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aCCOUNTING

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ACCOUNTING
ACCOUNTING

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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 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

This account is usually an expense account. Case#1: 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). you can move material from receiving inspection to inventory. When you receive material from a vendor into receiving inspection. Cost Receiving Inspection account @ PO price Debit xx xx Credit Source At Define Sub-inventory At Define Organization ance Account (Negative Expense) xx At Define Organization 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 Sub-inventory accounts @ Std. when the goods are transferred from Receiving Inspection to Inventory With Enter Receiving form. Cost Debit xx xx Receiving Inspection account @ PO price xx At Define Organization/ Define Receiving Options Credit Source At Define Sub-inventory At Define Organization Parameters ariance Account (Positive Expense) . 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 ACCOUNTING ENTRIES A). Delivery from Receiving Inspection to Inventory under Standard Costing. Apps uses the quantity received and the PO price to update the following accounts. Accounting Entry Sub-inventory accounts @ Std. When the goods are received into Inspection Location.Exchange Rate Gain or Loss Account To Accumulate purchase exchange rate gains or losses for the organization. Recorded at the time. Purchase Order receipt to the Receiving Inspection Location. Accounting Entry Receiving inspection account @ PO price Inventory A/P Accrual account @ PO price (for receiving Inventory Items) Receiving inspection account @ PO price Expense A/P Accrual account @ PO price (for receiving expense items) Debit xx xx Credit Source At Define Organization/ At Organization Parameters Receiving Options xx xx At Define Organizations At Define Purchasing Options B).

Oracle Purchasing uses the transaction quantity and the PO price of the delivered item to update the receiving inspection and expense charge account. Recorder at the time. This step is performed in Inventory as Inter-organisations transfers and the accounting impact is: Accounting Entry Inter-Org Receivable account @ Purchase order cost + actual Landed cost Sub-inventory Material account @ Purchase order Cost Inter-Org transfer charges account @ Amount of actual Landed cost Debit xx Credit Source At Define Inter-Org transfers xx xx At Define Networks Sub-inventories / Define Organisationtransfers At Define Inter-Org E). If you use average costing. Recorded at the time. you deliver the inventory items to the inventory at the Enter Receiving Transactions form. when the goods are transferred from Receiving Inspection to Expense Destination Networks With Enter Receiving form. you can also move material from receiving inspection to expense destinations. when the goods are transferred from Receiving Inspection to Inventory After inspection. When the goods are received into Inspection Location at the Enter Receipts form. Delivery from Receiving Inspection to Inventory under Average Costing. Accounting Entry Sub-inventory accounts @ PO price Receiving Inspection account @ PO price xx (for delivering to the inventory at actual PO cost) At Define Organisation/ Define Receiving Options Debit xx Credit Source At Define Sub-inventory 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.(C). the actual cost is picked from the PO and hence you do not have any PPV. Purchase Order receipt to the Receiving Inspection at Average Cost. Accounting Entry Receiving inspection account @ PO price Inventory A/P Accrual account @ PO price (for receiving Inventory Items) Debit xx xx Credit Source At Define Organization/ Define At Organization Parameters Receiving Options (D). Accounting Entry PO distribution charge accounts @ PO price Debit xx Credit Source At individual item level xx At Define Receiving Options ction account @ PO price . Delivery from Receiving Inspection to Expense.

