Oracle purchasing accounts guide

This document gives in detail different accounts used and the accounting impact of various
transactions that take place in Oracle Purchasing and Oracle Payables. Both Standard costing
and Average costing methods are considered. The accounts are Oracle Applications specific and
might differ from the conventional accounting names. Examples are given wherever required for
better understanding of the concept. The sources of these accounts are given.
PURCHASING: Receiving – For Accrual Process for perpetual Accruals
Receipts for inventory purchases are always accrued upon receipt. And also use perpetual
accruals for expense purchases you want to record uninvoiced purchase
liabilities immediately upon the receipt of the expense goods.
Receiving Account (Receiving Account)
To record the current balance of the material in receiving and inspection.
Where to define in Apps: Define Organization

Define Receiving Options
Inventory AP Accrual Account

Used to accrue your inventory accounts payable liability when you receive your items. This
account represents your uninvoiced receipts and is usually a part of your accounts payable
liabilities in the balance sheet. Payable relieves this account when the invoice is matched and
approved.
Where to define in Apps: Define Organization Parameters
Expense AP Accrual Account

Used to accrue your expense accounts payable liability when you receive your items. This
account represents your uninvoiced receipts when your Expense Accrual Option is
On Receipt and is usually a part of your accounts payable liabilities in the balance sheet.
Payable relieves this account when the invoice is matched and approved.
Where to define in Apps: Define Purchasing Options

Purchase Price Variance Account
To Accumulate purchase price variance for the organization. PPV account is usually an expense
account, which you record at the time you receive an item into the inventory and is the difference
between the purchase order cost and the item’s standard cost. PPV account is not used for
average costing.

Invoice Price Variance Account

To Accumulate invoice price variance for the organization. IPV account is usually an expense
account, which is used at the time of creating requisition or PO. When a corresponding invoice is
matched and approved, AP uses this account from PO to record the invoice price variance
entries. It is the difference between the purchase order price of the inventory item and the actual
invoice price multiplied by the quantity invoiced.

Exchange Rate Gain or Loss Account

To Accumulate purchase exchange rate gains or losses for the organization. This account is
usually an expense account, which you use to record the difference between the exchange rate
used for purchase order cost and the exchange rate used for invoice

Where to define in Apps: Define Financial Options
ACCOUNTING ENTRIES
A). Purchase Order receipt to the Receiving Inspection Location. When the goods are received
into Inspection Location.
When you receive material from a vendor into receiving inspection, Apps uses the quantity
received and the PO price to update the following accounts.
Accounting Entry Debit Credit

Source
Receiving inspection account @ PO xx At Define Organization/
price Receiving Options
Inventory A/P Accrual account @ PO xx At Organization
price Parameters
(for receiving Inventory Items)
Receiving inspection account @ PO xx At Define Organizations

price
Expense A/P Accrual account @ PO xx At Define Purchasing
price Options
(for receiving expense items)
B). Delivery from Receiving Inspection to Inventory under Standard Costing. Recorded at the
time, when the goods are transferred from Receiving Inspection to Inventory
With Enter Receiving form, you can move material from receiving inspection to inventory.
Case#1: If the standard cost is greater than purchase order price then the PPV is favourable and
Apps records this expense as a credit (negative expense).

Source
Sub-inventory accounts @ Std. Cost xx At Define Sub-inventory
Receiving Inspection account @ PO xx At Define Organization
price
ce Variance Account (Negative Expense) xx At Define Organization
Parameters
Case#2: If the standard cost is less than the PO price then the variance is unfavourable and
Apps record this as a debit (positive expense)

Source
e Variance Account (Positive Expense) xx At Define Organization
Parameters
Receiving Inspection account @ PO xx At Define Organization/
price Define Receiving Options
(C). Purchase Order receipt to the Receiving Inspection at Average Cost. When the goods are
received into Inspection Location at the Enter Receipts form.
If you use average costing, the actual cost is picked from the PO and hence you do not have any
PPV.

Source
Receiving inspection account @ PO xx At Define Organization/
Inventory A/P Accrual account @ PO xx At Organization
price Parameters
(D). Delivery from Receiving Inspection to Inventory under Average Costing. Recorded at the
time, when the goods are transferred from Receiving Inspection to Inventory
After inspection, you deliver the inventory items to the inventory at the Enter Receiving
Transactions form.

