An Oracle White Paper

May 2014

Encumbrance Accounting in the Procure to Pay

Flow: Best Practices
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Executive Overview ..................................................................................................... 3

Introduction ................................................................................................................. 4
Encumbrance Accounting – Procure-to-Pay Overall Process Flow ............................ 6
Encumbrance Accounting – Procure to Pay with Journal Entries ............................... 7
Creating Budgets .................................................................................................... 7
Purchase Requisitions Approval and Reserve ........................................................ 9
Purchase Order Reservation & Approval .............................................................. 10
Changes to PO: Increase quantity or price through Revision ............................... 11
Changes to PO: Decrease Quantity or Price through Revision............................. 12
Cancellation of Quantities/Lines/Shipments in a Purchase Order ........................ 13
Receipt of Goods/Services .................................................................................... 13
Invoice Matched to PO .......................................................................................... 14
Invoice Payment .................................................................................................... 16
Technical Overview ................................................................................................... 17
Conclusion ................................................................................................................ 18
Appendix: Setup Overview ........................................................................................ 19
Setup in Oracle General Ledger ........................................................................... 19
Setup in Oracle Purchasing, Oracle Payables and Oracle Cost Management ..... 25
Setup in Oracle Inventory ...................................................................................... 26
Appendix: Common Customer Issues and their resolution ....................................... 29
Appendix: Important Tables used by Encumbrance Accounting ............................... 38
Appendix: Reference Documents / Notes related to Encumbrances ........................ 39
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Table of figures:

Figure 1: Setting up Budget for Encumbrance Accounting.................................................... 8

Figure 2: Funds Availability after Budget Creation .................................................................. 8
Figure 3: Budget Position after Commitment ........................................................................... 9
Figure 4: Budget Position after Obligation.............................................................................. 11
Figure 5: Budget Position after PO Amount increase ........................................................... 12
Figure 6: Budget Position after Invoice Matching ................................................................. 16
Figure 7: Encumbrance Accounting Technical Overview .................................................... 17
Figure 8: Enable Budgetary Control ......................................................................................... 19
Figure 9: Sub-ledger Accounting Method................................................................................ 20
Figure 10: Define Budget ........................................................................................................... 21
Figure 11: Define Budget Organization ................................................................................... 21
Figure 12: Account Ranges ........................................................................................................ 22
Figure 13: Budgetary Control Options .................................................................................... 22
Figure 14: Budgetary Control Group ....................................................................................... 23
Figure 15: Profile for Budgetary Control Group .................................................................... 23
Figure 16: Open Encumbrance Year........................................................................................ 24
Figure 17: Define Encumbrance Types ................................................................................... 24
Figure 18: Define Financial Encumbrance Options .............................................................. 25
Figure 19: Enable Encumbrance in Oracle Purchasing and Oracle Payables .................... 26
Figure 20: Costing Information ................................................................................................ 27
Figure 21: Organization Parameters - Other Accounts ......................................................... 27
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Executive Overview
Most organizations understand the need to use budgetary controls in their business processes. Budgetary
controls ensure that unnecessary and maverick spending is minimized or curtailed. Budgetary controls
ensure proper approvals for legitimate expenses and users do not overshoot the budgets specified for
their activities. It is a very useful tool to avoid unnecessary business transactions and expenses.
Encumbrance Accounting in Oracle e-Business Suite integrates the entire budgetary control lifecycle and
enables better control over expenditures incurred in organizations. With Encumbrance Accounting,
organizations can monitor the amount of money they spend, ensure that departments don't exceed their
budgets or are immediately notified if they do. It can also help predict cash flow balances more
effectively.
This paper will help users understand the concept of Encumbrance Accounting and how it can be set up
and used within Oracle e-Business Suite. The main focus of this white paper is to explain the
Encumbrance Accounting process from a Procure to Pay perspective.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Introduction
Encumbrance Accounting is a widely used business practice for managing expenses and ensures that
departments stay within budgetary expenditure targets. Encumbrance Accounting per se is a much wider
concept than a simple budgetary control. Encumbrance Accounting helps organizations stay within
budgets, so that it is easy for users and organizations to identify and report various business transactions
and how they impact cash flows. This white paper provides an overview of the Encumbrance
Accounting process used in Oracle E-Business Suite.

What is Encumbrance?
Encumbrance is a commitment to pay in the future, although the goods or services have been ordered,
however, they have not been received yet.
For a company, Encumbrance reserves the money for paying for goods or services in the future; the
amount is called Encumbrance. And the amount(s) will subsequently become expenditure when goods
and services are received.

What is Encumbrance Accounting?

Encumbrance Accounting is also known as Commitment Accounting. It deals with accounting for
expenses from the time that the intent to incur that expenditure becomes clear, that is, the commitment
to incur the expenditure becomes certain. Usually, the majority of spend in an organization happens in
the procurement process; when purchase requests are created and approved, there is a greater degree of
certainty about incurring that expense over a certain period. Encumbrance Accounting ensures that this
expense is accounted for, against the sanctioned budget, when the request is approved. This implies that
funds are set aside in accounting for meeting this expense which is not liable to be paid unless the
requests are received and billed. Encumbrance Accounting also ensures that a reduced budget is
available for other competing purchase requests. When the budget is completely utilized, it is no longer
possible to create fresh purchase requests.

What is Encumbrance Accounting in Oracle e-Business Suite?

Encumbrance Accounting ensures that money or budgets are set aside for meeting anticipated future
expenses. There may be multiple scenarios in the procurement process that use Encumbrance
Accounting: creation of purchase orders with backing purchase requisitions, creation of purchase orders
without a backing requisition, directly accounting for an invoice and paying it, without a backing
purchase order, etc. Encumbrance Accounting in Oracle e-Business Suite ensures that the money is
correctly set aside and appropriately accounted for during the entire procurement lifecycle.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Oracle Encumbrance Accounting Terms