cost is less than the PO price) At Define Organisation/ Define Receiving Options At Define Sub-inventory At Define Organisation Parameters ariance Account (Positive Expense) (G). Cost Receiving Inspection account @ PO price xx xx At Define Sub-inventory At Define Organisation xx Debit Credit At Define Organisation/ At Organisation Parameters Receiving Options Variance Account (Negative Expense) xx At Define Organisation Parameters (Delivered into inventory when the Std. If you use average costing. In this case. Purchase Order receipt to the Inventory without inspection at Standard Cost. 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. Cost xx xx Receiving Inspection account @ PO price xx (Delivered into inventory when the Std. Accounting Entry Source Receiving inspection account @ PO price xx Inventory A/P Accrual account @ PO price (for receiving Inventory Items) Case # 1 Sub-inventory accounts @ Std. Purchasing uses quantity ordered and PO price to update the following accounts. Purchase Order receipt to the Inventory without inspection at Average Cost. Apps performs both receipt and delivery in one step. At the same time. except this one is arrived with one operation/step). Accounting Entry Source Receiving inspection account @ PO price xx Inventory A/P Accrual account @ PO price (for receiving Inventory Items) xx Debit Credit At Define Organisation/ At Organisation Parameters Receiving Options . 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). When the goods are received into Inspection Location at the Enter Receipts form and delivered to inventory directly in one step. When the goods are received into Inspection Location at the Enter Receipts form and delivered directly in one step.cost is more than the PO price) Case # 2 Sub-inventory accounts @ Std.(F).

Accounting Entry Source Inventory A/P Accrual account @ PO price Receiving inspection account @ PO price xx (for returning Inventory Items) Receiving Options Expense A/P Accrual account @ PO price Receiving inspection account @ PO price (for returning expense items) xx Xx At Define Purchasing Options At Define Organizations At Define Organisation/ Debit xx Credit At Organisation Parameters Return to Vendor from Inventory (to Receiving 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. Accounting Entry Source Receiving inspection account @ PO price xx Expense account @ PO price (for receiving expense items) PO distribution charge account @ PO price Receiving inspection account @ PO price xx (for delivering to the expense destinations directly) At Define Organisation/ Define Receiving Options xx Debit Credit At Define Organisation/ Define At Define Items Receiving Options xx From Purchase Order Return to Vendor from Receiving Inspection at Standard Cost.Sub-inventory accounts @ PO price Receiving Inspection account @ PO price xx xx At Define Sub-inventory At Define Organisation/ Define Receiving Options (for delivering to the inventory at actual PO cost) (H). Purchasing decreases the receiving inspection balance. For a return from inspection. Purchase Order receipt to the Expense destinations without inspection. and reverses the accounting entry created for the original receipt.

Case # 1: Incase of Std. Accounting Entry Source Step#1: When you return goods from inventory to receiving location Receiving Inspection account @ PO price xx Sub inventory accounts @ Std. Accounting Entry Debit Credit Source Step#1: When you return goods from inventory to receiving location Receiving Inspection account @ PO price xx At Define Organisation/ Define Purchase Price Variance xx At Define Org. you must first return the material to Receiving Inspection from inventory before you can return to your vendor. Purchasing decreases the receiving inspection balance. and reverses the accounting entry created for the original receipt. This is two step process.If you use receiving inspection and delivered material into inventory and if you want to return material from the same inventory.cost is less than PO price of the returned item when it was received into the inventory. For a return from inspection. Parameters Receiving parameters Sub inventory accounts @ Std. Parameters xx At Organisation Parameters Case # 2: Incase of Std.cost is more than PO price of the returned item when it was received into the inventory. 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 Receiving inspection account @ PO price Xx (for returning Inventory Items from Receiving inspection to the vendor) At Define Organisation/ Receiving Options Xx At Organisation Parameters . Price Purchase Price Variance (for reversing the entry – when the items is returned from SI to Receiving Inspection) Step#2: When you return goods from receiving inspection location to the supplier Inventory A/P Accrual account @ PO price Receiving inspection account @ PO price xx (for returning Inventory Items from Receiving inspection to the vendor) At Define Organisation/ Receiving Options xx xx Debit Credit At Define Organisation/ Define At Define Sub-inventory Receiving parameters 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 Receiving inspection account @ PO price Xx (for returning Inventory Items from Receiving inspection to the vendor) At Define Organisation/ Receiving Options xx At Organisation Parameters Case # 2: Incase of Standard cost is more than PO price of the returned item when it was received into the inventory. Parameters Receiving parameters Sub inventory accounts @ Std. Case # 1: Incase of 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 Receiving inspection account @ PO price Xx (for returning Inventory Items from Receiving inspection to the vendor) Same Procedure has to be followed for returning the expense items also.(I). except all the accounting is done in one step. Return to Vendor from Inventory when the items are received through Direct Receipt without inspection at Standard Cost. Price xx At Define Sub-inventory Receiving parameters Purchase Price Variance xx At Define Org. Accounting Entry Debit Credit Source Receiving Inspection account @ PO price xx At Define Organisation/ Define Sub inventory accounts @ Std. The accounting impact is the same as in the previous inspection case.cost is less than PO price of the returned item when it was received into the inventory. At Define Organization/ Receiving Options Xx At Organization Parameters ACCOUNTS PAYABLE . Accounting Entry Debit Credit Source Receiving Inspection account @ PO price xx At Define Organization/ Define Purchase Price Variance xx At Define Org.

