Procure to Pay (P2P) – Accounting Entries

1. Enter purchase order

When you enter a purchase order, accounts are created and stored with the
purchase order distribution. The accounts will eventually be used as a basis for
creating accounting that is sent to the general ledger. Creating a purchase order in
and of itself generates no accounting that is sent to the general ledger.

2. Receive

When you process a receipt, no accounting is created for period end accruals.
Receipts that are accrued at period end will always be for a destination type of
expense.

3. Deliver and cost

When you deliver a receipt to its final destination, no accounting is created. The
expense will be recorded after matching to the purchase order, running the
Payables Accounting process and subsequently running the Payables Transfer to
General Ledger process.

4. Period end accrual

If an invoice is not entered by period end, the Receipt Accruals - Period End
process will generate accruals and transfer the accounting for them to the GL
Interface. Use the Journal Import program to create unposted journals. This
journal is created with a reversal date in a subsequent period. The journal must be
reversed so your receipt liability is not overstated.

5. Reverse accrual in the general ledger

In the subsequent period, reverse the prior period accrual.

6. Invoice and match

Entering an invoice and matching creates a debit to the Inventory AP Accrual

account to clear the liability for the uninvoiced receipt (you now have an invoice).
The entire credit is to the AP Liability account that defaults from the supplier site if
the invoice unit price is the same as the purchase order line unit price. Any
difference is charged to the Invoice Price Variance account.
For items with destination type of Expense, the Invoice Price Variance account will
be the same as the charge account. The AP Liability account is cleared when a
payment is processed.

1. On Entry of PO ________ No accounting impact

2. On Material Receipt
Receiving Accrual Dr

AP Accrual Cr

3. On Completion of Inspection and goods accepted

Inventory Dr

Receiving Accrual Cr

The Above mentioned entries in PO Module

4. On entering invoice in AP

AP Accrual Dr

Accounts Payable Cr

5. On Payment

Accounts Payable Dr'

Cash/Bank Cr

Accounting Entries

A - Sales order creation – No entries

Pick release:
Inventory Stage A/c…………………Debit
Inventory Finished goods a/c……..Credit

Ship confirm:
Cogs A/c ……………………………Debit
Inventory Organization a/c………Credit

Receviable:
Receviable A/c………………………Debit
Revenue A/c………………………Credit
Tax ………………..…………………Credit
Freight…………..….……………….Credit

Cash:
Cash A/c Dr…………………………Debit
Receivable A/c……………………….Credit

B - Oracle P2P Accounting entries

In Oracle purchasing 3 different events occur

1. Enter Purchase Order:
No accounting takes place

2. Enter a Receipt:

Go to Cost Management module and run Create Accounting concurrent program and that will generate the
accounting of receivings & Issuances.

For Inventory, Asset and Expense Items Receivings accounting entry is:

Dr: Inventory Receiving A/c

Cr: Accrual A/c

* Cost Management SLA module is used to create inventory accounting entries generation.

For Inventory, Asset and Expense Items Issuances the accounting entry is:

Inventory Item:
Dr: Inventory Valuation A/c
Cr: Inventory Receiving A/c
Expense Item:
Dr: Expense A/c
Cr: Inventory Receiving A/c
Asset Item:
Dr: Asset Clearing A/c
Cr: Inventory Receiving A/c

C - Oracle Payable:

In payable 3 events occur

1. Enter Invoice:
Dr: Accrual A/c
Cr: Liability A/c

2.Payment against Invoice:

Dr: Liability A/c
Cr: Bank clearing A/c

3.Clearing (Cash Management):

Dr: Bank clearing A/c
Cr: Bank A/c

Oracle P2P Accounting entries

Incase below type of items one more accounting entry happens in Oracle

Inventory Item: Item issued to Dept.

Dr: Expense A/c
Cr: Inventory valuation
Asset Item: Asset is capitalized
Dr: Asset A/c
Cr: Asset clearing A/c

Procure to Pay Cycle Accounting Entries

After completing this document, you should be able to understand the accounting
entries generated by the system during procure to pay cycle.

When Inventory / Material is in Transit

When Inventory is delivered to the Inventory Sub Stores

When Invoice is booked / recorded

When Payment is made

When Reconciliation is made

ENTRY 01:

When Goods / Material Are In-Transit Or When We Receive Inventory, The Following
Accounting Entry Will Be Generated.

Description Dr. Cr.

Receiving Inventory Account xxxxx
Inventory AP Accrual Account xxxxx

There are two inventory Organizations:

Receiving Organization Inventory Organization

When the inventory is received at Receiving Organization then the above entry will be
generated. Receiving of Inventory can be made through Purchasing Responsibility as
well as Inventory Responsibility.

Receiving Inventory Account

This account is defined in the Receiving Options of purchasing Responsibility.

Navigation: PURCHASING>SETUPS>ORGANIZATIONS> RECEIVING OPTIONS

Inventory AP Accrual Account

This account is defined in the Inventory Organization Parameters window; click on

Others (B) and then select Inventory Information and then chose the Other Accounting
tab.

