Oracle Purchasing

Online Accruals

An Oracle White Paper July 2014

1

Online Accruals – Setup and Usage

Section 1 Purpose, Scope and Application 3Section2 Introduction 3

2.1 Over view of Accruals and Accrual Accounting 3

2.2 Types of Purchase Accruals 3

2.3 Modules Involved in Oracle Application 4

2.4 Prerequisites 4

2.5 R12 Accrual Reconciliation Process 4

Section 3 Top Level view of Online Accruals Flow 5

3.1 Online Accruals with Expense Destination 5

3.2 Online Accruals with Inventory Destination 5

Section 4 Online Accruals Setup 6

4.1 Oracle Purchasing 6

4.1.1 Enable Accrue on Receipts at Purchasing Options 64.1.2 Expense AP Accrual Account setup 74.1.3 Setup selects Accrual Account 84.1.4 Define Receiving Inventory Account 8

4.2 Oracle Inventory Management 9

4.2.1 Define Inventory AP Accrual Account 94.2.2 Define Invoice Price variance Account 9

Section 5 Programs and Reports used for Online Accrual process 10

5.1 Programs used for Online Accrual process 10

2

5.1.1 Accrual Reconciliation Load Run Program 105.1.2 Create Accounting-Receiving program 105.1.3 Create Accounting-Cost Management program 105.1.4 Transfer Journal Entries to GL 11

5.2 Reports used for Online Accrual process 11

5.2.1 AP and PO Accrual Reconciliation Report 115.2.2 Miscellaneous Accrual Reconciliation Report 125.2.3 Summary Accrual Reconciliation Report 135.2.4 Accrual Write-Off Report 145.2.5 Account Analysis Report 15

Section 6 Accruals write offs process 16Section 7

Online accrual accounting flows in purchasing, payable and general ledger 17

7.1 Online Accrual Accounting flow with Expense Destination 18

7.2 Online Accrual Accounting flow with Inventory Destination 31

Section 8 Accrual write-off accounting flows 31Section 9 Important tables used in online accrual process 39

SECTION 1 PURPOSE, SCOPE AND APPLICATION

This white paper is intended to aid users in verifying common setup steps and provide usage relating to accrual methods and processes, involved in Release 12 (R12). The document takes users through a complete cycle of Online Accruals covering all relevant aspects. This white paper is intended for all users, consultants and support analysts of the Oracle Procurement Application. Anyone using this document is expected to have the basic knowledge of Oracle Application setup steps and a firm understanding of accounting principles, apart from having a basic knowledge of SQL*Plus.

SECTION 2 INTRODUCTIONSThis section is to provide a broad overview of the Online Accrual and Online Accrual accounting process in R12. It also provides explanations of common terms and concepts to include accrual, accrual accounting, types of purchase accruals in Oracle Applications and the modules involved.

3

2.1 Overview of Accruals and Accrual AccountingAccruals are an accumulation of expense that is recognized before cash is paid or accruals can be liabilities to pay for goods or services that have been received, but have not been paid or invoiced.Accrual accounting is recognition of revenue when earned and expenses when incurred, even though cash has not been received or paid. An example of a typical Accrual process: I have employees that earn money through the end of July. Their actual pay date is not until August 5th. So at the end of July I would accrue the money the employees have earned but not been paid, to accurately reflect expenses in my financial statements. At the beginning of the next period I would reverse the accrual. When the employees get paid on the 5th, the entire amount of the payroll would then hit actual expenses.

2.2 Types of Accrual Methods in Purchasing. There are two types of Accrual methods used in Purchasing:

1. Accrue on Receipt also known as Online Accruals or Perpetual Accruals2. Accrue at Period End also known as Period End Accruals or Periodic

AccrualsAccrue on Receipt:Accrue on Receipt means that when a receipt is saved, accrual transactions are immediately recorded in the receiving subledger or inventory subledger based on the item type. The Create Accounting process then must be submitted separately to generate the receipt accounting in the Subledger Accounting (SLA) and the General Ledger (GL). This is also known as ‘online’ accruals or ‘perpetual’ accruals.All items with a destination type ‘inventory’ and outside processing, are accrued on receipt. For items with a destination type of ‘expense’, the option of accruing on receipt or at period end is available. This depends upon the business requirement of the organization.The AP and PO Accrual Reconciliation report, Miscellaneous Accrual Reconciliation report or the Summary Accrual Reconciliation report are used to view online accruals. These reports are used to reconcile an online accruals balance within the GL.

Accrue at Period End: Accrue at Period End means that when a receipt is saved, the accrual transactions are not immediately recorded and sent to SLA and the GL. The accounting entries are generated at the end of the month by running the Receipt Accrual Period-End program followed by the Create Accounting process, which must be submitted separately to generate the receipt accounting in SLA and the GL. This is also known as ‘Period End accruals’ or ‘Periodic Accruals’. For items with a destination type of Expense the Receipt Accrual-Period End process can only be used. Expense items typically are not accounted for on a daily basis. Most companies find it easier to account for and reconcile these expenses at month-end rather than at the time each individual expense is

4

incurred. The Uninvoiced Receipts report should be used to view period-end accruals. This report is used to reconcile period end accruals with the GL.