The following terms are widely used while discussing Encumbrance Accounting, in this whitepaper.
COMMITMENT
Commitment implies the commitment to spend money in the future. In Oracle e-Business Suite, it
denotes reserving and accounting for money committed to be spent on a Purchase Requisition
document. Commitment happens on the approval of a Purchase Request document.
OBLIGATION
Obligation is the obligation on the part of an issuer of a purchase order or a contract to pay an amount
to a vendor, as per the terms and conditions and supply schedules of the purchase order or contract. In
Oracle e-Business Suite, it denotes reserving and accounting for money that will be required to pay for
goods and services contracted through a purchase order / agreement type of document. Obligation
takes place on the approval of a Purchase Order / Agreement.
ENCUMBRANCE ENTRY
An encumbrance entry is a journal entry that is created when you reserve a requisition or a PO or create
an unmatched invoice – the type of encumbrance created is either a Commitment or Obligation.
Encumbrance journal entries are always created using the functional currency (that is, the currency of
the default operating unit).
BUDGET ACCOUNTS
These are accounts against which amounts are specified in a Budget that is created. These budgetary
Accounts can be specified at the summary level or detail level.
FUNDS AVAILABLE:
Funds Available = Budget – (Actual Expenses + Encumbrances)
Funds available are the amount of Funds, available to be encumbered. It is the difference between the
amount you are authorized to spend and all actual and anticipated expenditures. In other words, funds
available are the amount budgeted less actual expenses and encumbrances of all types. Users can use the
Funds Check feature in purchase requisitions and purchase orders to review the available funds.

Benefits of Encumbrance Accounting

Using Encumbrance Accounting, the following benefits are available:
• Enforces Control: Encumbrance Accounting works together with budgetary control,
monitors spending by departments, avoids overspending and enforces controls.
• Increases Visibility: Encumbrance Accounting enables users to pre-allocate the
budget amount, track expenditure, and increase spends transparency.
• Accelerates Planning Process: Encumbrance Accounting is used to predict cash
outflow and is also used as a planning tool to accelerate the planning process.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Encumbrance Accounting – Procure-to-Pay Overall Process Flow

Encumbrance Accounting is closely integrated with the entire Procure-to-Pay (P2P) flow. It starts with a
purchase requisition and ends when actual expenditure is booked against an invoice. Encumbrance
Accounting in the Procure-to-Pay process is depicted in the diagram as follows:

Encumbrances flow throughout the procurement process; that is, from the intention to buy goods or
services, to procuring and receiving the goods or services, to the final step of incurring the actual
expenditure and making the payment. The following stages are basic Encumbrance Accounting activity
in the procure-to-pay process:
• Creating and Approving a Purchase Requisition (Commitment Stage)
• Creating and Approving a Purchase Order (Obligation Stage)
• Creating and Approving Receipts / Invoices (Actual Stage)
This is business major processes for company buying goods or services. Along with that, Encumbrances
liquidate from one stage to the next.
An example for this business flow is as follows:

Business Transaction Budget Commitment Obligation Actual

Remaining

Budget Allocated for Expenditure - 10000 - - -

$10000

Purchase Requisition (PR) created for $ 10000 - - -

2000

PR Approved 8000 2000 - -

PR Auto-created to Purchase Order (PO) 8000 2000 - -

Purchase Order Value changed from 8000 2000 - -

$2000 to $ 2500

Purchase Order Approved 7500 (2000) - 2500 -

Invoiced received and matched against 7500 - (1000) 1000

PO for $ 1000 1500

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Initially, assume that a budget amount of $10000 is allocated for certain expenditure. Notice that when a
Purchase Requisition is created, there is no impact on Encumbrance. The commitment is recorded when
the Purchase Requisition is approved. If there are multiple approvers, it gets recorded at the time of the
final approval for the document. Once the commitment is created, it is not liquidated until the
Obligation is recorded.
Obligations are recorded when a Purchase Order is approved. Again, if there are multiple approvers, the
obligation is recorded at the time of the final approval for the PO. The obligation is always created for
the PO amount, irrespective of the backing commitments. While recording the obligation, any backing
commitments created through the backing PRs are liquidated. When receipts are created or invoice is
matched against a PO, the obligation is liquidated and the actual expenditure is recorded.

Encumbrance Accounting – Procure to Pay with Journal Entries

In the following section, we will focus on the following flows:
• Creation of Budgets
• Purchase Requisition Approval & Reserve
• Purchase Order Approval & Reserve
• PO Changes: Increase or Decrease of Qty
• PO Changes: Cancellation of Quantities/Lines/Shipments
• Receipt of Goods/Services
• Invoice Matched to PO
• Payment to PO Vendor.

Creating Budgets
Encumbrance Accounting always works together with budgetary control. At the beginning of a fiscal
year, enterprises estimate how much they are going to spend in the future, based on business plans for
the forthcoming year. The planned expenditures under various heads is estimated and used to create
budgets. Enterprises can use this budget amount to compare it to actual expenditure at any time in order
to track and monitor actual spending.
In Oracle e-Business Suite, users can create budgets using the following steps:
1. Login and select an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Budget > Enter > Journals

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Figure 1: Setting up Budget for Encumbrance Accounting

3. Enter a budget amount for specific accounts for each period.

Figure 2: Funds Availability after Budget Creation

Navigating to the Funds Availability Inquiry window, the budgets would now reflect as created. In this
example, the Budget was created for $20,000.
The next section describes how these budgets will be used and encumbrances created or liquidated in
various scenarios.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Purchase Requisitions Approval and Reserve

The following example outlines Encumbrance Accounting for recording commitments. The user intends
to buy some office stationery this month. The estimated amount is approximately $ 3,000.
Steps:
User creates a Purchase Requisition (PR) for $3,000. User ensures that the correct distribution account is
selected for the PR line.
• The user performs the Funds Check action to ensure that sufficient funds are available
for reserving the money required for this purchase, against the Budget.
• The user submits the document for approval and the approver approves the
document. The following are the accounting details:

Event Type Requisition Reserve

Encumbrance Type Commitment

Balance Type Encumbrance

Journal Entry Date Encumbrance Date as provided in the PR distribution

DEBIT Budget Account from PR Distribution $3,000

CREDIT Reserve for Encumbrance (Commitment) $3,000

Note: If there are multiple PR distributions for the PR line, each distribution is debited separately with
corresponding credit on the Encumbrance Date specified in the respective PR distributions.
The remaining budgetary funds are as follows:

Figure 3: Budget Position after Commitment

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Purchase Order Reservation & Approval

After the Requisition is approved, the user can place the Purchase Requisition details in a Purchase
Order (PO) document.
Steps:
• The user uses Autocreate process to create the Purchase Order document from the
Purchase Requisition.
• The user submits the PO document for approval and the Approver approves the
document. The following are the accounting details:

Event Type Requisition Un-Reserve

Encumbrance Type Commitment

Balance Type Encumbrance

Journal Entry Date Encumbrance Date as provided in the PO distribution

DEBIT Reserve for Encumbrance (Commitment) $3,000

CREDIT Budget Account from PR Distribution $3,000

Event Type Purchase Order Reserve

Encumbrance Type Obligation

Balance Type Encumbrance

Journal Entry Date Encumbrance Date as provided in the PO distribution

DEBIT Budget Account from PO Distribution $3,000

CREDIT Reserve for Encumbrance – (Obligation) $3,000

Note: If the user creates the PO manually without the referenced PR, it can lead to the
duplication of reservation of funds for the same transaction. Further, if the PO line distribution
amount changes from $3,000 to $3,500, the commitment un-reserve will take place for $3,000
(backing PR distribution amount) and PO reserve will happen for $3500.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

The budgetary funds remaining will now reflect as:

Figure 4: Budget Position after Obligation

Changes to PO: Increase quantity or price through Revision

After the PO is approved, it is likely that the PO quantities / prices / amounts may be changed. A PO
revision is created in such situations in order to update these changes in the PO. The following example
explains the process of increased PO line amount. This action would also have a bearing on
Encumbrance Accounting:
Steps:
• The user updates the PO and creates a new revision to change the line / shipment’s
quantity, price, amount etc. In this example, the user changes the quantity / price to
reflect in an increased amount of $500.
• The user submits the PO revision for approval and the approver approves the
document. The following are the accounting details:

Event Type Purchase Order Reserve

Encumbrance Type Obligation

Balance Type Encumbrance

Journal Entry Date Encumbrance Date as provided in the PO distribution

of the PO Revision

DEBIT Budget Account from PO Distribution $500

CREDIT Reserve for Encumbrance – (Obligation) $500

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

The Budgetary funds remaining will now reflect as follows:

Figure 5: Budget Position after PO Amount increase

Changes to PO: Decrease Quantity or Price through Revision

This example explains the process of decreasing PO line amount. Again, this action would have a
bearing on Encumbrance Accounting:
Steps:
• The user updates the PO and creates a new revision to change the line / shipment’s
quantity, price, amount etc. In this example, the user changes the quantity / price to
reflect in a decreased amount of $500.
• The user submits the PO revision for approval and the approver approves the
document. The following are the accounting details:

Event Type Purchase Order Un-Reserve

Encumbrance Type Obligation

Balance Type Encumbrance

Journal Entry Date Encumbrance Date as provided in the PO distribution

of the PO Revision

DEBIT Reserve for Encumbrance (Obligation) $500

CREDIT Budget Account from PO Distribution $500

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Cancellation of Quantities/Lines/Shipments in a Purchase Order

It is possible that line/shipment quantities can be cancelled in a Purchase Order for various reasons.
These cancel actions also has an impact on Encumbrance Accounting:
Steps:
• The user selects the approved PO and cancels a line or shipment, using the Cancel action. In
the original example, assuming that the PO is cancelled for $1,800, the following will be the
accounting entries:

Event Type Purchase Order Un-Reserve

Encumbrance Type Obligation

Balance Type Encumbrance

Journal Entry Date Encumbrance Date as provided in the PO distribution
of the PO Revision for Cancellation

DEBIT Reserve for Encumbrance (Obligation) $1,800

CREDIT Budget Account from PO Distribution $1,800

Receipt of Goods/Services
When goods or services in a Purchase Order line are received, and if the Accrue on Receipt flag is set to
“YES”, there will be Encumbrance liquidations on Accounting for the receipt, leading to liquidation of
Encumbrances. Since the accounting takes place at the time of receipt, the encumbrances are liquidated
and the actual amounts are booked. The following outlines the Accounting impact:
Steps:
• The user creates a receipt for $3,000, which is the full value of goods received against the PO.
• A Receive transaction is created when the receipt is saved. The accounting entry is:

Event Type Receipt into Receiving Inspection

Encumbrance Type

Balance Type Actual

Journal Entry Date Receipt Date

DEBIT Receiving Inspection A/c $3,000

CREDIT AP Accrual (Liability) A/c $3,000

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

When goods are delivered to the respective location, the following entries are created:

Event Type Delivery to Expense Location

Encumbrance Type

Balance Type Actual

Journal Entry Date Date of Delivery

DEBIT Charge Account from PO Distribution $3,000

CREDIT Receiving Inspection A/c $3,000

Event Type Delivery to Expense Location

Encumbrance Type Obligation Reversal

Balance Type Encumbrance

Journal Entry Date Date of Delivery

DEBIT Reserve for Encumbrance (Obligation) $3,000

CREDIT Budget Account from PO Distribution $3,000

Note: When there are period end accruals, the journal entries are quite similar to the flow described
earlier, with minor variations. The Actual and Encumbrance entries are reversed in the next period until
accounting occurs with Invoice Accounting.
Note: For all the encumbrance journals created through the sub-ledger, the Reserve for Encumbrance line
will not be there before posting. General Ledger (GL) automatically creates the balancing amount to the
Reserve for Encumbrance account during posting. GL does the same with unbalancing manually entered
encumbrance journals.

Invoice Matched to PO
Invoices are received from Suppliers against PO lines for payment. For Inventory and Expense Item,
If the Accrue on Receipt flag is set to “YES”, The following are the accounting entries in such a
scenario:
Steps:
• The user receives the invoice from the vendor for $3,000 and enters the invoice details in
Oracle Accounts Payables. A draft Invoice is created.
• The user matches the Invoice with the PO Shipment.
• The user does Invoice Accounting for the Invoice. The following are the accounting entries
that are generated:

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Event Type Invoice Match to PO

Encumbrance Type

Balance Type Actual

Journal Entry Date GL Date specified on the Invoice Distribution

DEBIT AP Accrual (Liability) A/c $3,000

CREDIT Supplier Liability (Payables) A/c $3,000

For Expense Item, if user set “Accrual at Period-End”, then Invoice accounting has an impact on
Encumbrances and reversals. The following are the accounting entries in such a scenario:
• The user receives the invoice from the vendor for $3,000 and enters the invoice details in
Oracle Accounts Payables. A draft Invoice is created.
• The user matches the Invoice with the PO Shipment.
• The user does Invoice Accounting for the Invoice. The following are the accounting entries
that are generated:

Event Type Invoice Match to PO

Encumbrance Type

Balance Type Actual

Journal Entry Date GL Date specified on the Invoice Distribution

DEBIT AP Accrual (Liability) A/c $3,000

CREDIT Supplier Liability (Payables) A/c $3,000

• The user Run “Transfer Journal Entries to GL” Program in Oracle Payables. This action
generated the following journal entries:

Event Type Invoice Match to PO

Encumbrance Type Obligation Reversal

Balance Type Encumbrance

Journal Entry Date GL Date specified on the Invoice Distribution

DEBIT Reserve for Encumbrance (Obligation) $3,000

CREDIT Budget Account from PO $3,000

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

The remaining budgetary funds now reflect as below:

Figure 6: Budget Position after Invoice Matching

Invoice Payment
When the user makes a payment against an Invoice, the following accounting entry will be generated:

Event Type Invoice Payment

Encumbrance Type

Balance Type Actual

Journal Entry Date Payment Date

DEBIT Supplier Liability (Payables) A/c $3,000

CREDIT Cash Clearing/Cash/Bank A/c $3,000

Note: There are no Encumbrance journal entries during Payment, because the actual
expenditure is already accounted for, and the payment activity is used to liquidate the
outstanding liability against the vendor.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Technical Overview
From a technical perspective, Encumbrance journal entries flow from Oracle Purchasing to
Oracle Sub-Ledger Accounting tables and then to the Oracle General Ledger tables.

The following flow chart explains the technical flow:

Figure 7: Encumbrance Accounting Technical Overview

1. When Reserving and Approving the PO, Encumbrance entries get generated in
GL_BC_PACKETS and the table PO_BC_DISTRIBUTIONS.
2. Receiving generates Encumbrance Entries that are processed in the GL_INTERFACE table.
When a PO has the Accrue on Receipt flag set to Y, the Receiving Transaction Processor
generates the accounting entries in RCV_RECEIVING_SUB_LEDGER upon Receipt and
Deliver of the PO.
3. Run the “Create Accounting-Receiving concurrent program to create journals that will insert
records in XLA_AE_HEADERS and XLA_AE_LINES. Meanwhile, this program will
generate another program called Create Accounting that will create the entries in
GL_INTERFACE.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Conclusion
This paper provides an explanation of the complete Encumbrance Accounting process as it works in the
Procure-to-Pay flow. It separates the actual and budget amounts, and acts as a medium to control the
organization’s spending effectively. Encumbrance Accounting also ensures that the actual spend is
maintained within the allocated budget.
To conclude, Encumbrance Accounting in Oracle e-Business Suite:
• Improves the Period Close Processing by automatic encumbrance journal entries
• Increases the predictability of company’s performance by restraining actual spend within budget
• Gains better visibility into company’s worldwide operations by tracking every expenditure

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Appendix: Setup Overview

The Encumbrance Accounting function is based on effective and seamless integration between various
Oracle e-Business Suite modules such as Oracle General Ledger, Oracle Accounts Payables, Oracle Cost
Management, Oracle Purchasing and Oracle Inventory.
The steps for setting up and using Encumbrance Accounting consist of the following:
• Setup in Oracle General Ledger
• Setup in Oracle Purchasing and Payables
• Setup in Oracle Inventory

Setup in Oracle General Ledger

The following are the Encumbrance Accounting related setup steps to be carried out in Oracle General
Ledger.
Enable Budgetary Control
Encumbrance Accounting works together with Budgetary Control. The Budgetary Control flag needs to
be enabled in Oracle General Ledger. The system automatically creates encumbrances from requisitions,
purchase orders and other transactions as Purchasing and Payables. If the Budgetary Control flag is not
enabled, the encumbrance entries have to be entered manually in Oracle General Ledger, and the
Requisition, Purchase Order and Payables will not generate encumbrance related accounting entries.
The steps for enabling the Budgetary Control flag are as follows:
1. Log into Oracle e-Business Suite with an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Setup > Financials > Accounting Setup Manager (ASM)
> Accounting Setups> Update Accounting Options > Advanced Options

Figure 8: Enable Budgetary Control

3. Select the check box Enable Budgetary Control. This will enable funds checking within
Oracle General Ledger, Oracle Payables, and Oracle Purchasing modules, and will
automatically create encumbrance entries from Oracle Purchasing and Oracle Payables.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

4. Assign an account for the Reserve for Encumbrance Account. Oracle General Ledger
automatically posts offset amounts to this account when encumbrance transactions are
posted.
5. Perform the same setup step for the secondary ledger if encumbrance needs to be used for
secondary ledger.
The following points are to be noted related to the Sub-Ledger Accounting Method:
• If encumbrance needs to be enabled, then the Sub-Ledger Accounting Method has to be set to
Encumbrance Accrual in case of Accrual basis accounting method or Encumbrance Cash
in case of cash basis accounting method for the ledger.
• If Encumbrance is not used, then the Sub-ledger Accounting Method has to be set as
Standard Accrual or Standard Cash for the ledger.

Figure 9: Sub-ledger Accounting Method

Define Budget
After enabling budgetary control for a ledger, the next step is to define a budget, to enter estimated
account balances for a specified range of periods. Use these estimated amounts to compare actual
balances, or to control actual and anticipated expenditures.
1. Log into Oracle E-Business Suite with an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Budgets > Define > Budget

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Figure 10: Define Budget

3. Enter a budget name and description for a ledger, select the accounting period that will
collect estimated amounts for this budget.

Define Budget Organization

After creating a budget, the next step is to define which organization and which account is to be used
for budgetary control. Budgetary Account Range and Organization are defined in Budget Organization
window:
1. Log into Oracle E-Business Suite with an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Budget > Define > Organization

Figure 11: Define Budget Organization

3. Enter a Name and Description for the Budget Organization. Budget Organization is the
budget entity, to which the budgets are estimated.
4. Assign accounts for which the budgetary control is required for the given budget
organization.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Figure 12: Account Ranges

5. Set the appropriate Funds Check level for each Account Range. For the Funding Budget
field, select the budget which was defined on Define Budget to link the account range with
the budget.

Figure 13: Budgetary Control Options

Define Budgetary Control Groups

The next step is to define the budgetary control rules in Budgetary Control Group Window.
1. Log into Oracle e-Business Suite with an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Budgets > Define > Controls.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Figure 14: Budgetary Control Group

3. Enter a name for the budgetary control group. Select journal sources, categories, funds check
level, and related details. If Tolerance is set as Advisory, then the budgetary control will allow
overriding of the spend amount, even if it’s more than the budget amount.
Assign Budgetary Control Groups
Users can also create multiple budgetary control groups for different budgetary control tolerances and
override insufficient funds. Every usage could have one default budgetary control group. The default
group is linked to a user in the System Profile window.
1. Log into Oracle E-Business Suite with the System Administrator responsibility.
2. Navigate to System Administrator >Profile > System.

