parameters @ Invoice quantity * (Invoice price - PO price) AP liability account @ Invoice price * Invoice xx At individual Define Suppliers aty When the Invoice Price is less than the Purchase order Price Accounting Entry Debit Credit Source Inventory AP Accrual account @ PO price x Comes from Purchase Order / and Entered in the Distributions AP liability account @ Invoice price * Invoice Xx At individual Define Suppliers ay Invoice Price Variance account Xx At Define Org. Parameters @ Invoice quantity * (Invoice PO price) ans craclesblearing blogspol.comi2012/0awhal-are-feren-accours-used.andhimlsa13 Accouting otros in Oracle Purchasing ant Payables | Oracio Ebiz Gyaan For Other Cost Invoices like Clearing Agent payments, Insurance, Freight, etc. Different invoices are booked for each supplier invoice. 1.Supplier invoice 2.Clearing Agent invoice 3.Insurance invoice 4.Freight invoice. As these are booked as four different invoices this accounting entry is impacted that many times and the payments are made separately for each invoice. Accounting Entry Debit Credit Source Inventory AP Accrual account @ Actual costs cs ‘Comes from Purchase Order / and Entered in the Distributions AP liability account @ Invoice price Xx At individual Define Suppliers Invoice Booking at Average Costing at DU While making the inter-organization transfer (to record the landed cost) from Landed cost organization to Pharma or Non Pharma organizations, the Landed cost Clearing Account is credited with the landed costs as the Transfer Charges, The same account is debited at the time of invoice booking as an expense account. Accounting Entry Debit Credit Source inventory AP Accrual account @ PO price x ‘Comes from Purchase Order / and Entered in the Distributions Landed Cost Clearing Account x @ the actual landed cost AP liability account @ Invoice price * Invoice Xx At individual Define Suppliers aty Payment of the Invoices booked As mentioned above payment is done separately for each invoice. Accounting Entry Debit Credit Source AP liability account @ Amount paid cs ‘Comes from Purchase Order / and Entered in the Distributions Bank account @ Amount paid xx At individual Define Banks craclesblearing blogspol.comi2012/0awhal-are-feren-accours-used.andhiml sais.