2.3 Modules Involved in Oracle Application The online accrual accounting involves the following modules:

Oracle Purchasing Oracle Payables Oracle Inventory Oracle Cost Management - SLA Oracle General Ledger

2.4 Prerequisites The pre-requisites to enable Online Accruals are as follows:

Installation of required modules Define Expense Accounts Payable (AP) accrual account and Inventory AP

accrual account in the GL module Create a Subledger Accounting Method (SLAM) Assign the correct SLAM to the Ledger Enable Online Accruals at Purchasing Options

2.5 R12 Online Accrual Reconciliation Process In R12 the Online Accrual process must be carefully reviewed before implementation. There are different components involved in the process. Each component performs a separate action in moving and verifying the transactions from the Purchasing tables to the Receiving Subledger (rcv_receiving_sub_ledger) to SLA and finally to the GL.After completing the receipt transactions and invoice matching, the create accounting program must be run in final mode along with the subsequent transfer of entries to the GL, after which the accrual reconciliation process must be started. Submit the Accrual Reconciliation Load Run program with transaction date as the parameter to populate the data in the tables cst_reconciliation_summary, cst_ap_po_reconciliation and cst_misc_reconciliation. Then run the Accrual Reconciliation report for the operating unit to start the reconciliation process

5

Description: Figure 1 displays the Accrual reconciliation process

SECTION 3 TOP LEVEL VIEW OF ONLINE ACCRUAL FLOW IN R123.1 R12 Online Accruals with Expense Destination

If a Purchase Order (PO) which is set to online accruals (accrue at receipt) is received and delivered to an expense destination, receipt accounting happens in the receiving subledger for both receive and deliver transactions. Then submit the Create Accounting process manually to generate the receipt accounting in SLA and the GL. This receipt accounting includes encumbrance reversal entries if the PO is encumbered; otherwise, it will just include the actual entries.

Technically when a PO is set to online accruals (accrue on receipt) and is received, the Receiving Transaction processor generates the accounting entries in the receiving subledger ‘rcv_receiving_sub_ledger’ upon receipt and delivery of the PO. Then the create accounting should take place to create the SLA journals which will insert records into the tables ‘xla_ae_headers’ and ‘xla_ae_lines’. These accounting entries will be available in the table xla_ae_lines. The event type code in xla_ae_headres for these actual entries will be ‘RECEIVE’ for receipt accounting and ‘DELIVER_TO_EXPENSE’ for delivery accounting. The SLA journals can be transferred to the GL with the parameters 'Transfer to GL' and 'Posting in GL' as Yes when submitting the Create Accounting program.

Description: Figure 2 displays the top level accrual accounting flow for expense destination PO

3.2 R12 Online Accruals with Inventory Destination If the PO which is set to online accruals (accrue at receipt) is received and delivered to an inventory destination, receipt accounting happens in the receiving subledger and the delivery accounting happens in the inventory subledger. Then the Create Accounting process must be submitted manually to

6

generate the receipt accounting in SLA and the GL. This receipt accounting includes encumbrance reversal entries if the PO is encumbered; otherwise, it only includes the actual entries. Technically, when a PO is set to online accruals (accrue on receipt) and the inventory destination is received, the Receiving Transaction Processor generates the accounting entries in the receiving subledger (rcv_receiving_sub_ledger) for the receive transactions and in inventory subledger (mtl_transaction_accounts) for the deliver transactions. Then create accounting should take place to create the SLA journals which will insert records into tables ‘xla_ae_headers’ and ‘xla_ae_lines’. These accounting entries will be available in the table ‘xla_ae_lines’. The event type code in ‘xla_ae_headres’ for these actual entries will be ‘RECEIVE’ for receipt accounting and ‘PO_DEL_INV’ for delivery accounting. The SLA journals can be transferred to the GL with parameters 'Transfer to GL' and 'Posting in GL' as Yes while submitting the Create Accounting program.

Description: Figure 3 displays the top level accrual accounting flow for inventory destination PO

SECTION 4 ONLINE ACCRUALS SETUP

In Release 12, it is imperative that each of the following accounts used in the online accrual process are set with separate and distinct accounts. The following setups are used in the online accrual process:

Enable Accrue on Receipts at Purchasing Options

Expense AP Accrual Account

7

Setup Select Accrual Account

Receiving Inventory Account

Inventory AP Accrual Account

Invoice Price Variance Account

4.1 Oracle Purchasing

4.1.1 Enable Accrue on Receipts at Purchasing Options SetupNavigate from the Purchasing Responsibility to Setup>Organization>Purchasing Options>Accrue Expense Item ‘At receipt’ and Accrue Inventory Item ‘At receipt’

Description: Figure 4 displays the online accrual setups at Purchasing Options

4.1.2 Expense AP Accrual Account Setup

Setup a GL account to accumulate the expense AP accrual for Purchasing. This is the account used by Purchasing to accrue AP liability for expense items at time of receipt, when the expense accrual option is at receipt or at period-end. Navigate from the Purchasing Responsibility to Setup>Organization>Purchasing Options>Expense AP Accrual Account

8

Description: Figure 5 displays the Expense AP Accrual Account setups at Purchasing Options

4.1.3 Select Accrual Account SetupNavigate from the Purchasing Responsibility to Accounting>Accrual Write-Offs>Select Accrual Accounts

Description: Figure 6 shows defining the accrual account in the Select Accrual Accounts form

4.1.4 Define Receiving Inventory AccountEnter the GL account to record the current balance of material in receiving and inspection.