Freight.PO price) AP liability account @ Invoice price * Invoice qty Debit Xx Xx Credit Source Comes from Purchase Order / and Entered in Parameters At Define Org.Insurance invoice 4. 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. Insurance.Clearing Agent invoice 3. Different invoices are booked for each supplier 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 Inventory AP Accrual account @ PO price Invoice Price Variance account @ Invoice quantity * (Invoice price .Freight invoice. Parameters For Other Cost Invoices like Clearing Agent payments.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. etc. the Distributions xx At individual Define Suppliers When the Invoice Price is less than the Purchase order Price Accounting Entry Inventory AP Accrual account @ PO price AP liability account @ Invoice price * Invoice qty Invoice Price Variance account @ Invoice quantity * (Invoice price . Accounting Entry Source Debit Credit .Supplier invoice 2. If it s an unmatched invoice. 1.PO price) Debit xx Credit Source Comes from Purchase Order / Xx Xx At individual DefineDistributions and Entered in the Suppliers At Define Org.

Accounting Entry Source AP liability account @ Amount paid xx Bank account @ Amount paid xx Debit Credit Comes from Purchase Order / At individual Define Banks and Entered in the Distributions Incase of Debit and Credit Memo When you enter a credit note and match it with a purchase order the following entry is created. The same account is debited at the time of invoice booking as an expense account.Inventory AP Accrual account @ Actual costs xx AP liability account @ Invoice price Xx Comes from Purchase Order / At individual Define Suppliers and Entered in the Distributions 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. Accounting Entry Source Inventory AP Accrual account @ PO price xx Landed Cost Clearing Account @ the actual landed cost AP liability account @ Invoice price * Invoice qty xx Xx Debit Credit Comes from Purchase Order / and Entered in the Distributions At individual Define Suppliers Payment of the Invoices booked As mentioned above payment is done separately for each invoice. Accounting Entry Source AP liability account @ Amount of credit note xx xx Debit Credit At individual Define Banks/ and comes from the relatedOrder / Comes from Purchase invoice and Entered in the Distributions Accrual account @ Amount of credit note .