Navigation: PURCHASING > SETUPS > ORGANIZATIONS > ORGANIZATIONS

ENTRY 02:

When Inventory Is Delivered To Sub Inventory Stores Then The Following Accounting
Entry Will Be Generated.

Description Dr. Cr.

Material Account xxxxx

Receiving Inventory Account xxxxx

When the Inventory is delivered in the Stores this account will be hit in the Inventory
Organization click on the others button and then select the Inventory Information and
then choose the Costing Information tab and this account will be defined in the
Valuation Account region named as Material.

Receiving Inventory Account

This account is defined in the Receiving Options of purchasing Responsibility.

Material / Inventory Account

This account is defined in the Inventory Organization Parameters window; click on

Others (B) and then select Inventory Information and then chose the Costing
Information tab.

Navigation: PURCHASING > SETUPS > ORGANIZATIONS > ORGANIZATIONS

ENTRY 03:

When We Book Liability At Invoice Level, The Following Accounting Entry Will Be
Generated.

Description Dr. Cr.

Inventory AP Accrual Account xxxxx
Liability Account xxxxx

At the Invoice Level when we book the liability the supplier liability account will be
credited.

Inventory AP Accrual Account

This account is defined in the Inventory Organization Parameters window; click on

Others (B) and then select Inventory Information and then chose the Other Accounting
tab.

Supplier Liability Account

To define the Liability account in the Payables Responsibility click on Setups, choose Options, click on
Financials, and then select the Accounting tab.
Navigation: PAYABLES > SETUPS > OPTIONS > FINANCIALS

ENTRY 04:

When Payment Is Made To Supplier, The Following Accounting Entry Will Be Generated.

Description Dr. Cr.

Liability Account xxxxx
Cash Clearing Account xxxxx

Cash Clearing Account is defined in the Payables Responsibility while defining the banks.

Supplier Liability Account To define the Liability account in the Payables Responsibility click on Setups,
choose Options, click on Financials, and then select the Accounting tab.

Cash Clearing AccountTo define Cash Clearing Account click on Setups, choose Payments and then click
on Banks. After entering the required information in the main bank window click on the Bank Accounts
button. In the Bank Accounts region choose the Account Use Type Internal to show the GL Accounts.
Here we find the Cash Clearing Account.

Navigation: PAYABLES > SETUPS > PAYMENT > BANKS

ENTRY 05:

When Reconciliation Is Made In Cash Management, The Following Accounting Entry Will Be Generated.
 Description Dr. Cr.
Cash Clearing Account xxxxx
Bank / Cash Account xxxxx

Switch to the Cash Management Responsibility for Reconciliation purpose. When we made the
Reconciliation then the above Accounting entry will be generated.

Cash Clearing AccountTo define Cash Clearing Account click on Setups, choose Payments and then click
on Banks. After entering the required information in the main bank window click on the Bank Accounts
button. In the Bank Accounts region choose the Account Use Type Internal to show the GL Accounts.
Here we find the Cash Clearing Account.

Bank / Cash Account To define Cash Account click on Setups, choose Payments and then click on
Banks. After entering the required information in the main bank window click on the Bank Accounts
button. In the Bank Accounts region choose the Account Use Type Internal to show the GL Accounts.

P2P Cycle Flow (India Localization) with Accounting Entries

P2P Cycle Flow (India Localization)

Step Activity Navigation Responsibility

India Localization>Purchase India Local

1 PO Creation
Orders>Purchase Orders Purchasing

India Localization>Purchase India Local

2 Attach Tax for the PO
Orders>Purchase Orders Purchasing

India Localization>Purchase India Local

3 Approve the PO
Orders>Purchase Orders Purchasing

India Localization > Receipts India Local

4 Take Receipt against the PO
>Receipts (Localized) Purchasing

Check Completion of Report "Receiving Transaction India Local

5 View (Alt + V) > Requests > Find
Summary" Purchasing
 India Localization > Receipts India Local
6 Claim Vat for the PO
>Receipts (Localized) Purchasing

India Localization > Receipts >Claim India Local

7 Claim Excise for the PO
Modvat on Receipts Purchasing

Trigger "Pay on Receipt Auto Invoice" Concurrent (For View (Alt + V) > Requests > Submit India Local
8
Importing the Transaction from Purchasing to Payables) New Request Purchasing

Trigger “India - To insert taxes for Pay On Receipt” (To View (Alt + V) > Requests > Submit India Local
9
insert Taxes to Payables) New Request Payables

S no Activity Debit Credit

Inventory Receiving A/c AP Accural A/c

1 PO Receipt
Vat Interim Recovered

RG 23A Basic

RG 23A CESS
2 Claim Excise
RG 23A SH CESS

Inventory Receiving A/c

Vat Recovered
3 Claim VAT
Vat Interim Recovered

4 Delivery Material Value A/c Inventory Receiving A/c

AP Accural A/c Liability A/c

Misc. Excise

5 Invoice Misc. CESS

Misc. SH Cess

Misc. Vat

6 Payment Liability A/c Cash / Clearing A/c