Navigate from the Purchasing Responsibility to Setup>Organization>Receiving Options>Select the Organization>Receiving Inventory Account 

9

Description: Figure 7 displays the Receiving Inventory Account setup at Receiving Options

4.2 Oracle Inventory 4.2.1 Define Inventory AP Accrual AccountSetup a GL account to accumulate the inventory AP accrual for this organization. This is the account used by Purchasing to accrue payables liability when items are received. This account represents the uninvoiced receipts and is usually part of the AP liabilities in the balance sheet. Payable relieves this account when the invoice is matched and approved. Navigate from the Inventory Responsibility to

Setup>Organization>Parameters>Other Accounts 

Description: Figure 8 displays the Inventory AP Accrual Account setups at Organization Parameters

4.2.2 Define Invoice Price Variance AccountThe Invoice Price Variance account is used to accumulate invoice price variance for the organization. This is usually an expense account. Invoice price variance

10

is the difference between the PO price for an inventory item and the actual invoice. When Payables creates accounting entries for the invoice, it uses the invoice price variance account from the PO to record invoice price variance entries.

Navigate from the Inventory Responsibility to Setup>Organization Parameters>Other Accounts

Description: Figure 9 displays the Invoice Price Variance Account setups at Organization Parameters

SECTION 5 PROGRAM AND REPORTS USED FOR ONLINE ACCRUAL PROCESS

5.1 Programs Used for Online Accrual Process5.1.1 Accrual Reconciliation Load Run ProgramThe Accrual Reconciliation Load Program is the counterpart of the Rebuild manager in Release 11i. The Accrual Reconciliation Load Program populates the reconciliation tables with all necessary transaction data needed to perform the reconciliation process. All the affected PO distributions within the date range will be deleted first and updated to the current values for the date range given in the Accrual Load Program. A record is inserted into the table cst_reconciliation_build each time the Accrual Reconciliation Load run program is submitted.

The program populates the data into the tables cst_ap_po_reconciliation, cst_reconciliation_summary, cst_misc_reconciliation and cst_reconciliation_build. In an R12 upgraded instance the ‘From Date’ specified is ignored and it is run from the start of the transaction history. Write off transactions from 11i will be upgraded and loaded into the cst_write_offs and cst_write_off_details tables.

Accrual Reconciliation Load Run Program data flow:

11

Description: Figure 10 displays the Accrual Reconciliation Load run program data flow

5.1.2 Create Accounting-Receiving ProgramThe Create Accounting-Receiving process has to be submitted manually to generate the receipt accounting in SLA and the GL. Create Accounting-Receiving belongs to the Purchasing module added to Cost Management to process the transactions from the receiving subledger to SLA and the GL. The process only accounts for expense destination PO receipt. Create Accounting-Receiving is a wrapper that includes an additional parameter application id needed for the entire Supply Chain Management system and various applications.

5.1.3 Create Accounting-Cost Management ProgramCreate Accounting-Cost Management is owned by the Cost Management module to process the transactions from various subledgers to SLA and the GL. The Create Accounting-Cost Management request has to be submitted manually to transfer the subledger journal entries to SLA and the GL. The program creates accrual journal entries, accrual reversals, and multi-period journal entries in SLA. The following process categories are considered by the Create Accounting-Cost Management program:

Inventory Manual Receiving Third Party Merge Work in Process (WIP)

Create Accounting - Cost Management process the following sources of transactions which includes:

Expense destination PO Receipt All Inventory transactions including inventory destination Pos WIP transactions

12

Accrual Write Off transactions

5.1.4 Transfer Journal Entries to GL ProgramTransfer Journal Entries to GL program is owned by the General Ledger module. This program transfers the accounting entry from SLA to the GL (which are in Final mode in SLA and not yet transferred to GL). The program should be submitted from each application to transfer the journal from SLA to the GL.

5.2 Reports used for Online Accrual ProcessThe Accrual Reconciliation report is used to analyze the balance of the AP accrual accounts. To submit this report, Oracle Purchasing and Payables must be installed. Both expense and inventory purchases can be accrued as they are received. Once the receiving is complete, record a temporary AP liability to the Expense or Inventory AP accrual accounts. When Oracle Payables creates accounting entries for the invoice, Payables clears the AP accrual accounts and records the liability from the supplier site. The Accrual Reconciliation report can be run anytime with the date parameter to view the accrual balance. After the receipt transactions have been entered and matched to invoices, run the Accrual Reconciliation report for any transaction date range and identify any differences between the PO receipts and AP invoices. The following reports are used in the online accrual process:

Summary Accrual Reconciliation report AP and PO Accrual Reconciliation report Miscellaneous Accrual Reconciliation report Accrual Write-Off report Account Analysis report

5.2.1 AP and PO Accrual Reconciliation ReportThe purpose of this report is to show all Oracle AP and PO transactions where the AP transactions are matched to a PO (this could be a receipt as well). The AP and PO Accrual Reconciliation report provides a transactional breakdown of each accrual account with a net balance not equal to zero in a summarized or full transaction details version. In summarized mode, for each accrual account only the distribution information and PO, AP, Write-Off (WO) and Total Balances are displayed. For detailed mode, the individual transaction details for each distribution are also shown.

