Primary Troubleshooting Guide for Cancel Actions in Purchasing (Doc ID 1480108.

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1.5.2 What is the encumbrance effect for Cancellations?

If you are using encumbrance or budgetary control, Purchasing automatically creates
negative debit entries in your general ledger system to cancel the encumbrance that
corresponds to the purchase order header, lines, or shipments you are cancelling,
using the action date you specify in GL Date. The amount of the encumbrance is the
lesser of the unbilled or undelivered amount on the shipment being cancelled. If
the amount delivered is more than the billed at the time the shipment is cancelled,
the encumbrance is left on the purchase order, waiting invoicing of the delivered
but not yet billed amount.

Purchasing recreates requisition encumbrances for the requisition lines you used to
create the purchase order if the Cancel Requisitions check box is not selected.
Purchasing uses the distributions from your cancelled purchase order to recreate
the encumbrance for your requisition.

Error can occur on cancellation if there are insufficient funds. See the following
documents for more information:

Note 1611180.1 'APP-PO-1416 when trying to cancel an approved PO when using

encumbrance?'
Note 352096.1 'Unable to cancel an encumbered Autocreated Purchase Order?'