EBSPOAccrualAccounting-2

Question: What is the difference between 'Accrue On Receipt' and 'Accrue at Period End'?

Answer: The two Accrual Methods used in Oracle are 'On Line Accrual' and 'Period End Accrual'.Accrue On Receipt means that when a receipt is saved, accrual transactions are immediately accounted and sent to the general ledger interface. This is also known as 'online' accrual.Accrue at Period End means that when a receipt is saved, the accrual transactions are not immediately recorded and sent to the general ledger; instead, the accounting entries are generated and sent at the end of the month only by running the Receipt Accruals - Period-End Process.

All items with a destination type of either Inventory and Outside Processing are accrued on receipt. For items with a destination type of Expense, you have the option of accruing on receipt or at period end.To verify a PO is enabled for On Line Accruals, PO Shipments > More tab, check box : accrue_on_receipt_flag will be enabled.At the table level, the column accrue_on_receipt_flag in PO_DISTRIBUTIONS_ALLand PO_LINE_LOCATIONS_ALL will be 'Y'

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Question: What is the recommended accrual method for expense items, Period end or Online?

Answer: One should use accrue on receipt if perpetual inventory is used to facilitate reconciliation between inventory valuation reports and accounting entries.
Most manufacturing customers choose to track Expense Accruals only on period end basis to avoid accounting over head each time a low value individual expense is incurred and hence choose period end accrual process to track expense item spending consolidated to a period, while 'Online Accrual process' is used for only high value inventory receipts which substantially increase a manufacturing company's assets and hence require to be tracked on a daily basis.
When both inventory and expense items are accrued on receipt, the following problems may be encountered:

Receiving inspection balances will include both inventory assets and expenses, so at the end of the month, they will need to be manually reclassified.
The number of entries needed to research and reconcile the perpetual A/P Accrual Account(s) becomes significantly increased.

Since the expense receipts could increase the volumne of low cost accrual accounting entries to process, the Accrual Reconciliation Report could take much longer to run.The amount of time required by end users to research any discrepancies would also increase.Period-end accrual for Expense Transactions is recommended for large volume of low cost expenditures which has low financial impact on a day to day basis. Also, Period-end accrual method reduces labor and overall cost in processing these large volume low cost expenditures everyday.

Question: Does Oracle Purchasing allow you to change from Online to period end for accruals and vice versa for expense items? And what are the implications?

Answer: Yes, you can change this as a setup parameter.
Navigation:
Setup -> Organizations -> Purchasing Options (Accrual alternate region)
However it is recommended that this business decision be taken at the time of implementing the Application as it will have major accounting impact.

The business should be clear at the time of implementation about using Online accrual method or period end accrual method for expense items based on their requirement to track expense spending.
New POs created after the setup switch from online to period end and vice versa, will however immediately be accrued using the new accrual method.The Purchase Orders that were created before the setup change will continue to use the method they were created in. The accrual method used for a PO is determined by the field Accrue_on_receipt flag on the PO shipments. This value can be viewed as part of the PO Shipments data.
This change in accrual setup may pose problems when you reconcile accrual account with GL balance. As in this case, one has to take care of both Uninvoiced Receipt Report of old period end accruals and Accrual Reconciliation Report for newer accrual accounting transactions or vice versa.Hence it is advisable to reconcile the accrual account and close the balances before making this switch. ie, either,

Decisions regarding accrual method change for Expense destination should therefore not be taken lightly. Reconciliation will be easier if there are no open uninvoiced POs with accrual balance.

Question: How to determine a default value for 'Accrue On Receipt' flag in the Purchase Order Shipments entry form?

Answer: The algorithm comes from POXPOS8B.pls and it's still the same in 11i and R12.Algorithm for Accrue on receipt flag:- If OSP, accrue_on_receipt = Y- If shipment destination = INVENTORY, accrue_on_receipt = Y- If shipment destination = EXPENSE then + if Financial Options's Accrue Expense Item = At Receipt, then accrue_on_receipt_flag := receipt_required_flag; [***] + Else if Financial Options's Accrue Expense Item = At Period End, then accrue_on_receipt_flag = NO [***] receipt required flag calculation: -- Get receipt required flag and inspection required flags -- in the following order: -- item -- line type (only for receipt required) -- vendor -- system options

Question: Why does the purchase order for expense items show accrue on receipt flag unchecked when the Purchasing Options has the set up as 'Accrue expense items at Receipt'?