This report picks data from the table cst_ap_po_reconciliation which gets populated during the load run process. While running this report, the system prompts to enter the following parameters:

13

Operating UnitSelect the operating unit for the report

TitleEnter a title for the report

Aging Period DaysNumber of days by which group transactions are sorted in descending order

Item FromLower limit of item range to consider for this report

Item ToUpper limit of item range to consider for this report

Vendor FromLower limit of vendor range to consider for this report

Vendor ToUpper limit of vendor range to consider for this report

Min Outstanding BalanceLower limit of distribution balance to display

Max Outstanding BalanceUpper limit of distribution balance to display

Balancing Segment FromLower limit of balancing segment range to consider for this report

Balancing Segment ToUpper limit of balancing segment range to consider for this report

5.2.2 Miscellaneous Accrual Reconciliation Report

The purpose of this report is to show all inventory and AP (not matched to PO) transactions that have hit the accrual accounts. Transactions are grouped by accrual code. The report can be run either in summary where only the distribution information and balance is shown or in detail where all the transaction that makes up a particular distribution, are shown. Accrual amount will be displayed for each transaction along with the source whether it is inventory or AP. This report picks data from the table cst_misc_reconciliation which gets populated during the load run process. While running the report, the system will prompt to enter the following parameters:Operating Unit

14

Select the operating unit for the reportTitleEnter a title for the reportSort ByParameter to specify how to sort the data at the distribution level (independent of Summarization parameter)Valid ValuesItem, Transaction Date (default), AmountDate FromStarting date of time period to display for this reportDate ToEnding date of time period to display for this reportItem FromLower limit of item range to consider for this reportItem To Upper limit of item range to consider for this reportMin AmountLower limit of transaction amount to displayMax AmountUpper limit of transaction amount to displayBalancing Segment FromLower limit of balancing segment range to consider for this reportBalancing Segment ToUpper limit of balancing segment range to consider for this report

5.2.3 Summary Accrual Reconciliation Report

The Summary Accrual Reconciliation report can be used to analyze the balance of the AP accrual accounts. Both expense and inventory purchases can be entered as they are received. When this happens, temporarily an AP liability record is entered to the Expense or Inventory AP accrual accounts. When Oracle Payables creates the accounting for the matched and approved invoice, Payables clears the AP accrual accounts and records the liability from the supplier site.

The Accrual Reconciliation report helps monitor potential problems with purchasing and receiving activities that can affect the accuracy of the AP accrual accounts. It displays the balance of each accrual account as well as partial representation of the source of the balance. This report picks data from

15

the table cst_reconciliation_summary which is populated during the load run process. While running this report, the system prompts to enter the following parameters:

Operating UnitSelect the operating unit for the report

TitleEnter a title for the report

Balancing Segment FromLower limit of the balancing segment range for the report to consider

Balancing Segment ToUpper limit of the balancing segment range for the report to consider

5.2.4 Accrual Write-Off ReportThe Accrual Write-Off report provides supporting detail for write-off journal entries. The process is as follows. First, analyze the Accrual Reconciliation report for transactions that should be expensed out of the accrual accounts. After researching the reported accrual balances, then use the Accrual Write-Off window to indicate which entries should be removed and written off from this report. Then after the entries have been written off, use the Accrual Write-Off report as supporting detail for manual journal entry.

The report displays transactions from PO receipts and AP invoices. Purchasing and Payables must be installed to run this report. If Inventory or Work in Process is installed, the Accrual Write-Off report also displays any inventory or work in process transactions that have been written off. This report picks data from the cst_write_offs table which is populated during the load run process. While running this report the system prompts to enter the following parameters:Operating Unit:Select the operating unit for the reportTitle: Enter the title for this run of the reportBalancing Segment FromLower limit of balancing segment range to use for this reportBalancing Segment ToUpper limit of balancing segment range to use for this reportMinimum Write-Off AmountLower limit of amount range to use for this reportMaximum Write-Off Amount

16

Upper limit of amount range to use for this report

Write-Off Dates FromEnter the beginning GL date. Usually, this is the beginning date of the accounting period

Write-Off Dates ToEnter the ending GL date. Usually, this is the ending date of the accounting period

Write-Off ReasonEnter a specific write-off reason

Sort BySelect a value to determine how to sort write-off transaction data 5.2.5 Account Analysis ReportThe Account Analysis report lists the accumulated balances of a range of accounts and all journal entry lines that affect that range. This report prints the journal entry lines and beginning and ending balances of the accounts requested. For each journal entry line, the report prints the source, category, batch name, journal entry name, account, description, entry/line/source item reference information, and the debit or credit amount. While running this report the GL prompts to enter the following parameters:

TypeChoose ‘Entry Item’ to generate a report showing EXTERNAL_REFERENCE from the GL_JE_HEADERS table. This reference appears only if one was provided in the Enter Journals form or if Journal Import was used. Choose ‘Line Item’ to generate a report showing REFERENCE_1 from the GL_JE_LINES table. Choose ‘Source Item’ to generate a report showing REFERENCE_4 from the GL_JE_LINES table. These references appear only if Journal Import was used and a journal voucher number is included, an invoice date and number, or some other source document information to help identify the origin of this journal entry was entered.Currency Choose the functional currency for the set of books Balance TypeChoose to report on Actual, Budget, or Encumbrance balances. If budget balances are selected, then choose the Budget Name on which to report. If encumbrance balances are selected, choose the Encumbrance Type on which to report.Starting/Ending PeriodChoose the accounting period range for the report. GL starts a new page for every period in the range.

17

Flex field From/ToEnter the account range for the reportOrder ByChoose to sort the journal entry lines of the report by Account Segment, Balancing Segment, or Source name.

SECTION 6 ACCRUAL WRITE-OFF PROCESS

Purchasing records an AP liability to an AP accrual account for goods received but not invoiced. When Payables matches and approves the invoice for the received goods, Payables clears the AP accrual account and records the actual liability amount to the invoice AP liability account. It may be desired to reconcile those transactions that leave some balance (liability) in accrual accounts. This can be done with the accrual reconciliation process.