Figure 15: Profile for Budgetary Control Group

3. Select Default Budgetary Control Group value for User.

Open Encumbrance Year
After enabling budgetary control for a Ledger, Encumbrance Accounting Period needs to be opened for
entering and posting encumbrance journal entries. Initial encumbrance year is opened automatically
when the first period of ledger is opened.

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

The steps are similar to the steps to set up the Actual Accounting Period:
1. Log in to Oracle General Ledger with an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Setup > Open/Close

Figure 16: Open Encumbrance Year

3. Click the Open Next Year button, and the next year will be opened. When you open an
encumbrance year, the user will always be able to enter and post encumbrance journals to any
period up to the latest open encumbrance year.
Define Encumbrance Types
The next step is to define Encumbrance Types. Encumbrance Types segregate funds reservation levels
for Purchase Requisitions, Purchase Orders, and Invoices. Users can classify and track expenditures
according to the reservation levels and can define as many additional encumbrance types as needed.
The setup steps are:
1. Login to Oracle General Ledger with an appropriate General Ledger responsibility.
2. Navigate to General Ledger > Setup > Journals > Encumbrances.

Figure 17: Define Encumbrance Types

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 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

3. Enter the Encumbrance Types as needed.

In Oracle General Ledger, The seeded encumbrance types are:
• Commitment: An encumbrance for a purchase requisition.
• Obligation: An encumbrance for a purchase order.

Note: By default, Requisition encumbrance is Commitment, PO encumbrance is Obligation and invoice

encumbrance is Invoice. If any of these three encumbrance types are not enabled in GL > Setup >
Journal > Encumbrance, then the transaction document (PR/PO/Invoice) will display a budgetary
control exception and will fail funds check.

Setup in Oracle Purchasing, Oracle Payables and Oracle Cost Management

After setting up Encumbrance Accounting in Oracle General Ledger, you need to set up integrated
modules such as Oracle Purchasing, Oracle Payables and Oracle Cost Management to let the system
generate different encumbrance journal entries for different transactions.
Define Financials Encumbrance Options
After defining Encumbrance Types, users need to enable Encumbrances for PR / PO / Invoices using
the Financial Options window:
1. Log in to Oracle Payables or Oracle Purchasing with an appropriate Payables/Purchasing
responsibility.
2. Navigate to Setup > Options > Financial Options> Encumbrance tab.

Figure 18: Define Financial Encumbrance Options

25
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

3. Select the operating unit, in the Encumbrance tab - enable Use PO Encumbrance to enable
encumbrances for POs and Supplier invoices. Optionally enable Use Requisition Encumbrance
to encumber requisitions as well.
Enable Encumbrance in Oracle Purchasing, Oracle Payables and Oracle Cost Management
Users need to associate Encumbrance Type to Journal Line Types. This step is done while defining Sub-
Ledger Accounting Method:
1. Log into Oracle Cost Management/Oracle Purchasing/Oracle Payables with an appropriate
Super User responsibility.
2. Navigate to Cost Management/Purchasing/Payables>Set up > SLA > Accounting Methods
Builder > Methods and Definition > Sub-Ledger Accounting Methods

Figure 19: Enable Encumbrance in Oracle Purchasing and Oracle Payables

3. For Oracle Purchasing, the seeded method is Purchasing Encumbrance Application
Accounting Definition. For Payables, it is Encumbrance Accrual or Encumbrance Cash
depending on the accounting method. Alternatively, users can define their own application
accounting definitions.

Setup in Oracle Inventory

Oracle Inventory and Oracle Purchasing provide a visible control of accrued liabilities for inventory
items. Oracle Purchasing automatically records the accrued liability for inventory items at the time of
receipt. The inventory expense is recorded at the time of delivery. In the Inventory Organization
Parameter window, users can determine whether encumbrance reversals are needed.
Enabling the 'Reverse Encumbrance' check box
1. Log into Oracle Inventory with an appropriate super user responsibility.
2. Navigation: Inventory > Setup > Organization > Parameters > Costing tab

26
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

3. Select “Reverse Encumbrance” for reversal of encumbrances created in Oracle Purchasing.

Figure 20: Costing Information

Define the Encumbrance Account
For Inventory Destination bound purchased items, users also need to specify the Encumbrance Account
in the Organization Parameter window. The steps are as follows:
1. Login to Oracle Inventory with an appropriate super user responsibility.
2. Navigate to Inventory > Setup > Organization > Parameters > Other Accounts

Figure 21: Organization Parameters - Other Accounts

27
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

3. Enter an account for Encumbrance. Requisitions and purchase orders for inventory purchases
will create commitments/obligations against the encumbrance account.

28
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Appendix: Common Customer Issues and their resolution

Oracle Encumbrance Accounting integrates seamlessly with Oracle Purchasing, Oracle Payables and
Oracle General Ledger. This section provides details of common issues frequently identified around
Encumbrance and Accrual Accounting and how they can be resolved.
Issue: Negative Encumbrance Occurs In Funds Inquiry Screen (Doc ID 949876.1)
Reproduction steps:
1. Login to Oracle Purchasing, create a PO and reserve this PO.
2. Login to Oracle General Ledger, Navigation: General Ledger > Journal > Inquiry > Funds.
The Encumbrance Amount is Negative.
Cause:
In Release 12 (R12), reversal of encumbrances happens automatically when the Create Accounting
process is done with the end date as first date of the next period. Users need not perform the reversal of
encumbrance reversal as a separate process. However, reversal of encumbrances is needed for Periodic
Average Costing (PAC) usage, because PAC is not using Oracle Sub-Ledger Accounting. Hence in R12
with PAC, the encumbrance reversal entries should be reversed explicitly.
Resolution:
1. Identify whether missing reversal of encumbrance is the cause for negative encumbrance: Run
the script given below which will confirm that the reversal for the encumbrance reversal has not
been carried out in case of period end accruals.

29
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

2. Get total amount against each account for the current year or quarter or period using this script.
3. Enter a manual encumbrance debit entry for the total amount. This should resolve the negative
encumbrance caused because of this issue.

