EBS LCM : How Does the Landed Cost Management Impacts the Accounting Flow in a Procure To Pay Cycle

[ID 782920.1] Modified 02-JUN-2011 Type HOWTO Status PUBLISHED In this Document Goal Solution References

Applies to:
Oracle Purchasing - Version: 12.1 to 12.1 - Release: 12 to 12 Oracle Landed Cost Management Oracle Cost Management - Version: 12.1 to 12.1 [Release: 12.1 to 12.1] Information in this document applies to any platform.

Goal
What are the accounting entries in a Procure to Pay cycle when the PO shipment is enabled for Landed Cost Management?

Solution
1. Receive the PO with estimated landed cost calculated - Receiving Inspection a/c DR @ Estimated Landed Cost - AP Accrual a/c CR @ PO Price inclusive of Non-Recoverable tax - Landed Cost Absorption a/c CR @ (Estimated Landed cost - PO Price inclusive of NonRecoverable tax) (This a/c is defined in Receiving options)   These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting These entries get created in rcv_receiving_sub_ledger

2. Deliver the PO to Inventory destination For Standard Costing organization - Material Valuation a/c DR @ Std Cost - Receiving Inspection a/c CR @ Estimated Landed Cost - Purchase Price Variance a/c DR @ difference between Std Cost and Estimated Landed Cost For Average Costing organization - Material Valuation a/c DR @ Estimated Landed Cost - Receiving Inspection a/c CR @ Estimated Landed Cost   These entries can be viewed from Inventory > Material Transactions > Distributions These entries get created in mtl_transaction_accounts

Receiving Inspection a/c DR @ difference between Actual LC and Estimated LC .Landed Cost Absorption a/c DR @ difference between Actual LC and Estimated LC   These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting These entries get created in rcv_receiving_sub_ledger Average Cost Update (Average Costing) .Delivery (Standard Costing) .Purchase Price Variance a/c DR @ difference between Actual LC and Estimated LC Landed cost Adjustment . 4.Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC Landed cost Adjustment .3.Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC If this Average cost update happens for updating the item cost with the difference between Actual and Estimated landed cost for an item which has 0 or negative on-hand quantity. Then the adjustment entries would get created as given below on running the Landed Cost Adjustment Processor Landed cost Adjustment .Liability a/c CR @ Invoice Price including tax .LCM:Exchange Rate Variance a/c DR @ difference between receipt exchange rate and Invoice exchange rate (This ERV a/c is defined in Receiving options) .Landed Cost Variance a/c DR @ difference between Actual LC and Estimated LC (This a/c is defined inventory > Set up > Organization > Parameters)    These entries can be viewed from Inventory > Material Transactions > Distributions These entries get created in mtl_transaction_accounts The link between the Receiving transaction and Average Cost update is done through txn_source_line_id.Material Valuation a/c DR @ difference between Actual LC and Estimated LC .Receiving Inspection a/c CR @ difference between Actual LC and Estimated LC . Create accounting for item invoice .Tax a/c DR @ tax rate . then the accounting entries would be as follows: . Rcv_transaction_id of deliver transaction is stamped as txn_source_line_id in mtl_material_transactions for the LCM adjustment transaction which has the transaction type as Average Cost Update.Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC . Invoice validated and actual landed cost calculated Once the Actual Landed Cost is calculated. LCM will populate this information in cst_lc_adj_interface with rcv_transaction_id corresponding to the receipt to which the invoice is matched.Delivery (Average Costing) .Material Valuation a/c DR @ 0 .Receiving .Receiving Inspection a/c CR @ difference between Actual LC and Estimated LC .AP Accrual a/c DR @ PO Price .LCM:Invoice Price Variance a/c DR @ difference between PO Price and Invoice Price (This IPV a/c is defined in Receiving options) .

AP Accrual a/c DR @ PO Price + Non-Recoverable Tax .Default Charge a/c DR @ invoice price (This charge a/c is defined in Receiving options) .Tax CR @ tax rate . Estimated and Actual Landed Cost are always inclusive of PO price and Non-Recoverable tax. 2.Liability a/c DR @ Invoice Price including tax .Receiving Inspection a/c CR @ Actual Landed Cost .Invoice Price Variance a/c CR @ difference between PO price and Invoice Price Note: 1.Purchase Price Variance a/c CR @ difference between Std cost and Actual Landed Cost Return to Receiving/Negative Correction (Average Costing) .{PO Price+Non-Recoverable Tax})   These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting These entries get created in rcv_receiving_sub_ledger Return to Receiving/Negative Correction (Standard Costing) .5.Material Valuation a/c CR @ Actual Landed Cost .Liability a/c CR @ invoice price 6.Material Valuation a/c CR @ Std Cost . 4. 3. Raise a Debit Note .Receiving Inspection a/c DR @ Actual Landed Cost .Landed Cost Absorption a/c DR (Actual Landed Cost . Retroactive Pricing is not supported in LCM enabled organization and hence retroactive price update program will not create the retroactive price adjustment entries in Receiving subledger for the receiving transactions created. Perform Return transaction or negative correction after invoice is accounted and actual landed cost is calculated Return to Vendor /Negative Correction . Accounting entries for Expense POs and Shopfloor destination POs has no impact as Landed Cost Management is not applicable for Purchase Orders with Expense and Shopfloor destination. Landed Cost Management has no impact on the Encumbrance Accounting as the PO gets reserved at PO price and it gets reversed at PO price only even though the actual charge account get hit at landed cost. . Landed Cost Absorption account need not be having zero balance at the end of this procure to pay cycle in LCM enabled organization.AP Accrual a/c CR @ PO Price . It will be zero only if default charge a/c defined in Receiving options is same as the landed cost absorption a/c and Actual landed cost is same as the Estimated landed cost. Create accounting for charge invoice . 5.Receiving Inspection a/c DR @ Actual Landed Cost   These entries can be viewed from Inventory > Material Transactions > Distributions These entries get created in mtl_transaction_accounts 7.

.Also review Note 1310019. FREIGHT. Please use 'Contact Us' for other feedback.1 How Landed Cost Management and Accounts Payable Accounting flow References NOTE:1310019. LCM. COST UPDATE. COSTING.1 .1 .AGIL-00075075 : E : Missing Default Row Related Products    Oracle E-Business Suite > Logistics > Logistics > Oracle Landed Cost Management Oracle E-Business Suite > Procurement > Procurement > Oracle Purchasing Oracle E-Business Suite > Manufacturing > Discrete Manufacturing > Oracle Cost Management Keywords COST. Very easy Comments Provide feedback for this article. ESTIMATED LANDED COSTS. PURCHASE ORDER Back to top Rate this document Article Rating Rate this document Excellent Good Poor Did this document help you? Yes No Just browsing How easy was it to find this document? Important Note: this feedback may be anonymously visible to other customers until processed by Oracle Support. LANDED COST.How Landed Cost Management and Accounts Payable Accounting flow NOTE:570660.

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