The following flow diagram illustrates the flow for the accrual reconciliation and the accrual write-off:

18

Description: Figure 11 displays an overview of the Accrual Write-off process

After receipt transactions have been entered and AP invoices have been matched and approved, run the accounting process that creates the accounting for these transactions in the final mode which subsequently transfers the transactions to the GL. The accrual reconciliation process can then be started by running the Accrual Reconciliation Load program. This program is used to populate the accrual reconciliation table with all necessary transaction data to perform the reconciliation process.

The AP and PO Accrual Reconciliation report provides a transactional breakdown of each accrual account with a net balance greater than zero in a summarized or full transaction details version. The AP and PO Accrual Write-Offs window is used to indicate which AP and PO transactions should be written off and removed from the AP and PO Accrual Reconciliation report.

The Miscellaneous Accrual Reconciliation report provides reporting of all miscellaneous AP (not matched to PO or PO receipts) and Oracle Inventory transactions hitting accrual accounts. Use the Miscellaneous Accrual Write-Offs window to indicate which miscellaneous AP (not matched to PO) and Oracle Inventory transactions should be written off and removed from the Miscellaneous Accrual Reconciliation report.

The following steps can be used to perform the write off transaction: Use the Select Accrual Accounts window to verify or define all the

accrual accounts to be used when loading accrual data. Run the Accrual Reconciliation Load Run program. Run the Summary Accrual Reconciliation report to find out which

accounts have balances and the amount of those balances. If a balance is in AP and PO transactions, run the AP and PO Accrual

Reconciliation report. If a balance is in other types of transactions, run the Miscellaneous

Accrual Reconciliation report. Examine the transactions. If AP and PO transactions exist where there is an AP invoice matched to a

PO or a PO receipt, use the AP and PO Accrual Write-Offs window to view the transactions by PO distribution.

Otherwise use the Miscellaneous Accrual Write-Offs window to view the transactions.

Choose those transactions that are candidates for write-off and perform the write off.

Use the View Write-Off Transactions window to see the write-off transactions. Write-off transactions can also be reversed from this window.

19

Run the Accrual Write-Off report to see the history of write-off transactions.

Run the Summary Accrual Reconciliation report to make sure that the Receiving balanced accounts do not appear in the report.

Once the accrual entries for the PO or invoice are shown in the Accrual Reconciliation report, an Accrual Write-off can be done using the Cost Management or Purchasing responsibility>Accounting>Accrual write offs>AP and PO. This will delete the accrual entry from the cst_ap_po_reconciliation table and populate the write off transaction into the cst_write_offs table. This write off transaction can also be viewed in the form View Write offs. Accounting entries have to be created in SLA and the GL for these write off transactions by submitting the Create Accounting program. This can be viewed in SLA by navigating to Tools > View Accounting in the View Write offs form.

The following accounting entries happen for write off against RECEIVE transactions:Accrual a/c DR Offset a/c CR Similarly for an AP PO MATCH transactionAccrual a/c CR Offset a/c DR

This Offset a/c will always be the Invoice Price Variance account.

Accounting events for write off transactions will show the Event status as "Final Accounted" once the Create Accounting program is submitted and the entries are transferred to the GL. In Release 11i accounting will not get created for the write off transaction and accrual entry has to be manually adjusted in GL. In R12, the Create Accounting program will create the accrual entry for the write off transaction in SLA as well as in the GL and hence manual adjustment of accrual entry is not required.

SECTION 7 ONLINE ACCRUAL ACCOUNTING FLOWS IN PURCHASING, PAYABLES AND GENERAL LEDGER This section will explain online accrual accounting flow for the expense destination PO.

7.1 Online Accrual Accounting Flow with Expense Destination 1. Create PO screen

Create a PO with an expense item. The Accrue at Receipt flag gets checked automatically in the PO shipment, since the ‘Accrue expense Item – At receipt’ is set at purchasing option. The Expense AP Accrual account (in the example below Account: 01-000-2220-0000-000) set in the Purchasing Options gets

20

defaulted to the PO distribution. For inventory items, the Inventory AP accrual account will get defaulted to the PO distribution from the Organization Parameters>Other Accounts setup. For a PO with an expense destination the expense AP accrual account should be considered for reconciliation; whereas for inventory destination, inventory AP accrual account should be considered for accrual reconciliation.

Check the PO headers data in po_headers_all

Standard PO will be created with authorization status as approved. The PO number will be stored in the segment1 column. The PO header id from this table can be used to retrieve data from other PO tables.

21

Check the PO shipment in po_line_locations_all

PO shipment will be created with accrue on receipt flag as ‘Y’, in our example below with quantity (100) and quantity billed (0). Accrue at Receipt flag will be ‘Y’ since the ‘Accrue expense Item – At receipt’ is set at purchasing option.

Check the PO distribution in po_distributions _all

PO distributions will be created with accrue on receipt flag as ‘Y’ and quantity ordered 100. The expense AP accrual account will be stored in the code_combination_id column.

2. Receipt Screen

Perform a receipt against the PO. In the example below Receipt Number 8512 was generated.

22

Check the receipt data in rcv_transactions

This receiving table will show a quantity of 100 received against the PO. The value of transaction_id in this table will be the same as rcv_trnsaction_id in the rcv_receiving_sub_ledger table. The value of transaction_id can be used to retrieve the data in the rcv_receiving_sub_ledger table.

