Oracle Applications :Purchasing Receiving Inventory Account

2/01/2016 07:43:00 PM

Sekhar Byna

The Receiving Inventory Account is a clearing account.

The account is used for perpetual (on receipt) accruals.

After receiving transactions are processed and the Transfer Transactions to GL process is run, the Receiving Inventory

Account is cleared and the Material account is charged with the cost of the capitalized inventory.

Specify this account when you define Receiving Information for your inventory organizations.

When a PO Receipt is created in the Receiving Transactions form with destination type as Inventory, 2 entries get created in

the RCV_TRANSACTIONS form. One with Transaction type as Deliver and other with Receive. Also accounting is also

derived for the 'RECEIVE' transaction.Entry RECEIVING_INSPECTION and an ACCRUAL entry

in the RCV_RECEIVING_SUB_LEDGER table.

When "Create Accounting: Receiving" is run, these Accrual Transaction for Receipt is transferred to GL through SLA. In

SLA for Receive Transactions "Receiving Inspection" account is Debited and "Accrual" Account is credited. Journal

Category will be "Receiving" for these transactions

For the Deliver Transaction type the transaction is sourced to Material Transactions as "PO Receipt" Transaction Type.

Accounting will be done on this transaction when "Active Cost Worker" program is run. Usually this program will be

scheduled to run every few minutes to calculate cost of the transactions.

When "Accounting Program" is run, these transactions from MTL_TRANSACTION_ACCOUNTS will be transferred to GL

through SLA. In SLA for Deliver Transactions, "Inventory Valuation" account is Debited and "Receiving Inspection"

account is Credited. Journal Category will be "Inventory" for these Deliver Transactions.
 PO Receipt Accounting entries to GL

Accounting Entries

Dr.... .Receiving Inventory a/c

Cr.....AP Accrual A/c

On moving to final destination

Dr.....Sub inventory a/c

Cr...... Receiving inventory a/c

There will be 2 more a/c entries if inspection is done.

Entries in AP

When Invoice is raised & matched to PO

Dr.....AP Accrual a/c

Cr.....Liability a/c

When Invoices is raised w/o matching to PO

Dr.....Charge a/c
Cr.....Liability a/c

On payment of the same

Dr.....Liability a/c

Cr.....Bank/Cash a/c

Once the invoice is approved and accounted, you can view the accounting

entries from Tools--> View Accounting

Oracle Applications Purchasing : Charge Account Setups

1/31/2016 06:56:00 PM

Sekhar Byna

What is charge account or rather why we use charge account?

Ans: The charge account in your PO distributions will be used as the Debit account during

your PO Delivery process.

For example if you are receiving and delivering an Inventory Item the charge account would typically default

from Sub-inventory or organization material account.

This is the balance sheet account that will be charged after inventory is capitalized.

Setup

Look at the Material Account on the destination inventory organization, or (if specified), destination sub

inventory.

Inventory: Setup/Organizations/Parameters or Sub inventories

If you are dealing with an expense item, the charge account could default from your sub-inventory or

organization or item expense account

If the destination type is expense, you can specify this account (provided it is not project related) and

override any defaults.

This account will be either an asset clearing account that will be included on the balance sheet or an

expense account

that will be included on the income statement. This account is either created or specified when you create a

purchase order.

Purchase Orders, and Releases windows, the Account Generator constructs the account when you navigate
into the distribution Charge Account field,

or when an explicit or implicit commit anywhere in the window provides enough information for Oracle

Purchasing to create a distribution.

For Shop Floor destinations, the code is constructed when you enter all required data in the Outside

Processing region

and either return to the document distributions region or commit.

For all windows, the build sequence is:

1. Charge

2. Budget

3. Accrual

4. Variance

Charge account defaulting rules depend on

a) Type of Item

b) Destination Type

c) Destination Sub-inventory.

There are 3 kinds of Items used in Purchasing.

Expense Items - Referred to as Item A

Inventory Expense Items - Referred to as Item B

Inventory Asset Items - Referred to Item C

1) Expense Items - Referred to as Item A.