Source
Sub-inventory accounts @ PO price xx At Define Sub-inventory
Receiving Inspection account @ PO xx At Define Organisation/
(for delivering to the inventory at
actual POcost)
To record the actual Landed cost (Average Cost)
The goods are received into Landed Organisation first and then are transferred to actual
organisations with the addition of landed cost recorded as the transfer charges. This step is
performed in Inventory as Inter-organisations transfers and the accounting impact is:

Source
Inter-Org Receivable account xx At Define Inter-Org
@ Purchase order cost + actual Landed transfers Networks
cost
Sub-inventory Material account xx At Define Sub-
@ Purchase order Cost inventories / Define
Organisation
Inter-Org transfer charges account xx At Define Inter-Org
@ Amount of actual Landed cost transfers Networks
E). Delivery from Receiving Inspection to Expense. Recorder at the time, when the goods are
transferred from Receiving Inspection to Expense Destination
With Enter Receiving form, you can also move material from receiving inspection to expense
destinations.
Oracle Purchasing uses the transaction quantity and the PO price of the delivered item to update
the receiving inspection and expense charge account.
Source
PO distribution charge accounts @ PO xx At individual item level
price
nspection account @ PO price xx At Define Receiving Options
(F). Purchase Order receipt to the Inventory without inspection at Standard Cost. When the
goods are received into Inspection Location at the Enter Receipts form and delivered to inventory
directly in one step.
In this case, Apps performs both receipt and delivery in one step. Purchasing uses quantity
ordered and PO price to update the following accounts. At the same time, Oracle Inventory uses
the quantity and the standard cost of the received item to update the receiving inspection and the
sub-inventory balances (The accounting impact is the same except as the case of inspection &
deliver, except this one is arrived with one operation/step).

Source
Receiving inspection account @ PO xx At Define Organisation/
Inventory A/P Accrual account @ PO xx At Organisation
price Parameters
Case # 1
Receiving Inspection account @ PO xx At Define Organisation
price
ce Variance Account (Negative Expense) xx At Define Organisation
Parameters
(Delivered into inventory when the
Std.cost is more than the PO price)
Case # 2
e Variance Account (Positive Expense) xx At Define Organisation
Parameters
(Delivered into inventory when the
Std.cost is less than the PO price)
(G). Purchase Order receipt to the Inventory without inspection at Average Cost. When the
goods are received into Inspection Location at the Enter Receipts form and delivered directly in
one step.
If you use average costing, the actual cost is picked from the PO and hence you do not have any
PPV (The accounting impact is the same except as the case of inspection & deliver, except this
one is arrived with one operation/step).

Source
price Parameters
Sub-inventory accounts @ PO price xx At Define Sub-inventory

(for delivering to the inventory at
actual POcost)
(H). Purchase Order receipt to the Expense destinations without inspection. When the goods are
received into Inspection Location at the Enter Receipts form and delivered to inventory directly in
one step.

Source
Expense account @ PO price xx At Define Items
(for receiving expense items)
PO distribution charge account @ PO xx From Purchase Order

price
(for delivering to the expense
destinations directly)

Return to Vendor from Receiving Inspection at Standard
Cost.
For a return from inspection, Purchasing decreases the receiving inspection balance, and
reverses the accounting entry created for the original receipt.
Source
price Parameters
(for returning Inventory Items)
Expense A/P Accrual account @ PO xx At Define Purchasing

price Options
Receiving inspection account @ PO Xx At Define Organizations
price
(for returning expense items)

Return to Vendor from Inventory (to Receiving Inspection)
at Standard Cost.
If you use receiving inspection and delivered material into inventory and if you want to return
material from the same inventory, you must first return the material to Receiving Inspection from
inventory before you can return to your vendor. For a return from inspection, Purchasing
decreases the receiving inspection balance, and reverses the accounting entry created for the
original receipt. This is two step process.
Case # 1: Incase of Std.cost is less than PO price of the returned item when it was received into
the inventory.

Source
Step#1: When you return goods from
inventory to receiving location
price Define Receiving
parameters
Sub inventory accounts @ Std. Price xx At Define Sub-inventory
Purchase Price Variance xx At Define Org.
Parameters
(for reversing the entry – when the
items is returned from SI to
Receiving Inspection)
receiving inspection location to the
supplier
price Parameters
(for returning Inventory Items from
Receiving inspection to the vendor)
Case # 2: Incase of Std.cost is more than PO price of the returned item when it was received into
the inventory.
Source
inventory to receiving location
parameters
Parameters
Sub inventory accounts @ Std. Price Xx At Define Sub-inventory
(for reversing the entry – when the
items is returned from SI to
Receiving Inspection)
Case #2: When you return goods from
the receiving inspection location to the
supplier
Inventory A/P Accrual account @ PO Xx At Organisation
price Parameters
Receiving inspection account @ PO Xx At Define Organisation/
(I). Return to Vendor from Inventory when the items are

