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How To Setup, Use and Balance Your A/P Accrual Accounts
How To Setup, Use and Balance Your A/P Accrual Accounts
Douglas A. Volz
KPMG
June 1998
1
Update for May 2007
In Release 12 there are significant enhancements:
• you finally have the ability to do mass A/P accrual write-offs
• the standard Accrual Reconciliation Report will handle blanket
purchase orders
Doug has helped clients with A/P Accruals since 1996, starting
with Cisco Systems, and even in Release 11i, continues to
assist clients with similar issues.
2
Introduction
Learn about the Oracle Release 10
accrual processes
Find out why these accrual processes
are so important
How many of you have difficulties with
your accrual processes?
Solve current problems you may have
3
Agenda
Why are these accrual processes so
important?
What are these accrual accounts?
Periodic vs perpetual accruals
Basic accounting entries for the A/P
accruals
Setup steps for the accrual processes
Using the Accrual Reconciliation Report
4
Agenda
Using the expense accrual processes
Typical problems and issues with
accruals
Implementation and conversion issues
Current bug fixes
Enhancements to consider
Conclusions
5
Why Are These Accrual
Processes so Important?
Valuable integration control
Monitors accuracy of receiving and
payables processes
Provides a vital barometer over these
activities
Helps to ensure accurate inventory
counts
6
What Are These
Accrual Accounts?
Principle of accrual accounting
7
Periodic Versus
Perpetual Accruals
Periodic accruals occurs at month-end
10
More Background Information
Charge Account
Accrual Account
Budget Account
11
Accrual Accounting Entries
Purchase order receipt
Invoice match
Return to vendor
Invoice correction
Receipt delivery
Expense accrual
12
Accounting Entries
for a PO Receipt
Receive one item @ $100 PO unit price
13
Accounting Entries
for an Invoice Match
Same item, $80 invoice unit price, $100
PO unit price
14
Accounting Entries
for a PO Return to Vendor
Same item, $100 PO unit price
15
Accounting Entries
for an Invoice Correction
Same item, $80 invoice unit price
16
Caution
You cannot change an invoice
distribution from the A/P Accrual
Account to another account
17
Accounting Entries
for Receipt Deliveries
Account Debit Credit
Delivery to stock inventory
Subinventory Account XXX
Receiving Account XXX
20
Setup in Oracle Purchasing
Use the Define Purchasing Options
Form
• Set Accrue Expense Items to Period
End
• Set the Expense A/P Accrual Account
22
Setup in Oracle Inventory
Use the Define Organization
Parameters Form
23
Caution
Use separate accounts for each type of
system account:
• Expense A/P Accrual Account
• Inventory A/P Accrual Account
• Receiving Account(s)
• Expense Purchase Order Charge
Accounts
• Other inventory, WIP and price
variance accounts 24
Caution
Release 10.7 SmartClient/NCA has a
incorrect field name for the receiving
options:
• In character it is the Receiving
Account, but the GUI screens
incorrectly used “Receiving Accrual
Account”
• Enter your receiving valuation
account, an asset account!
25
Caution
Release 10.7 SmartClient/NCA has a
incorrect field name for the receiving
options, continued:
• Using the Inventory A/P Accrual
Account for the Receiving Accrual
Account will completely invalidate
your receiving accounting results, and
make the Accrual Reconciliation
Report completely unusable!!