Issue: Encumbrance Not Getting Converted To Actual for Purchase Orders (Doc ID
728064.1)
Steps to reproduce:
1. Log into Oracle Purchasing, Create a new PO, and set the PO for Accrue at Receipt and for
Inventory Destination. Approve & Reserve this PO.
2. Create a Receipt against this PO after receiving the ordered items.
3. Run Transfer to GL program to transfer journal entries to General Ledger
4. Log into Oracle General Ledger, Navigate to: General Ledger > Journal > Inquiry > Funds
You can notice that the Encumbrance Amount did not get converted to actual amount.
Cause:
1. The option Reverse Encumbrance is not enabled in Inventory > Set up > Organization >
Parameters > Costing tab, therefore encumbrance will not get reversed on performing the
receipt and delivery of PO to Inventory destination. The actual amount will get accounted on
the other side but the encumbrance does not get converted to actual amount.
2. If the budget account used in the PO and the Sub-inventory's Material Account / Expense
Account are not the same, the encumbrance reversal will happen for the budget account against
which the funds got reserved, however, actuals will not get accounted to the same budget
account. Instead Actuals will get accounted to the Sub-inventory's account. This will result in
incorrect funds availability because the encumbrance does not get converted to Actuals.
Resolution:
For inventory destination POs:
1. When the deliver transaction is complete, verify Inventory > Transactions > Material
Transactions > Distributions to confirm the transaction is correctly considered for costing and
is accounted.
2. Submit the Create Accounting-Cost Management program immediately. Set the parameters
Transfer to GL as Yes and Post to GL as Yes.
3. Ensure that the Reverse Encumbrance flag is enabled in Inventory > Set up > Organization >
Parameters > Costing tab.
4. Ensure that the encumbrance account against which the funds get reserved is same as the
Actual account that gets accounted on performing the PO receipt and delivery.

30
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

5. For inventory asset items that use Average costing, Encumbrance Account and Material
Account defined in Inventory Organization parameters should be same.
6. For inventory asset items that use Standard Costing, Encumbrance Account and Material
Account defined for the sub-inventory should be same.
7. For Inventory expense items that use Standard Costing or Average Costing, Encumbrance
account defined for the item should be same as the expense account defined for the sub-
inventory.

Summary of other common issues and recommended patches to resolve the issues:
Issues related to Encumbrance Journal:
Issue(s) Cause Patch to be applied to resolve
the issue

Encumbrance accounting This is due to the wrong sign of variable Patch.10209325:R12.BOM.C

during over receipt return 1_source_doc_quantity in PROCEDURE
creates negative balance Get_Quantity() in RCVVRUTB.pls.

Reserve for encumbrance in Prior to this patch, the code had wrongly passed Patch.9100984:R12.PSA.A for
SLA- incorrect for PO when Funds Check and set that BC event as 'Processed' , R12 &
some lines have no funds when one or more distribution failed Funds Check, Patch.9100984:R12.PSA.B
resulting in unbalanced GL entries getting created.

Wrong SLA status returned If there were multiple lines passed to XLA and not Patch.9037877:R12.PSA.A for
to AP all of them fail with XLA_NO_JOURNAL error, R12 &
PSA passes the wrong status to AP Patch.9037877:R12.PSA.B for
12.1

When an inventory item in
an encumbrance instance is
returned, accounting is
wrong
The journal for inventory encumbrance reversal Patch.8914459:R12.BOM.A
was missing the join to the accounting line type 15
causing number of records to return as many
accounting line types as there are in Inventory sub-
ledger 'mtl_transaction_accounts'

Encumbrance accounting Unprocessed Budgetary events were processed Patch.8423174:R12.XLA.A for

event processed with the along with the Non-Budgetary events , resulting in R12 &
actual journals incorrect accounting in Costing during the Create Patch.8423174:R12.XLA.B for
Accounting process 12.1

Receipt accrual -period end Code limitation in file CSTVRAPB.pls Patch.7661294:R12.BOM.A for
program missing billed amt R12 &
Patch.9600743:R12.BOM.C

PSA API returns incorrect Reversal Encumbrance amount calculation on PO Patch.7592825:R12.PSA.A for

31
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Issue(s) Cause Patch to be applied to resolve

the issue

PO reverse encumbrance did not consider the exchange rate due to code R12 &
amount limitation Patch.8940136:R12.PSA.B for
12.1

PO reversed encumbered Code limitation in file psavapbb.pls Patch.7229803:R12.PSA.A

amount calculation needs
to be fixed.

CST: Internal order to Code limitation in file cstxlaaad.ldt Patch.6624738:R12.BOM.A

expense not relieving the
encumbrance entry

On receipt corrections the The actual line’s “Correct” transaction did not Patch.8904447
budgetary entries to general populate the TC code
ledger incorrect.

Internal requisition Encumbrance reversal accounting entries were not Patch.7031719

encumbrance cancel
reversal batch
being generated by the Periodic distribution
processor since total received quantity was counted
for all receipts like perpetual costing method rather
than computing total received quantity just before
the current receipt transaction as PAC is used

Encumbrance incorrect Code limitation in file RCVVRUTB.pls Patch.6683404

after corrections made to
receipts

Inventory generates Code was using purch_encumbrance_flag instead Patch.7127049

incorrect Encumbrance of req_encumbrance_flag while checking for
reversal. PR Encumbrance encumbrance reversal
is set to off in financials

Journal import errors with Code limitation in file RCVVACCB.pls Patch.4153676

ecw1 ec10 for POs created
in foreign currency

Completely relieve active Patch. 15987200:R2.PO.B

encumbrance during finally
close

Approval Checkout of Patch.7529281:R12.ICX.B

requisition does not
encumber all the
distributions

32

Issue(s)
Edit the Document without
Unreserve ER
Invalid Business Flow Prior
events error (BFLOW)
When attempting to cancel
a PO with backing
req, without cancelling the
req, error was occurring
View results does not show
any budgetary control
errors
Funds check error for a
foreign currency PO
Issues related to Global Procurement Accounting
Issues
Receive transaction of
global procurement get
wrong currency rate
Issues related to Budgetary Control Exceptions and Incorrect Funds Check Behavior
Issues
Not able to re-reserve an
adjust federal planned PO
BC API should work in
background mode for
concurrent requests
33
Encumbrance Accounting in the Procure to Pay Flow: Best Practices
Cause Patch to be applied to resolve
the issue
Patch.15843459:R12.PRC_PF.B
Patch. 6681444:R12.PO.B
Patch. 16781315:R12.PO.B
Patch.12824154:R12.PO.B
Patch. 4229705:R12.PO.B
Cause Patch Number
Code limitation in the following files: Patch.8684475:R12.BOM.A for
CSTPACQS.pls R12 and
CSTPACQB.pls & CSTAPRB.pls Patch.8684475:R12.BOM.C for
12.1 (Controlled release)
Cause Patch Number
Code limitation in file POXENC2B.pls Patch.10329412:R12.PO.B
This issue occurred because of locking system in Patch.9907009:R12.PSA.A for
PSA code, before the approval application tries to R12 &
reserve the document. At the time of reserve, Patch.9907009:R12.PSA.B for
gl_bc_dual table gets locked in exclusive 12.1
NOWAIT mode. Because of this reason, if
processes for multiple documents tried to access
the table at the same time only one of them gets
the lock and rest returned with an exception

