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Reconciliation
White Paper
Anil Kumar
Jan 2017
This report contains 12 pages
Decoding GL-Inventory Reconciliation.docx
Decoding GL-Inventory Reconciliation
Jan 2016
Contents
1 Introduction 1
Jan 2016
1 Introduction
This white paper aims at the following -
1. Providing insights into inventory period closure process.
2. The process that may be followed to reconcile Inventory Cost.
3. Troubleshooting the GL-Inventory Reconciliation issues.
Intention of the white paper is to provide effective guidelines and some handful scripts which
can be used in checking various aspects of period closing as well as Reconciliation between
Inventory and General Ledger.
This white paper is applicable for Average Costing Organizations for R12 application
versions. The document has been on the basis of testing and process validation done for a
Discrete Manufacturing organization and the Reader is requested to validate before applying the
document in any other environments.
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Jan 2016
In accounting (GL) terminology, these elements are referred to as Valuation A/cs and item cost
is distributed among these five elements. These cost elements are defined under the tab Costing
Information of the Organization Parameters of an Inventory Organization.
Navigation:
Inventory Responsibility Setup Organizations Parameters Costing Information
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Jan 2016
elemental value of the items, the report includes inventory residing in receiving and in-
transit. Items in receiving inspection are valued at the PO cost.
It is pertinent to note that last three reports give output on the basis of on-hand material
and prevailing item average cost at the time of submitting the program. Hence, it is
advisable to run these reports and save the outputs as soon as the period is closed and
before next period is opened so that these reports can be used during period end
reconciliation.
The program can be run for any period, whether open or closed. If it is generated for an open
period, one is creating a simulation, or snapshot of the period. The simulation status is indicated
in the report title. If the program is run for an open accounting period the report reads directly
from a temporary table.
Following columns are displayed in the report output for Average Costing Organizations–
Cost Group: Name of the cost group. In case of PJM enabled organizations, it is an attribute of
project which allows the system to hold item unit costs at a level below the inventory
organization.
Cost Group Description: Description of the cost group.
Item: Inventory Item code
On-hand Value: On-hand Value is calculated as multiplication of ROLLBACK_QUANTITY
(On-hand quantity) with item average cost at the time of period closure.
ROLLBACK_QUANTITY is calculated by taking current on-hand quantity from table
MTL_ONHAND_QUANTITY MOQ and deducting transaction quantities in
MTL_MATERIAL_TRANSACTION MMT for all transactions taking place after the end of
the concerned period.
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Accounted Value: This is the valuation calculated by adding current period’s account
distributions from MTL_TRANSACTION_ACCOUNTS table to the previous period’s on-hand
value.
Discrepancies: The difference between Accounted Value and On-hand Value. Some
discrepancies may occur due to rounding-off; however larger differences would need to be
looked into further.
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SELECT DISTINCT
mmt1.transaction_id,
mmt1.transaction_date,
mcacd1.transaction_costed_date,
mmt2.transaction_id,
mmt2.transaction_date,
mcacd2.transaction_costed_date,
mmt1.inventory_item_id,
mmt1.cost_group_id
FROM org_acct_periods oap,
mtl_material_transactions mmt1,
mtl_material_transactions mmt2,
mtl_cst_actual_cost_details mcacd1,
mtl_cst_actual_cost_details mcacd2
WHERE oap.acct_period_id = &acct_period_id
AND mmt1.transaction_date
BETWEEN oap.period_start_date
AND oap.schedule_close_date
AND mmt1.inventory_item_id = mmt2.inventory_item_id
AND mmt1.cost_group_id = mmt2.cost_group_id
AND mmt1.transaction_date < mmt2.transaction_date
AND mcacd1.transaction_id = mmt1.transaction_id
AND mcacd2.transaction_id = mmt2.transaction_id
AND mcacd1.transaction_costed_date >
mcacd2.transaction_costed_date
Discrepancies owing to back dated transactions get corrected in the PCRR on its own after two
periods as long as there is no back dated transaction in subsequent periods. The reason for this is
that the Accounted Value is restarted each period from On-hand Value on the assumption that
On-hand Value is the True value. Suppose we have three periods – 𝑃0 , 𝑃1and 𝑃2 . Below is what
happens when we backdate a transaction to the beginning of 𝑃1 and have otherwise normal
transactions –
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Backdated transactions could be controlled by following any of the below action plan-
1. Opening next inventory only after closing the previous period ensuring that at any point
of time, only one inventory period is in Open status.
2. Usage of Cost Cut-off: When it is required to keep more than one inventory period
open, use of cost cut-offs can effectively control backdated transactions. Usage of Cost
Cut-offs allows you to delay the cost manager until all of your backdated transactions
are entered. At this point you may shift the cost cut-off to the next period end and allow
the cost manager to process in order by transaction date and not in the order you entered
the transactions.
Below is the suggested usage of Cost Cut-offs where you are in April and want users to
enter backdated transaction in April after 1st May –
a) During April, Cost Cut-off should be set to 1st May. This means that the cost
processor will not pick up any transaction with TRANSACTION_DATE on or after
01-May-YYYY 00:00:00
b) After the end of April, users can enter transactions that are backdated as well as
normal transactions.
- The normal transactions (TRANSACTION_DATE > 30-Apr-YYYY 23:59:59)
will be ignored by the cost processor.
- The backdated transactions (TRANSACTION_DATE < 30-Apr-YYYY 23:59:59)
will be picked up for costing.
c) After April is closed, the Cost Cut-off date should be changed to the first day in the
next period i.e. 01st June. Now all the transactions with TRANSACTION_DATE >
30-Apr-YYYY 23:59:59 that were entered earlier will be picked up and costed.
Please refer metalink note 213628.1 (How to use the Cost Cutoff date) for more
information on this.
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transaction results in increase or decrease (as the case may be) in inventory report whereas GL
balances remain unaffected since both debit and credit accounts are same for such transactions.
Same issue arises when any of the valuation account is used at the time of Average Cost
Updates.
The best practice to avoid such issues is to use separate accounts for miscellaneous transactions
and average cost updates and control the usage of Valuation Accounts for these transactions.
Jan 2016