26
Purpose for the Accrual
Reconciliation Report
Report all perpetual accrual account
transactions
30
Payables Accrual Transactions
A/P Line Match
A/P PO Match
A/P Item Match
A/P No Match
A/P No Item
A/P No PO
Invoice Price Variance
Exchange Rate Variance
31
Purchasing
Accrual Transactions
Oracle Purchasing transactions
• Receive
• Deliver
• Match
• Return to Vendor
32
Other Accrual Transactions
Oracle Inventory transactions
• Release 9 PO receipts or returns
• Any other accrual account transaction
45
What to Check If the Perpetual
Accruals do Not Balance
Latest version for the A/P and PO
subledger reports
Latest version for the Accrual
Reconciliation Report
If you have applied the cumulative
accrual patch bug #337257 (pre 10.7)
• May be missing two PO lookup codes
Check for any conversion issues
Check for manual G/L journal entries 46
How to Balance the Receipt
Accrual - Period End Process
Run the Uninvoiced Receipts Report by
specifying Accrued Receipts: No
(before running the month-end
process), Yes (after running the month-
end process), Include On-line accruals:
no, the desired Period Name, and the
desired sort selection (purchasing
Category or Vendor)
47
How to Balance the Receipt
Accrual - Period End Process
Use careful cut-off controls for receipt
and invoice transactions
Close purchase orders and lines after
you have reconciled the Expense A/P
Accrual Account
Get bug patch #489880 (or later) for the
Receipt Accrual - Period End process
48
If the Accrual Reconciliation
Report Does Not Complete
Check for identical system accounts
Ask your database administrator if there
is enough shared memory (or SGA)
Make sure you have the latest version
for the Accrual Reconciliation Report
Major process problems with Receiving
and Payables
49
If the Accrual Reconcilation
Report Is Too Large
Check for identical system accounts
You may have too many cumulative
accrual transactions
• Use the amount and quantity
parameters
• Use the G/L Date From and To
parameters to reduce the report
Caution: non-cumulative G/L Dates
ranges may omit needed transactions 50
Implementation Issues (Mistakes
You Don’t Want to Make)
Sharing system accounts
Badly defined receiving and payables
processes
Little or no system testing for your
accrual processes
After “go live”, late review for the first
Accrual Reconciliation Report
51
Conversion Issues (More
Mistakes You Don’t Want)
Not correctly matching invoices to
receipts
• Need a valid PO_DISTRIBUTION_ID
in AP_INVOICE_DISTRIBUTIONS_ALL
Incorrect cumulative values for PO line
quantity received, returned, inspected,
and billed
Not setting the receipt on accrual flag
correctly in PO_DISTRIBUTIONS_ALL
52
Conversion Issues (Continued)
Incorrect foreign key relationships
between PO_HEADERS, PO_LINES,
PO_LINE_LOCATIONS, and
PO_DISTRIBUTIONS_ALL
54
Current Bug Fixes for
Accrual and Related Processes
Release 10.7 or earlier
• Current bug patch for the Accrual
Reconciliation Report, contact Oracle
WorldWide Support
(caution: bug patch 483453 breaks the
PO.PO_VIEW, the ODF files are invalid)
55
Current Bug Fixes for
Accrual and Related Processes
Release 10.6.1 or earlier
• Re-register the Receipt Accrual -
Period End process for no printing -
gives an erroneous warning message
Release 10.5 or earlier
• Apply the most current cumulative
accrual patch to get the latest
accounting and accruals code for
both PO and A/P
56
Current Bug Fixes for Release
10.4.2 or Earlier
For outside processing, the import
requisition process assigned the
receiving account to the PO distribution
A/P Accrual Account.
• Repair historical accounting entries
with bug No. 235288
• Get the most current patch for the
Import Requisition process
57
Current Bug Fixes for Release
10.4.2 or Earlier (Continued)
Incorrect IPV stored in the
AP_INVOICE_DISTRIBUTIONS table
• Causes the latest Accrual
Reconcilation Report to not balance
to older versions of the Payables
Expense Detail Report
• Request bug No. 319258 to obtain a
select only SQL*PLUS script
• However, the IPV in the G/L is correct
58
Current Bug Fixes for Release
10.4.2 or Earlier (Continued)
Incorrectly set Receipt on Accrual Flag
• Request the latest Enter Purchase
Orders Form
Incorrect encumbrance flag set in
AP_INVOICE_DISTRIBUTIONS
• Request a bug fix for PO Releases
• Causes the latest Accrual
Reconcilation Report to miss A/P
entries 59
Desired Enhancements
Have the ability to either exclude closed
purchase orders and PO lines or only
report closed POs and lines on the
Accrual Reconciliation Report
60
Desired Enhancements
(Continued)
Write off accrual transactions directly to
the general ledger, and store these
write-offs in the AP_INVOICE_
DISTRIBUTIONS_ALL table
61
Desired Enhancements
(Continued)
Write off accrual discrepancies on a net
basis
• Store net PO line amounts in the
PO_LINE_LOCATIONS_ALL table
• Write off net PO line amounts when
the PO line or purchase order is
closed
Actually match invoices to specific
receipts
62
Conclusions
These accrual processes are very
important to control your business
activity
Proper implementation and data
conversion is essential
Major code bugs are resolved
Please vote wisely on enhancement
requests
63
Where to get more information
The OAUG paper that this presentation
is based upon
Douglas A. Volz
65