Issues
The funds verification fails
even when funds are
available.
RCA multiple entities SCM-
Purchasing 3-1081270271
PSA rollup patch for critical
bug fixes and
enhancements
Buyers unable to cancel
approved requisition lines
in iProcurement
Issue with fund check and
budgetary control during
PO funds reserve
R12 invoice getting cant
funds check hold, cannot
find why
Check funds not working in
language
POAPPRV fails with
attribute
advisory_warning_check
does not exist
34
Encumbrance Accounting in the Procure to Pay Flow: Best Practices
Cause Patch Number
Special S rows are not inserted in Patch.9328734:R12.PSA.A for
gl_bc_period_map table R12 (Controlled release) &
for non federal customers resulting in inaccurate Patch.9328734:R12.PSA.B for
calculation in file glbcma.lpc 12.1
Multiple entities are created for PO having many Patch.9235968:R12.XLA.A for
distributions when funds check is done R12 &
distribution by distribution in some scenarios Patch.9235968:R12.XLA.B for
12.1 (Controlled release)
Consolidated fix for bugs related to PSA Patch.9100984:R12.PSA.A for
R12 &
Patch.9100984:R12.PSA.B for
12.1
Code limitation in file POXENC2B.pls Patch.7138036:R12.PO.A
For applications where AAD is not defined for Patch.6414911:R12.XLA.A
secondary ledger, it implies that product teams do
not want to account for secondary ledger during
funds reserve/check. However, SLA was stamping
the budgetary event in error status because
secondary ledger processing was not successful
psa_funds_checker_pkg was invalid. The column Patch.6196198:R12.PSA.A
GL_ROW_NUMBER existed in table
GL_BC_PACKETS instead of gms_bc_packets
In routine get_sla_notupgraded_flag the following Patch.6415646:R12.PSA.A
statement was used:
to_date(Fnd_Profile.Value_Wnps
('PSA_R12_UPGRADE_DATE'), 'DD-MON-
RRRR HH24:MI:SS'); MON is normally 3 bytes
for English. However it converted into > 3 bytes
for some languages which causes this plsql code to
fall over
Procedure SetItemAttrText() in Patch.7109979
PO_REQAPPROVAL_ACTION.get_advisory_w
arning() was being called in case of a PO due to
code limitation in file POXWPA4B.pls
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Issues Cause Patch Number

This account doesn't Code limitation in file psafbcfb.pls Patch.5107441

require funds check

PO is stuck in pre approved Code limitation in file gmsglfcb.pls Patch.6761361

state. issue with reserve
document

Reserve action fails for Code limitation in file POXENC2B.pls Patch.4455643

scheduled release for
planned PO having a
backing requisition

PO stuck pre-approved- no Code limitation in file POXENC2B.pls Patch.4455643

funds available when using
USSGL/t-codes

PO stuck in pre-approved Due to incorrect setup for ITG ( iProcurement Patch.4895526

approval status Connector) , exceptions were being raised in the
ITG code, which were being propagated to the PO
transaction causing the trigger to fire. Thus the PO
transaction was being rolled-back/errored out.

Better error message about Result code P29, P31, P35, P36, P37, P38 was Patch 6125623
status of funds used for advisory and they were improper. In
Purchasing these were treated as Success.

Successive return of a Code limitation issue. Patch 5467527

requisition line after one
line has already been
returned, failed if
encumbrance was enabled

Po_msg_null_message Incorrect code that was part of get_period_info to Patch.7218243:R12.PRC_PF.A

when purchasing period set the send_to_gl_flag to 'N' for all rows that
closed failed GL period checks.

Reserve action fails for PR distribution id was populated onto the Patch.4455643
scheduled release for scheduled release distribution which was not
planned PO having a required.
backing req.

Po stuck pre-approved - no Code limitation issue. Patch.4285929

funds available when using
USSGL /t-codes

35

Issues Related To R12 Create Accounting Process
Issues
Landed cost adjustment
account was not created
after run landed cost
adjustment
Accounting program
(xlaaccup) completes in
error
Costing single event
approach for expense
destination PO
Getting rvtth-
448:subroutine user-defined
exception error while
receiving expense
Cannot add an existing
source to an existing event
class
CST XLA seed data
incorrectly loaded causing
invalid AADS
XLAACCUP
xla_ae_header_pkg.setlinea
cctattrs errors
RCA: r12:create accounting
process does not drop
queue table
Average costing: Sub-
Ledger journal entry does
36
Encumbrance Accounting in the Procure to Pay Flow: Best Practices
Cause Patch Number
Code limitation in files cstxlaaad.ldt and Patch.9600743:R12.BOM.C
cstxlaemseed.ldt
When the source used in the create accounting program Patch.9600743:R12.BOM.C
is higher than 240 characters, the accounting program
errors out with the ORA-06502: PL/SQL: numeric or
value error: characters which is a limitation of XLA
accounting program
Design issue between CST,PSA,XLA for encumbrance Patch.9456733:R12.BOM.A
accounting flow or Expense Destination POs accrued at for R12 &
receipt and accrued at period end Patch.9600743:R12.BOM.C
for 12.1.1 and 12.1.2
The view PSA_CST_XLA_UPG_V was not handling Patch.9291949:R12.PSA.A
Blanket Purchase Order Release properly. The Entity for R12 &
code for Blanket Purchase Order Release is different Patch.9711342:R12.PSA.B
for 12.1
The application_type_code in xla_subledgers for the Patch.9006973:R12.BOM.A
application 707 was incorrectly seeded for R12 &
Patch.9292380:R12.BOM.C
for 12.1
Code limitation in file cstxlaemseed.ldt Patch.8872296:R12.BOM.C
For the Event Retroactive Price Adjustment to Delivery Patch.8409628:R12.BOM.A
has the accounting attribute currency rate type attached for R12 &
to source currency conversion rate so if the rate is more Patch.8409628:R12.BOM.C
than the varchar2 limit of rate type the create for 12.1
accounting program fails
When there no events to be processed then in Create Patch.8284764:R12.XLA.A
Accounting program "accounting_program_batch" for R12 &
procedure raises an exception "normal_termination" Patch.8284764:R12.XLA.B
where the queues are not being cleaned up for 12.1
Code limitation in files CSTACDPB.pls Patch.8243112:R12.BOM.A