In other way.PO price) is debited or credited by Payables according the invoice price variances. Accounting Entry Source AP liability account @ (Invoice Amount – Credit/Debit note amount) Debit xx xx Credit At individual Define Banks/ and comes from the relatedOrder / Comes from Purchase invoice Accrual account mount – Credit/Debit note amount) Prepayment Advance to Suppliers and Entered in the Distributions The complete cycle of transaction relating to Prepayment to suppliers and their accounting impact is detailed under. The amount of the application depends on the amount you want to apply from the prepayment to the invoice. Debit xx xx Credit At individual Define Suppliers At individual Define Banks Accounting Entry Source Prepayment to Suppliers account @ Amount of Prepayment paid @ Amount of credit note Step-2: When you receive invoice from the supplier and booked. Debit xx xx Credit At individual Define Banks/ and comes from the related invoice Comes from Define suppliers / Accounting Entry Source AP liability account @ (Prepayment amount applied) to Suppliers account ent amount applied) Entered in the related Invoices Step-4: When the Invoice amount is less than the Prepayment amount. you can apply the remaining amount to the future invoice (the accounting impact is same as above). applying the credit/debit note. Invoice Price Variance account @ Invoice quantity * (Invoice price . Accounting Entry Inventory AP Accrual account @ PO price AP liability account @ Invoice price * Invoice qty Debit xx xx Credit Source Comes from Purchase Order / At individual Define Suppliers and Entered in the Distributions Step-3: When you apply the existing prepayment to the invoice booked.When you pay the invoice. then the difference amount has to be paid to the supplier with the following accounting impact. Accounting Entry Source Debit Credit . Step-1: When you pay Prepayment to the supplier (one prepayment account is maintained for all suppliers and on liability account is maintained for all suppliers in Algorithm). Payables keep track of individual supplier balances and the individual application of prepayments to the invoices. the following entry is created with the difference in the amounts. If the Invoice amount is more than the Prepayment amount.

Payables keep track of individual employee balances and the individual application of advances/prepayments to the invoices. Accounting Entry Advances to Employees account e paid by the employee) AP liability account @ (Amount to be paid by the employee) Debit Credit xx Source Has to be given manually Comes from Define suppliers / xx Entered in the related Invoices Then you apply the remaining amount of the advance to the new invoice created. an invoice is booked from it. Accounting Entry Expense account @ Expense cost AP liability account @ Expense cost xx At individual Define Employees Reports Step-3: When you apply the existing advance to the invoice booked. Debit xx xx Credit At individual Define Employees as individual Define Banks At Suppliers Accounting Entry Source Advances to Employee account @ Amount of advance paid @ Amount of advance Step-2: When you receive Expense report from the employee. Step-1: When you pay Advance to the supplier (one Advance/prepayment account is maintained for all employees and on liability account is maintained for all employees in Algorithm). The accounting impact in Payables is detailed under. create an adjustment invoice against the same employee for the difference amount he/she has to pay. the related Invoices employee has to return the money back to the company. debiting the Advance to employee account. Debit xx xx Credit Source Comes from the invoice to which the advance is applied Comes from Define suppliers / Debit xx Credit Source Comes from Define Expense Accounting Entry AP liability account @ (Advance amount applied) Employees account amount applied) Entered in Step-4: When the Expense report/Invoice amount is less than the Advance amount.AP liability account @ (Invoice amount – Prepayment amount) Bank account @ Amount paid xx xx Comes from Purchase Order / At individual Define Banks and Entered in the Distributions Employee Advances The complete cycle of transaction relating to Prepayment to suppliers and their accounting impact is detailed under. The defined as the application amount of Suppliers depends on the amount you want to apply from the advance to the invoice. In payables you have the following accounting impact. For that. .

(All the remaining entries are same as the above advance application except the Step-4) Step-4 Accounting Entry AP liability account @ (Amount to be paid to employee) Bank account @ (Amount to be paid by the employee) Debit xx xx Credit Source At individual Define Employees defined as Suppliers Comes from Payment methods . If the Invoice amount is more than the Prepayment amount. The accounting impact is detailed under. Accounting Entry Bank account @ (Amount to be paid by the employee) Advances to Employees account @ (Amount to be paid by the employee) Debit xx Credit Source Comes from Payment methods xx At Define Receivables Activities In other way. then the difference amount has to be paid to the employee with the following accounting impact.Accounting Entry AP liability account @ (Remaining advance amount applied) Debit Credit xx Source Comes from the invoice to which the advance is applied Comes from Define suppliers / Entered in the related Invoices ployees account dvance amount applied) xx The accounting impact in Receivables receive a miscellaneous receipt crediting the same Advances to Employee account which was debited while booking the adjustment invoice.

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