3. Receiving Transaction Summary > Tools > View Accounting

The moment a receipt transaction is completed, receipt accounting will be created in the receiving subledger for both receive and deliver transactions, for POs with expense destinations. When a PO is set to Accrue at Receipt the Receiving Transaction Processor generates the accounting entries in the rcv_receiving_sub_ledger table upon receive and delivery of the PO. For an inventory destination PO, the receive transaction accounting will be created in the receiving subledger, whereas the deliver transaction accounting will be created in the inventory subledger.

The following accounting happens for Receive transactions: Receiving Inventory account: 01-000-1410-0000-000 DR 237 Expense AP accrual account: 01-000-2220-0000-000 CR 237

23

4. Check the receipt accounting in rcv_receiving_sub_ledger

The receipt accounting will be created in the receiving subledger with Journal Entry (JE) source as ‘Purchasing’ and JE category as ’Accrual’ for the receive transaction. The expense AP accrual account will get credited with 237 and the Receiving Inventory account will get debited with 237. The accounting line type will be ‘Accrual’ for the expense AP accrual account and the accounting line type will be ‘Receiving Inspection’ for the Receiving Inventory account. The value of ‘rcv_sub_ledger_ id’ will be the same as the value of source_distribution_id_num_1 in the xla_distribution_links table. The rcv_sub_ledger_ id can be used to link between the receiving subledger and SLA data.

5. Create Accounting – Receiving to transfer the journals from receiving subledger to SLA and GL

Once the receipt accounting is generated in the receiving subledger, then the Create Accounting-Receiving program has to be submitted manually to transfer the journal from receiving subledger to SLA and GL. The Create Accounting-Receiving program inserts the records into the table’s xla_ae_headers, xla_ae_lines and xla_distribution_links.

24

6. Verify the journals in SLA : Cost Management –SLA responsibility >SLA > Inquiry > Journal Entry Lines These entries can be viewed from the SLA menu in the Cost Management module.Navigation from Cost Management-SLA to SLA >SLA: Inquiry > Accounting event >Query by transaction dates and ledger name.

7. View Journal Entries in SLA The Following accounting entries will be available in the HTML page.

Expense AP Accrual account CRReceiving Inventory account DR

Check the receipt accounting in SLA (xla_distribution_links)

The value of source_distribution_id_num_1 in this table will be same as the rcv_sub_ledger_id in the rcv_receiving_sub_ledger table. The accounting line code will be ‘ACCRUAL’ and the source distribution type will be ‘RCV_RECEIVING_SUB_LEDGER’ since the accrual transaction is transferred

25

from the receiving subledger. The value of ae_header_id from this table can be used to query other SLA tables like xla_ae_headers and xla_ae_lines.

Check the receipt accounting in SLA (xla_ae_headers)

The JE category name would be ‘Receiving’ and event type code would be ‘Receive’ for the receive transaction accounting. The gl_transfer_status_code will be ‘Y’ since the accounting entries has been transferred to GL.

Check the receipt accounting in SLA (xla_ae_lines)

This table will show the accounting entries detail. The accounting class ‘accrual’ will get credited with 237; whereas the accounting class ‘receiving inspection’ will get debited with 237. The value of the gl_sl_link_id present in this table can be used to link the GL tables.

8. View Journal Entries in GL

It is always preferred to do the transfer to GL and posting with the parameters 'Transfer to GL' and 'Posting in GL' as Yes while submitting the Create Accounting program. After transferring the receipt journal to GL the accounting entries can be seen in the following tables.

Check the receipt accounting in GL (gl_import_references)

The value of gl_sl_link_id in this table is the same as the value of the gl_sl_link_id in the xla_ae_lines table. The je_header_id value should be used to retrieve data from other GL tables like gl_je_headers and gl_je_lines.

26

Check the receipt accounting in GL (gl_je_headers)

The JE source will be updated to ‘Cost Management’ and the JE category as ‘Receiving’. In our example here the receipt accounting entry has been moved to the GL in the Mar-14 period.

Check the receipt accounting in GL (gl_je_lines)

This table will provide the details of accounting information in the GL like code combination id, posted status, accounted debit and accounted credit.

9. Run the Accrual Reconciliation Load Run program

The Accrual Reconciliation Load Program populates the reconciliation tables with all the necessary transaction data needed to perform the reconciliation process. It populates the data into the tables cst_ap_po_reconciliation, cst_reconciliation_summary, cst_misc_reconciliation and cst_reconciliation_build.

Check the receipt accounting in CST tables (cst_reconciliation_summary)

27

PO accrual balance credit amount (-237) will be shown against the PO distribution id (580942). Since there in no accrual balance from the AP side against the PO distribution, the AP accrual balance will be shown as zero.

Check the receipt accounting in CST tables (cst_ap_po_reconciliation)

PO accrual balance credit amount (-237) will be shown against the PO distribution id (580942). Since there in no accrual balance from AP side against the PO distribution, AP accrual balance will be shown as zero.

Check the receipt accounting in CST tables (cst_misc_reconciliation)

There should be no data in the cst_misc_reconciliation table since this report does not consider the AP and PO accrual balance.

10.Run the AP and PO Accrual Reconciliation report

28

11.AP and PO Accrual Reconciliation report output

12.Run the Summary Accrual Reconciliation report

29

13.Summary Accrual Reconciliation report output

14. Inquiry Journals form shows the receipt journal The receipt accounting entries can be viewed from GL once it is transferred from SLA to the GL.Navigate from the GL responsibility to Inquiry >Journal > Query by source, ledger name, category and period.

15. Inquiry Journals form

30

16.Create an Invoice against the PO

Check the PO shipment after Invoice is created (po_line_locations_all)

PO shipment will be updated to the quantity received 100 and quantity billed 100 after receive and invoice is completed against the PO shipment.

