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OracleApps11i Encumbrance Accounting

OracleApps11i Encumbrance Accounting

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Published by: Rajesh Pote on Jun 21, 2011
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04/01/2013

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Oracle Apps 11i Encumbrance Accounting

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Agenda y Functional Overview to Encumbrance Accounting. Setting Up Encumbrance Accounting Technical Details y y .

Ensure that departments don't exceed their budget or are made immediately aware when they do Plan the timing of actual expenditures 3 . Provincial & Municipal) use encumbrance accounting to: y y y Track spending by departments before an actual invoice is received.Functionality Educational institutions (Universities & Public School Boards) and government agencies (Federal.

To differentiate between the different modules and associated transactions. Commitment (PO) A commitment is solely associated with a requisition.Encumbrance Types Oracle heavily integrates encumbrance functionality into its purchasing. A commitment is generated to an account when a requisition is approved. however. it represents the beginning of the encumbrance process. 4 . encumbrances are normally referred to by different terms: Budget (GL) A budget entry is not an encumbrance. payables and ledger modules.

5 .Purchase Obligation (PO) A purchase obligation is associated with a purchase order. Actual (AP. Within Oracle. a purchase obligation is created. an invoice obligation is generated to an account when an invoice is approved. Contd. however. GL) An actual is not an encumbrance. it does represent the culmination of the encumbrance process. When funds are reserved on a purchase order. Invoice Obligation (AP) An invoice obligation is associated with an invoice.

y Funds Available = Budget Funds .Funds Balance The simplest overview of an account's current balances can be found within the Funds Inquiry form Nev: GL-> Inquiry->Funds.Actuals 6 .Encumbrances . The funds inquiry form essentially shows the basic encumbrance formula.

Advisory Users are notified with a message window informing them that the transactions failed funds check. the transaction is still processed normally.Funds Check Types Oracle applications implement three levels of funds checking: Absolute Users are prevented from processing a given transaction until funds are added or transferred to the account failing a funds check. users aren't notified or prevented from processing any given transaction. Alternatively. however. None While encumbrances are still tracked. a user within a budgetary control group will be able to process the transaction if the amount of the funds shortfall is less than their budgetary control group's Override amount. 7 .

from the initial requisition of a product to the posting of journals for an approved invoice. While considerably more complex examples exist. the related encumbrance balances should always be zero.) All encumbrances represent an intermediary stage of the procurement process. The following table shows a basic encumbrance cycle: 8 . encumbrances always have the following characteristics: As a transaction moves through the various procurement stages. When the procurement process is complete for any given transaction. the encumbrances will move along with it.The Encumbrance Process Encumbrances flow through most of the procurement process. that is. (See shaded cells.

Funds checking can be implemented at the following levels: Individual Account Level  Summary Account Level  Budgetary Control Group Level 9 . Oracle has integrated a highly flexible budgetary control environment into its financial applications.Budgets & Encumbrances : Setup To accommodate its clients' requirements.

Define a value within the liability range. Find the following 10 . The Reserve for Encumbrance is a liability account that acts as the offset to all encumbrance journals. The account should be enabled and of the liability account type Navigate to Setup \ Financials \ Key \ Values.Setting Up Encumbrance Accounting Step 1: Setting Up GL Set up the Reserve for Encumbrance account.

set 'Enable Budgetary Control' to Yes. 11 . also set 'Require Budget Journals' to Yes.Turn on funds checking for your accounting structure (set of books). the disadvantage is that the related journals add additional data to the database Navigate to GL: Setup \ Financials \ Books. AP and PO modules. This will enable funds checking within the GL. Within the Budgetary Control Options. The advantage to setting this option to 'Yes' is that budgetary transactions can be tracked. If you would like an audit trail for budgetary transactions.

An encumbrance you record when an invoice is created.The following encumbrance types are highly recommended: y Commitment .An encumbrance you record when a purchase order is created. y PO Obligation . Create additional encumbrance types by navigating to y GL: Setup \ Journal \ Encumbrances. 12 . y Invoice Obligation .An encumbrance your record when a requisition is created.

Define any necessary budgetary control groups by navigating to GLGL-> Budgets -> Define -> Controls. 13 .

GLGL-> Budgets -> Define -> Budget.Define your budget by navigating to. 14 .

Define your budget organizations GLGL-> Budgets -> Define -> Organizations 15 .

Step 2: Setting Up PO Enable encumbrances within PO. Navigate to PO: Setup \ Organizations \ Financial Options. 16 . Assign the encumbrance types from step C to the various encumbrances. Once again. a unique encumbrance type of Invoice Encumbrances is highly recommended.

it is recommended that all invoice approvals be set to non-postable. This setup facilitates user understanding of encumbrances. Navigate to AP: Setup\Invoice\ Invoice Hold and release Name.Step 3: Setting Up AP Examine the Invoice Approvals by navigating to While not mandatory. 17 . as funds won't be effected until an invoice is fully approved.

Technical Aspects Encumbrance Reservations are created in GL_BC_PACKETS While Encumbrance reversals are created in MTL_TRANSACTION_ACCOUNTS (Accounting_line_type = 15) RCV_RECEIVING_SUB_LEDGER (Actual_Flag = E ) 18 .

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