Answer: If the purchase order is set to 2 way matching, then the accrue on receipt flag in the PO shipments will be unchecked by default even though Purchasing Options has the set up as 'Accrue expense items at Receipt'. But system will allow you to override the accrue on receipt flag by enabling the check box.
When the purchase order is having 2 way match, it signifies that no receipt is required. If there is no receipt, there is no need for receipt accounting and the accounting happens only when the invoice is matched to the PO. In such cases, the option of accrue at receipt does not make any sense. Hence the default setting becomes as accrue at period end where accrual is not at all required if invoice matching is done directly without performing the receipt.

Question: What are the accounting entries that get created for Online and Period end accruals when the purchase order is received,delivered and billed?

Answer: Please refer to Note 386807.1 to understand the accounting entries that gets created for online & period end accruals when the purchase order is received,delivered and billed.

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Overview
This document deals with the accounting entries that are expected for Purchase orders having Expense as well as Inventory destinations along with 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-end
b) On Receipt
Inventory Items can ONLY be accrued at:
a) Receipt

This document contains the following case studies:

Accrue on receipt: (APO)

Case 1: Expense Destination/Create, Approve, Reserve a PO/Receive /Invoice
Case 2: Expense Destination/Create, Approve, Reserve a PO/Invoice /Receive
Case 3: Expense Destination/Create, Approve, Reserve a PO/Receive/Invoice at a price greater than PO price
Case 4: Expense Destination/Create, Approve, Reserve a PO/Receive /Invoice at a quantity greater than PO quantity
Case 5: Inventory Destination/ Create, Approve, Reserve a PO/Receive /Invoice
Case 6: Inventory Destination/ Create, Approve, Reserve a PO/Invoice /Receive

Accrue at Period-end: (APE)

Case 1: Create PO /Receive PO /Deliver PO /Invoice/Run the period end program
Case 2: Create PO /Invoice/Receive PO/Deliver PO/Run the period end program
Case 3: Create PO/Receive PO/Deliver PO/Run the period end program/Invoice
Case 4: Create PO/Receive PO/Run the period end program/Deliver PO/Run the period end program/Invoice
Case 5: Create PO /Receive PO /Deliver PO /Invoice at a price greater than PO price/Run the period end program
Case 6: Create PO /Receive PO /Deliver PO /Invoice at a quantity greater than PO quantity/Run the period end program

Copyright © 2002 Oracle Corporation. All rights reserved. Oracle is a registered trademark of Oracle Corporation. Various product and service names referenced herein may be trademarks of Oracle Corporation. All other product and service names mentioned may be trademarks of their respective owners.

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Question: How to view the accounting entries that get generated when the purchase order is received and delivered?

Answer: Expense POs set to accrue at receipt:

Accounting entries for Expense purchase order receipts can be viewed from Purchasing > Receiving > Receiving Transaction Summary > Keep the cursor against the receiving transaction > Go to Tools > View Accounting.Accounting can be viewed for all types of receiving transactions which include Receive,Deliver,Return to Receiving,Return to Vendor,Correction against delivery and Correction against Receiving following this navigation.
Inventory POs set to accrue at receipt:

For POs set to inventory destination, accounting entries for RECEIVE,RETURN TO VENDOR and CORRECTION AGAINST RECEIVING can be viewed from Purchasing > Receiving > Receiving Transaction Summary > Keep the cursor against the receiving transaction > Go to Tools > View Accounting. To view the accounting entries for DELIVER,RETURN TO RECEIVING and CORRECTION AGAINST DELIVERY transactions, navigate to Inventory > Transactions > Material transactions > Distributions
Expense POs set to accrue at period end:

For POs set to accrue at period end, accounting entries cannot be viewed from application front end and the 'View Accounting' option from Receiving Transaction Summary will be grayed out. Question: View Accounting from Receiving Transaction Summary is grayed out. How to view the accounting entries created for purchase order receipts?

Answer: View Accounting from Receiving Transaction Summary will be grayed out when the receiving transaction is done for a Purchase Order which is set to accrue at period end. Period end accrual entries created by Receipt Accrual-Period end process are temporary accrual entries that get created every month end till the invoice is created and it get reversed in the next period. Therefore multiple accrual entries will exist in Receiving subledger in different periods for the same PO receipt. Hence these entries cannot be viewed from View Accounting in Receiving Transaction Summary form.