31

Check the PO distribution after Invoice is created (po_distributions_all)

PO distribution will be updated to the quantity billed 100 and amount billed 200 after the invoice is validated against the PO distribution.

17. Invoice data after Invoice Validation

Check the Invoice data after Invoice is created (ap_invoices_all)The total invoice amount and invoice number information will be stored in the ap_invoices_all table. In this case Invoice number 7148 was created with the total invoice amount of 237.

Check the Invoice data after Invoice is created (ap_invoice_distributions_all)

The line type lookup code will be ‘ACCRUAL’ for the invoice transaction. If any non-recoverable tax is present then the line type lookup code will be ‘NONREC_TAX’. The value of the invoice_distribution_id is the same as the value of source_distribution_id_num_1 in xla_distribution_links. The value of invoice_distribution_id from this table can be used to retrieve data from xla_distribution_links.

18.Run Create Accounting from Payables

32

Check the Invoice data in SLA (xla_distribution_links)The value of the source_distribution_id_num_1 in this table will be same as the inv_distribution_id in the ap_invoice_distributions_all table. The source distribution type will be ‘AP_INV_DIST’ since the accrual transaction is transferred from the AP subledger. The value of ae_header_id from this table can be used to query other SLA tables like xla_ae_headers and xla_ae_lines.

Check the Invoice data in SLA (xla_ae_headers)

The JE category name will be ‘Purchase Invoices’ and the event type code will be ‘INVOICE VALIDATED’ for the invoice accounting. The gl_transfer_status_code will be ‘Y’ since the invoice accounting entries has been transferred to the GL.

Check the Invoice data in SLA (xla_ae_lines)

33

This table will show the detail level of the accounting entries. The accounting class ‘ACCRUAL’ will get debited with 237, whereas the accounting class ‘LIABILITY’ will get credited with 237. The value of gl_sl_link_id present in this table can be used to link the GL tables.

19.Run the Accrual Reconciliation load run program after invoice is validated and Create Accounting is run

There should be no data in the Costing (CST) tables after the invoice is validated and Create Accounting is run.

34

Check CST tables after Invoice is validated and load run is performed (cst_reconciliation_summary) There should be no data in the cst_reconciliation_summary.

Check CST tables after Invoice validated and load run is performed (cst_ap_po_reconciliation)

There should be no data in the cst_ap_po_reconcilaition.

Check CST tables after Invoice validated and load run is performed (cst_misc_reconciliation)

There should be no data in the cst_misc_reconciliation.

20.The PO does not appear in the Accrual Reconciliation Summary report

21.The PO does not appear in the AP and PO Accrual Reconciliation report

35

7.2 Online Accrual Accounting Flow with Inventory Destination

If the PO is created with an inventory destination, the Inventory AP Accrual account will be defaulted to the PO distribution from the Organization Parameters/Other Accounts. The other accounting flows in Purchasing, Account Payables and General Ledger module are the same as an expense destination PO.

See section 7.1 Online Accrual Accounting flow with expense destination

SECTION 8 ACCRUAL WRITE-OFF ACCOUNTING FLOWS

This section will explain the accrual write-off accounting flow for the expense destination PO.

1. Create PO screen

Create a PO with an expense item. The Accrue at Receipt flag gets checked automatically in the PO shipment, since the ‘Accrue expense Item – At receipt’ is set at purchasing option. The Expense AP Accrual account (in the example below Account: 01-000-2220-0000-000) set in the Purchasing Options gets defaulted to the PO distribution

Check the PO headers data in po_headers_all

Standard PO number will be created with authorization status as approved. The PO number will be stored in the segment1 column. The PO header id from this table can be used to retrieve data from other PO tables.

36

Check the PO shipment data in po_line_locations_all

PO shipment will be created with accrue on receipt flag as ‘Y’ with quantity ordered (100) and quantity billed (0).

Check the PO distribution data in po_distributions_all

The PO distribution will be created with accrue on receipt flag as ‘Y’ and quantity ordered (100). The expense AP accrual account (13402) defaulted to the PO distribution from the Purchasing Options setup.

2. Receipt Screen

Perform a receipt against the PO. In the example below Receipt Number 8541 was generated.

3. Receiving Transaction Summary > View Accounting

37

The moment a receipt transaction is completed, receipt accounting will be created in the receiving subledger for both receive and deliver transactions, for POs with expense destinations. When a PO is set to Accrue at Receipt the Receiving Transaction Processor generates the accounting entries in the rcv_receiving_sub_ledger table upon receive and deliver of the PO.

The following accounting happens for Receive transactions: Receiving Inventory account: 01-000-1410-0000-000 DR 237 Expense AP accrual account: 01-000-2220-0000-000 CR 237

Check the receipt accounting data in rcv_receiving_sub_ledger

The receipt accounting will be created in the receiving subledger with JE source as ‘Purchasing’ and JE category as ’Accrual’ for the receive transaction. The expense AP accrual account is credited with 237 and the Receiving Inventory account debited with 237. The accounting line type will be ‘Accrual’ for the expense AP accrual account and the accounting line type will be ‘Receiving Inspection’ for the Receiving Inventory account.

The value of ‘rcv_sub_ledger_ id’ will be the same as the value of source_distribution_id_num_1 in the xla_distribution_links table. The rcv_sub_ledger_ id can be used to link between receiving sub ledger and SLA data.