These items normally have the following item attributes

INVENTORY_ASSET_FLAG = N

PURCHASING_ITEM_FLAG = Y

INVENTORY_ITEM_FLAG = N

2) Inventory Expense Items - Referred to as Item B

These items normally have the following Item Attributes

INVENTORY_ASSET_FLAG = N

PURCHASING_ITEM_FLAG = Y

INVENTORY_ITEM_FLAG = Y

c) Inventory Asset Items - Referred to Item C

These items have the following Item attributes

INVENTORY_ASSET_FLAG = Y

PURCHASING_ITEM_FLAG = Y

INVENTORY_ITEM_FLAG = Y

COSTING_ENABLED_FLAG = Y

2. DESTINATION TYPE :

The Destination type determines the final destination of the

items.

This can be of two types

a) EXPENSE

b) INVENTORY -

3. DESTINATION Sub inventory:

When an Item is being received into Inventory , a sub-inventory

needs to be specified. A subinventory can be

a) ASSET subinventory

b) EXPENSE sub-inventory

The sql below will help in identifying what type of a

subinventory , the item is being delivered INTO.

The sql below will help in identifying what type of a

subinventory , the item is being delivered INTO.

select

substr(EXPENSE_ACCOUNT,1,6) Exp_act ,
substr(ENCUMBRANCE_ACCOUNT,1,7) Enc_act ,

ASSET_INVENTORY,

substr(SECONDARY_INVENTORY_NAME,1,15) S_name,

substr(DESCRIPTION,1,15) descrip,

substr(SOURCE_ORGANIZATION_ID,1,8) s_o_id

from

MTL_SECONDARY_INVENTORIES

where

SECONDARY_INVENTORY_NAME = '&destination_subinventory';

pass the value of DESTINATION_SUBINVENTORY

from PO_DISTRIBUTIONS_ALL.DESTINATION_SUBINVENTORY

if the value of ASSET_INVENTORY = 1 then this is an ASSET subinventory.

if the value of ASSET_INVENTORY = 2 then this is NOT an ASSET subinventory.

3.Keeping in view of the types of Items and the destination mentioned above

These are the destination types that can be possible against each type of item

Item A can have ONLY one destination- EXPENSE

Item B can have the destination of

a) EXPENSE

b) INVENTORY -- ASSET subinventory

c) INVENTORY -- EXPENSE subinventory

Item C can have the destination of

a) EXPENSE

b) INVENTORY -- ASSET subinventory

c) INVENTORY -- EXPENSE subinventory

Defaulting Rules for

1) Item A --- Defaults from the Expense a/c defined against the ITEM in the Receiving Organization.(

Organization Items)
===================================================================

====

2) Item B--- EXPENSE -Defaults from the Expense a/c defined against the ITEM in the

in the Receiving Organization.( Organization Items)

2) Item B ---INVENTORY--- ASSET Subinventory .... charge account comes from

a) EXPENSE a/c of the ASSET SUBINVENTORY in the RECEIVING Organization.

(This is ONLY if the PO Distribution , contains the Subinventory Information)

b) If the PO distribution DOES NOT have a SUBINVENTORY information

Expense a/c defined in the Organizational Parameters of the Receiving Organization.

===================================================================

=====

3) Item B ---INVENTORY--- EXPENSE subinventory -- comes from

a) EXPENSE a/c of the EXPENSE SUBINVENTORY in the RECEIVING Organization.

(This is ONLY if the PO Distribution , contains the Subinventory Information)

b) If the PO distribution DOES NOT have a SUBINVENTORY information

Expense a/c defined in the Organizational Parameters of the Receiving Organization.

===================================================================

=====

4) Item C --- EXPENSE -Defaults from the Expense a/c defined against the ITEM in the

in the Receiving Organization.( Organization Items)

5) Item C ---INVENTORY---ASSEST Subinventory .charge account comes from

a) Material a/c defined against the ASSET SUBINVENTORY /of the RECEIVING Organization.

(This is ONLY if the PO Distribution , contains the Subinventory Information)

b) Material a/c defined in the Organizational Parameters of the Receiving Organization.

6) Item C ---INVENTORY --EXPENSE Subinventory -- comes from

a) Expense a/c defined against the EXPENSE Subinventory in Receiving Organization.

(This is ONLY if the PO Distribution , contains the Subinventory Information)

b) If the PO distirbution DOES NOT have a SUBINVENTORY information

Material a/c defined in the Organizational Parameters of the Receiving Organization.

For more information On Oracle Purchasing

Refer Oracle Purchasing Blog