Question: How can one tell whether each journal in the general ledger is for period- end or on Online accruals?

Answer: Period-end and Online accrual entries may be contained in the same GL batch, but there will be separate journal created for each. Journals created by the Receipt Accruals - Period-End Process will have a category of 'Accrual' and journals created for online accruals will have a category of 'Receiving'.

Here is some technical table-level information that may provide assistance: Table: GL_INTERFACE Column : USER_JE_SOURCE_NAME = Purchasing Column : USER_JE_CATEGORY_NAME = Accrual (for period-end accruals) - OR - USER_JE_CATEGORY_NAME = Receiving (for online accruals) Table: GL_JE_HEADERS Column : JE_SOURCE = Purchasing JE_CATEGORY = Accrual (for period-end accruals) - OR - JE_CATEGORY = Receiving (for online accruals)

Question: What reference columns in GL_JE_LINES are populated for the accounting entries created from Purchasing/Receiving?

Answer: Accruals generated in the purchasing module (Receiving subledger-rcv_receiving_sub_ledger) after performing the PO receiving transactions will be imported into General Ledger (GL_JE_LINES) as accrual journals.
The following reference fields are used to capture and keep PO information in the GL_JE_LINES table.
These reference fields are populated when the Journal source (JE_SOURCE in GL_JE_HEADERS) is Purchasing.

For Period end accruals, the REFERENCE_5 column is not used.

Note: This is applicable only for 11i and not for R12 architecture.

Question: Why does the invoice distribution show accrual account instead of showing the PO charge account when the invoice is matched to the purchase order or receipt?

Answer: If the purchase order is set to accrue at receipt, then accrual account will get defaulted in the invoice distributions so that accrual account will get hit once the accounting is done for the invoice. Depending on the destination type used in the PO, inventory accrual a/c or expense accrual a/c will get defaulted in the invoice distributions.

PO charge account will get defaulted in invoice distributions only when the purchase order is set to accrue at period end so that charge account will get hit once the accounting is done for the invoice. Accrual account will not come into picture in Payables for period end accruals.

Question: How to get the balancing segment of PO Charge account for Accrual account while creating the accounting entries for purchase order receipts?

Answer: It is not possible to derive the balancing segment of PO charge account for Accrual account in 11i. It can be done only in R12 using the feature 'Account Derivation Rules' available in SLA architecture.

But it is possible to derive the balancing segment of PO charge account for Receiving Inspection account in 11i using the feature 'Automatic offset method'.

This feature is available in Purchasing > Set up > Organization > Purchasing options > Receipt Accounting tab.
If this option is set to 'Balancing', the balancing segment of PO Charge account will override the balancing segment of Receiving Inspection account when the accounting entries get created for PO receipt.

Question: How do you transfer the accounting entries created in Receiving subledger to General Ledger?

Answer: For online accruals,
Once the receiving transaction is created, Receiving Transaction Processor will generate the accounting entries in Receiving subledger as well as gl_interface.

Similarly for Period end accruals,
The Receipt Accrual Period end process will generate the accounting entries in Receiving subledger as well as gl_interface.

The data from the GL_INTERFACE table can be transfered to GL tables, by running the Journal Import program from the GL Responsibility. Accounting entries will be created in GL. Be sure to review the output file from the Journal Import request to ensure that the records are imported successfully.In case of encumbrance enabled environment, when the purchase order is set to online accrual, accounting entries will automatically get imported to General Ledger.The Journal import program will be triggered by the Receiving Transaction Processor during the receiving process itself.

Question: What are the conditions that need to be satisfied for the Uninvoiced Receipt Report to show a PO receipt ?

Answer: Uninvoiced Receipt Report(URR) picks all POs satisfying the below conditions as on the last date of the Period specified on the period_name parameter , if no parameter is specified, the URR run date will be considered.

Received quantity > Billed quantity for the Purchase Order shipment
PO shipment should not be in closed( depending on the Include Closed POs parameter ) /finally closed/cancel status

Question: What is the impact/effect of Finally closing an uninvoiced PO on Accrual - after PO has been fully or partly received ?

Answer: The impact of final closing a uninvoiced PO on Accrual, depends on whether the PO is a Period End PO or Online PO.