received through Direct Receipt without inspection at
Standard Cost.
The accounting impact is the same as in the previous inspection case, except all the accounting
is done in one step.
Case # 1: Incase of Std.cost is less than PO price of the returned item when it was received into
the inventory.
Source
parameters
Sub inventory accounts @ Std. Price xx At Define Sub-inventory
Parameters
(for reversing the entry that is made
when the items is received &
delivered directly)
price Parameters
Receiving inspection account @ PO Xx At Define Organisation/
Case # 2: Incase of Standard cost is more than PO price of the returned item when it was
received into the inventory.
Source
Receiving Inspection account @ PO xx At Define Organization/
parameters
Parameters
Sub inventory accounts @ Std. Price Xx At Define Sub-inventory
(for reversing the entry that is made
when the items are received &
delivered directly)
Inventory A/P Accrual account @ PO Xx At Organization
price Parameters
Receiving inspection account @ PO Xx At Define Organization/
Same Procedure has to be followed for returning the expense items also.
ACCOUNTS PAYABLE
Invoice Booking at Standard Costing at Algorithm
For Actual Supplier Invoice
When matched with the PO both Inventory AP Accrual account and Liability accounts come from
the related Purchase order. If it s an unmatched invoice, you have to give the Inventory AP
Accrual account and the liability account is defaulted from the supplier definition

When the Invoice Price is more than the Purchase order Price

Source
Inventory AP Accrual account @ PO Xx Comes from Purchase
price Order / and Entered in the
Distributions
Invoice Price Variance account Xx At Define Org.
@ Invoice quantity * (Invoice price Parameters
- PO price)
AP liability account @ Invoice price * xx At individual Define
Invoice qty Suppliers

When the Invoice Price is less than the Purchase order Price

Source
Inventory AP Accrual account @ PO xx Comes from Purchase
Distributions
AP liability account @ Invoice price * Xx At individual Define
Invoice Price Variance account Xx At Define Org.
@ Invoice quantity * (Invoice price Parameters
- PO price)
For Other Cost Invoices like Clearing Agent payments, Insurance, Freight, etc.
Different invoices are booked for each supplier invoice. 1.Supplier invoice 2.Clearing Agent
invoice 3.Insurance invoice 4.Freight invoice. As these are booked as four different invoices this
accounting entry is impacted that many times and the payments are made separately for each
invoice.

Source
Inventory AP Accrual account @ Actual xx Comes from Purchase
costs Order / and Entered in the
Distributions
AP liability account @ Invoice price Xx At individual Define
Suppliers
Invoice Booking at Average Costing at DU
While making the inter-organization transfer (to record the landed cost) from Landed cost
organization to Pharma or Non Pharma organizations, the Landed cost Clearing Account is
credited with the landed costs as the Transfer Charges. The same account is debited at the time
of invoice booking as an expense account.

Source
price Order / and Entered in
the Distributions
Landed Cost Clearing Account xx
@ the actual landed cost

AP liability account @ Invoice price * Xx At individual Define
Payment of the Invoices booked
As mentioned above payment is done separately for each invoice.

Source
AP liability account @ Amount paid xx Comes from Purchase
Order / and Entered in the
Distributions
Bank account @ Amount paid xx At individual Define Banks
Incase of Debit and Credit Memo
When you enter a credit note and match it with a purchase order the following entry is created.
Source
AP liability account @ Amount of credit xx At individual Define
note Banks/ and comes from
the related invoice
AP Accrual account @ Amount of credit note xx Comes from Purchase
Order / and Entered in the
Distributions
When you pay the invoice, applying the credit/debit note, the following entry is created with the
difference in the amounts.

Source
AP liability account xx At individual Define
@ (Invoice Amount – Credit/Debit note Banks/ and comes from
amount) the related invoice
AP Accrual account xx Comes from Purchase
e Amount – Credit/Debit note amount) Order / and Entered in the
Distributions
Prepayment Advance to Suppliers
The complete cycle of transaction relating to Prepayment to suppliers and their accounting
impact is detailed under.
Step-1: When you pay Prepayment to the supplier (one prepayment account is maintained for all
suppliers and on liability account is maintained for all suppliers in Algorithm). Payables keep
track of individual supplier balances and the individual application of prepayments to the
invoices.

Source
Prepayment to Suppliers account xx At individual Define
@ Amount of Prepayment paid Suppliers
unt @ Amount of credit note xx At individual Define
Banks
Step-2: When you receive invoice from the supplier and booked. Invoice Price Variance account
@ Invoice quantity * (Invoice price - PO price) is debited or credited by Payables according the
invoice price variances.