38

4. Run the Create Accounting-Receiving program to transfer the subledger entry to SLA and GL

Check the receipt accounting data in SLA (xla_distribution_links)

The value of the source_distribution_id_num_1 in this table will be the same as the rcv_sub_ledger_id in the rcv_receiving_sub_ledger table. The accounting line code will be ‘ACCRUAL’ and ‘RECEIVING_INSPECTION’ for the Accrual account and receiving Inventory account respectively. The source distribution type will be ‘RCV_RECEIVING_SUB_LEDGER’ since the accrual accounting gets transferred from receiving sub ledger. The value of ae_header_id from this table can be used to query other SLA tables like xla_ae_headers and xla_ae_lines.

39

Check the receipt accounting data in SLA (xla_ae_headers)

The JE category name would be ‘Receiving’ and event type code would be ‘Receive’ for the receive transaction accounting. The gl_transfer_status_code will be ‘Y’ since the accounting entries have been transferred to GL.

Check the receipt accounting data in SLA (xla_ae_lines)

This table shows the detail level of accounting entries. The accounting class ‘ACCRUAL’ would get credited with 237, whereas the accounting class ‘RECEIVING_INSPECTION’ would get debited with 237. The value of gl_sl_link_id present in this table can be used to link the GL tables.

5. Run the Accrual Reconciliation Load Run program

The Accrual Reconciliation Load Program populates the reconciliation tables with all necessary transaction data needed to perform the reconciliation process. It populates the data into the tables cst_ap_po_reconciliation, cst_reconciliation_summary, cst_misc_reconciliation and cst_reconciliation_build.

40

Check the receipt accounting data in CST table (cst_ap_po_reconciliation)

PO accrual balance credit amount (-237) will be shown against the PO distribution id (649950). Since there in no accrual balance from the AP side against the PO distribution, the AP accrual balance will be shown as zero.

Check the receipt accounting data in CST table (cst_reconciliation_summary)

PO accrual balance credit amount (-237) will be shown against the PO distribution id (649950). Since there in no accrual balance from AP side against the PO distribution, AP accrual balance will be shown as zero.

Check the receipt accounting data in CST table (cst_write_offs)

There should be no data in the write-off tables since no write off transaction is done.

6. AP and PO Accrual Reconciliation report output

41

7. Run the Summary Accrual Reconciliation report

8. Find AP and PO Writeoff Candidates screen

42

9. Run the Create Accounting-Receiving to transfer the write-off journal to SLA and the GL

43

10. Run the Accrual Reconciliation Load program after write-off transaction

Check the receipt accounting data in CST tables(cst_ap_po_reconciliation)

44

There should be no data in the cst_ap_po_reconciliation table after the write-off has been completed, followed by the load run program.

Check the receipt accounting data in CST tables(cst_reconciliation_summary)

There should be no data in the cst_reconciliation_summary table after the write-off has been completed, followed by the load run program.

11. There is no data in AP and PO Accrual Reconciliation report

12. There is no data in Summary Accrual Reconciliation report

Check the receipt accounting data in CST tables (cst_write_offs)

The transaction type code will be ‘WRITE OFF’ for the transaction. The amount will be shown against the corresponding PO distribution. The write-off amount shown in this table will be shown in the Accrual Write-off report.

45

13.View the write o-ff transactions in the View Write-Offs screen

Navigate from the Purchasing Responsibility to Accounting > Accrual Write Offs > View Write-Offs

14.View the write off transactions in the SLA screen

Navigate from the Purchasing Responsibility to Accounting > Accrual Write Offs > View Write-Offs > Tools > View Accounting

The following accounting entries happen for write off against receive transactions:Expense AP Accrual account DR 237Offset account CR 237

15.View Journal Entries

46

16. View the write-off transactions in the Accrual Write-Off report

SECTION 9 IMPORTANT TABLES USED IN ONLINE ACCRUAL PROCESS

This section lists the main tables involved in accounting transactions.

9.1 Purchasing Tables PO_HEADERS_ALL PO_LINES_ALL PO_LINE_LOCATIONS_ALL PO_DISTRIBUTIONS_ALL RCV_TRANSACTIONS RCV_RECEIVING_SUB_LEDGER9.2 Account Payables Tables AP_INVOICES_ALL

47

AP_INVOICE_DISTRIBUTIONS_ALL AP_AE_HEADERS_ALL9.3 SLA Tables XLA_EVENTS XLA_TRANSACTION_ENTITIES_UPG XLA_DISTRIBUTION_LINKS XLA_AE_HEADERS XLA_AE_LINES XLA_TRANSACTION_ENTITIES_UPG9.4 Cost Management Tables CST_RECONCILIATION_BUILD CST_AP_PO_RECONCILIATION CST_RECONCILIATION_SUMMARY CST_MISC_RECONCILIATION CST_WRITE_OFFS9.6 General Ledger Tables GL_JE_HEADERS GL_JE_LINES GL_JE_BATCHES GL_IMPORT_REFERENCES

Oracle Purchasing Online Accruals - Setup and UsageJuly 2014Author: Pramod Kumar Sethi, ISC

Oracle CorporationWorld Headquarters500 Oracle ParkwayRedwood Shores, CA 94065U.S.A.

Worldwide Inquiries:Phone: +1.650.506.7000Fax: +1.650.506.7200www.oracle.com

Oracle is a registered trademark of Oracle Corporation. Various product and service names referenced herein may be trademarksof Oracle Corporation. All other product and service names mentioned may be trademarks of their respective owners.

Copyright © 2002 Oracle Corporation All rights reserved.

48