For a Period end PO:

For online accrual enabled POs:

Final Closed or Closed or Cancelled, a PO enabled for Online accruals, which has a accrual balance will be reported on the Accrual reconciliation report. This report will help to review the accrual liability for the supplier.Though final closed and cancel statuses do not let any further actions on the PO, the accruals can be reversed by using the write off feature for online accruals.Hence the PO will have accrual balance untill written off using the Accrual Reconciliation Write Off feature. Question: Why does the View Accounting from Receiving Transaction Summary for DELIVER transaction not showing any accounting entries?

Answer: When a Purchase Order is received and delivered to inventory destination, accounting entries for RECEIVE transaction alone will exist in Receiving subledger and accounting for DELIVER transaction will not happen in Receiving subledger, instead it will happen in Inventory subledger. But the View Accounting from Receiving Transaction Summary is intended to show only the accounting entries pertaining to Receiving subledger. Hence it does not show the accounting entries for deliver transaction when the purchase order is delivered to inventory destination.

To view the accounting entries for DELIVER transaction, navigate to Inventory > Transactions > Material Transactions > Distributions.

Question: What is the impact of Retroactive Pricing on Receipt Accounting process?

Answer: Retroactive pricing will have its impact on On-line Accrual Accounting when the PO price is modified after performing the receipt. When the price is modified and when the Retroactive price adjustment program is run, it will create the accounting entries given below in Receiving subledger for both RECEIVE and DELIVER transaction. It will not create any accounting in inventory subledger even if the destination type is inventory.
RECEIVE transaction

Accrual a/c CR @ difference between (received qty * new PO price) and (received qty * old PO price)Receiving Inspection a/c DR @ difference between (received qty * new PO price) and (received qty * old PO price)

DELIVER transaction

Receiving Inspection a/c CR @ difference between (received qty * new PO price) and (received qty * old PO price)Retroactive price adjustment a/c defined in Receiving options CR/DR @ difference between (received qty * new PO price) and (received qty * old PO price)
Note: PO price also includes the Non-Recoverable tax per unit price

Question: How does the accounting happen when a purchase order for a consigned item is received?

Answer: Accounting entries get created for a consigned item only on doing the 'Transfer to Regular' transaction in Inventory and there won't be any accounting happening when the purchase order is received.Transfer to Regular transaction

Note: PO price also includes the Non-Recoverable tax per unit price

Question: Receiving Inspection account (or Receiving Inventory account) shows a balance in GL for purchase orders with OSP items set to Shop floor destination. Why does it happen?

Answer: For Receiving Inspection a/c (or Receiving Inventory a/c) to get offset without any balance in GL, purchase order should be received and delivered (Received qty = Delivered qty) and the corresponding accounting entries should be posted in GL.

Still if it shows a balance, it has to be ensured that the Resource Absorption a/c defined in Bill of materials > Routing > OSP Resources should be same as Receiving Inventory a/c defined in Purchasing > Organization > Receiving Options.

For POs with OSP items set to Shop floor destination, accounting entries get created as follows:

Question: Receipt against dropship PO hits the Clearing account instead of Receiving Inventory account (or Receiving Inspection account). Why does it happen?

Answer: In Dropshipment, the PO receipt is done in the intermediate inventory organization which is a logical transaction and not a physical transaction which does not involve any goods receipt in the Receiving dock. Hence there is no need for the Receiving Inventory a/c and just the Clearing a/c defined in Receiving options gets debited and Accrual a/c gets credited for this logical transaction.

Question: How does one include receipts into process enabled OPM inventory organization on Accrual Reconciliation Report?

Answer: Observation:

Create PO
Receive and deliver into OPM organization
Run Accrual Reconciliation Report
Receipts into OPM inventory organization does not show on the report output

Current design of Purchasing application release 11.5.10.2 does not allow for OPM transactions to be reported in Accrual Reconciliation Report.
This is confirmed by product development inBug 9042372 - RECEIPT INTO OPM INV ORGANIZATION NOT SHOW ON ACCRUAL RECONCILIATION REPORT
Enhancement Request Bug.8560981 (15) ACCRUAL REPORT FOR OPM TRANSACTIONS is also logged to request the feature for release 11i.

In release 12 or later, this feature is available.Reference: Note 973084.1 How Does One Include OPM Receipt in Accrual Reconciliation Report?

EBSPOAccrualAccounting-2

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