Source
Distributions
AP liability account @ Invoice price * xx At individual Define
Step-3: When you apply the existing prepayment to the invoice booked. The amount of the
application depends on the amount you want to apply from the prepayment to the invoice.

Source
@ (Prepayment amount applied) Banks/ and comes from
the related invoice
ent to Suppliers account xx Comes from Define
ayment amount applied) suppliers / Entered in the
related Invoices
Step-4: When the Invoice amount is less than the Prepayment amount, you can apply the
remaining amount to the future invoice (the accounting impact is same as above). In other way, If
the Invoice amount is more than the Prepayment amount, then the difference amount has to be
paid to the supplier with the following accounting impact.

Source
AP liability account xx Comes from Purchase
@ (Invoice amount – Prepayment Order / and Entered in the
amount) Distributions
Bank account @ Amount paid xx At individual Define Banks
Employee Advances
The complete cycle of transaction relating to Prepayment to suppliers and their accounting
impact is detailed under.
Step-1: When you pay Advance to the supplier (one Advance/prepayment account is maintained
for all employees and on liability account is maintained for all employees in Algorithm). Payables
keep track of individual employee balances and the individual application of
advances/prepayments to the invoices.

Source
Advances to Employee account xx At individual Define
@ Amount of advance paid Employees as Suppliers
unt @ Amount of advance xx At individual Define Banks
Step-2: When you receive Expense report from the employee, an invoice is booked from it.

Source
Expense account @ Expense cost xx Comes from Define
Expense Reports
AP liability account @ Expense cost xx At individual Define
Employees defined as
Suppliers
Step-3: When you apply the existing advance to the invoice booked. The amount of the
application depends on the amount you want to apply from the advance to the invoice.

Source
AP liability account xx Comes from the invoice to
@ (Advance amount applied) which the advance is
applied
s to Employees account xx Comes from Define
nce amount applied) suppliers / Entered in the
related Invoices
Step-4: When the Expense report/Invoice amount is less than the Advance amount, the
employee has to return the money back to the company.
For that, create an adjustment invoice against the same employee for the difference amount
he/she has to pay, debiting the Advance to employee account. The accounting impact in
Payables is detailed under.

Source
Advances to Employees account xx Has to be given manually
o be paid by the employee)
AP liability account xx Comes from Define
@ (Amount to be paid by the suppliers / Entered in the
employee) related Invoices
Then you apply the remaining amount of the advance to the new invoice created. In payables
you have the following accounting impact.

Source
AP liability account xx Comes from the invoice
@ (Remaining advance amount to which the advance is
applied) applied
s to Employees account xx Comes from Define
aining advance amount applied) suppliers / Entered in the
related Invoices
The accounting impact in Receivables receive a miscellaneous receipt crediting the same
Advances to Employee account which was debited while booking the adjustment invoice. The
accounting impact is detailed under.

Source
Bank account xx Comes from Payment
o be paid by the employee) methods
Advances to Employees account xx At Define Receivables
o be paid by the employee) Activities
In other way, If the Invoice amount is more than the Prepayment amount, then the difference
amount has to be paid to the employee with the following accounting impact.
(All the remaining entries are same as the above advance application except the Step-4)
Step-4

Source
@ (Amount to be paid to employee) Employees defined as
Suppliers
Bank account xx Comes from Payment
o be paid by the employee) methods

Oracle purchasing accounts guide

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Oracle purchasing accounts guide

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This document gives in detail different accounts used and the accounting impact of various

PURCHASING: Receiving – For Accrual Process for perpetual Accruals

Receiving Account (Receiving Account)

To record the current balance of the material in receiving and inspection.

Where to define in Apps: Define Organization

Inventory AP Accrual Account

Where to define in Apps: Define Organization Parameters

Expense AP Accrual Account

Where to define in Apps: Define Purchasing Options

Invoice Price Variance Account

Exchange Rate Gain or Loss Account

Accounting Entry Debit Credit

Receiving inspection account @ PO xx At Define Organizations

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

To record the actual Landed cost (Average Cost)

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Sub-inventory accounts @ PO price xx At Define Sub-inventory

Accounting Entry Debit Credit

PO distribution charge account @ PO xx From Purchase Order

Expense A/P Accrual account @ PO xx At Define Purchasing

Accounting Entry Debit Credit

(I). Return to Vendor from Inventory when the items are

Invoice Booking at Standard Costing at Algorithm

For Actual Supplier Invoice

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Invoice Booking at Average Costing at DU

Accounting Entry Debit Credit

Payment of the Invoices booked

As mentioned above payment is done separately for each invoice.

Accounting Entry Debit Credit

Incase of Debit and Credit Memo

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

Accounting Entry Debit Credit

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