Issues
not balance in the entered
currency
Creating receipts for
upgraded PO's get rvtth-
448 error
Unable to view create
accounting xml output.
Create accounting creates
one-sided entries for logical
intercompany transactions
R12:accounting program
ended with GLIBC
detected double free or
corruption
Xlaaccup: ora-00001: unique
constraint
(xla.xla_ae_lines_gt_u1)
violated
R12 : SLA consolidated
37
Encumbrance Accounting in the Procure to Pay Flow: Best Practices
Cause Patch Number
This issue started due to the recent SLA enhancement Patch.7460759:R12.PSA.A
7193986.Because of this enhancement it is required to
clean XLA GTs between multiple calls to XLA API. As
PSA is cleaning only few XLA GTs, this issue was
raised
The reference of P_LEDGER_NAME in the template Patch.7341297:R12.XLA.A
XLAACCPB00.rtf is not efficient for R12 &
Patch.8295104:R12.XLA.B
for 12.1
The logical sales issue to expense destination accounting Patch.7293052:R12.BOM.A
entry is missing in Cost setup
The cause of this issue was database core dump. It was Patch.5889331 - This is a
determined by the following error seen in the raw trace DB patch applicable for
of the Accounting Program concurrent program: RDBMS version 10.2.0.3
[...]
Exception signal: 11 (SIGSEGV), code: 1 (Address not
mapped to object), addr: 0x0, PC: [0x1871af5,
expCheckExprEquiv()+5015]
*** 2008-06-20 23:31:09.278
ksedmp: internal or fatal error
ORA-07445: exception encountered: core dump
[expCheckExprEquiv()+5015] [SIGSEGV] [Address
not mapped to object] [0x000000000] [] []
Current SQL statement for this session:
INSERT INTO XLA_DIAG_SOURCES (
EVENT_ID , LEDGER_ID , SLA_LEDGER_ID ,
DESCRIPTION_LANGUAGE , OBJECT_NAME ,
OBJECT_TYPE_CODE , LINE_NUMBER , [...]
This issue can be resolved by adding event_id to index Patch.6997731:R12.XLA.A
xla_Ae_lines_gt_u1 for R12 &
Patch.6997731:R12.XLA.B
for R12.1 (controlled
release)
Consolidated fix Patch.6826219:R12.XLA.A
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Issues Cause Patch Number

critical fixes on Feb 19, 2008

Getting error while saving The view PSA_CST_XLA_UPG_V was checking Patch.6754295:R12.PSA.A
receipt of expense PO’s receiving inventory org instead of PO operating unit

Appendix: Important Tables used by Encumbrance Accounting

The following tables are used for the encumbrance transactions.
Requisitions:
 PO_REQUISITION_DISTRIBUTIONS.encumbered_flag
 PO_REQUISITION_DISTRIBUTIONS.encumbered_amount
Purchase Orders:
 PO_DISTRIBUTIONS.encumbered_flag
 PO_DISTRIBUTIONS.encumbered_amount
 Po_bc_distributions
SLA :
 XLA_EVENTS
 XLA_AE_LINES
 XLA_AE_HEADERS
 XLA_DISTRIBUTIONS_LINK,
 XLA_TRANSACTION_ENTITIES
General Ledger:
 GL_BC_PACKETS
 GL_BC_PACKET_ARRIVAL_ORDER:
 GLBV_ENCUMBRANCE_BALANCES
 GLBV_ENCUMB_JOURNAL_BATCHES
 GLBV_ENCUMB_JOURNAL_ENTRIES
 GLBV_GL_ENCUMBRANCE_TYPES
 GLFV_ENCUMBRANCE_BALANCES
 GLFV_ENCUMB_JOURNAL_BATCHES
 GLFV_ENCUMB_JOURNAL_ENTRIES
 GLFV_GL_ENCUMBRANCE_TYPES
 GL_ENCUMBRANCE_TYPES
 GL_ENCUMBRANCE_TYPES_CURRENT_V
 GL_ENCUMBRANCE_TYPES_V
 RG_ENCUMBRANCES_V

38
 Encumbrance Accounting in the Procure to Pay Flow: Best Practices

Appendix: Reference Documents / Notes related to Encumbrances

• Master Note For Oracle EBS Procurement Suite-Encumbrance And Accrual Accounting
[Document ID 1138043.1]
• Impact of R12 Design in PO Accounting [Document ID:429105.1]
• Oracle Applications Release 12 Upgrade Sizing and Best Practices to evaluate the potential
growth of your SLA tables[ Document ID:399362.1]
• R12 FAQ for the SLA Upgrade: SLA Pre-Upgrade, Post-Upgrade, and Hot Patch[ Document
ID:604893.1]
• Create Accounting Process [Document ID:579836.1]
• R12 Account Requirements For Inventory Accrual Reconciliation[Document ID:824388.1]
• R12 FAQ Accounting for On Line and Period End Accruals [Document ID:1113712.1]
• FAQ R12 Essentials Of Accrual Accounting [ID 827125.1]
• R12 How To Diagnose Issues with Period End Accruals [ID 603971.1]
• R12: Discrepancies With Period End Accruals-Troubleshooting [ID 1279848.1] 
• R12 Receipt Accrual Period end process-Duplicate accrual reversal entries created [ID
873399.1]
• FAQ Encumbrance Accounting - Setup And Usage [Doc ID 1086669.1]
• R12: Diagnostic Script to help troubleshoot Purchasing Accounting or Encumbrance Issues
[Doc ID 1483743.1]
• Steps to Run Import And Validate AAD (Application Accounting Definition) with
troubleshooting [Doc ID 1406203.1]

39
White Paper Title: Encumbrance Accounting in Copyright © 2014, Oracle and/or its affiliates. All rights reserved.
the Procure to Pay Flow: Best Practices
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May 2014
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Author: Sabrina Sun
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