Wednesday, November 2, 2016

AP - Account Generator Setup

SETUP & Defaulting of accounts in an Encumbrance environment.

====================================================


TOPICS
I)   Definition of Items
II)  Definition of  subinventory
III) Accounts involved and their setup
IV)  Account Generator in Oracle Public Sector Purchasing
V)   Defaulting rules of the  accounts on a Purchase Order Distribution.



I)Definition of Items:
=========================
The terminlogy of items is rather confusing from an Purchasing/Inventory 
point of view. 

For easy understanding these will be referres to as  A , B  and C, 
A - Expense Items 
B - Inventory Expense Items
C - Inventory Asset Items

A - These items have attributes checked 
    Purchasable 
    Purchased 

B - These tems have the following attributes checked 
  a - inventory item = YES
  b - stockable
  c - transactable 
  d - Inventory Asset Value = NO
  e - Costing Enabled = No 

C - These items have the following attributes checked 
   a - inventory item = YES
   b - stockable. 
   c - transactable 
   d - Inventory Asset Value = YES
   e - Costing Enabled = YES

II) Definition of  subinventory
===============================
  A subinventory can be of two types
    i) Expense Subinventory 
   ii) Asset subinventory

i)Expense subinventory can be defined as an inventory which keeps  track of Items delivered into Inventory, which may NOT be of asset value. 
When Defining a new subinventory, the attribute Asset Subinventory   remains UNCHECKED, which means that this Subinventory is NOT an asset  subinventory and hence an Expense Subinventory. 
Navigation: Oracle Inventory > Subinventories window > Costing section  of the Master Item window

ii)Asset subinventory on the other hand keeps track/record of asset items 
received INTO this organization. When Defining a new subinventory, the attribute Asset  Subinventory  is CHECKED , which means that this subinventory is an asset subinventory.
Navigation: Oracle Inventory > Subinventories window > Costing section of  the Master Item Window


III)Accounts involved and their setup
=====================================

The following accounts play a vital role in Purchase Order Processing:
1) Expense Account 
2) Encumbrance Account 
3) Expense AP accrual account
4) Inventory  AP Accrual account
5) Receiving Inspection account
6) Purchase Price Variance Account
7) Invoice Price Variance Account
8) Material 


1)Expense Account
=================
The Expense account is has an GL account type of an EXPENSE and is defined 
in 3 areas:
  a)Subinventory 
  b)Item 
  c)Organization

a) Subinventory - This is the GL account used to accumulate expenses for this  subinventory.  The EXPENSE account of an EXPENSE subinventory is charged  when you receive any item (A, B, C) into it. The Expense account of an  ASSET subinventory is charged ONLY when you receive an expense item (A).

b)Item - This account is REQUIRED if Inventory Asset Value is set to No and  Inventory Item is set to Yes. This attribute is controlled at the Organization  level only. This is  the default inventory account for Inventory Expense  items (B). Oracle Purchasing debits this account when you receive an item 
into inventory.  only if the item is being expensed and received into the  expense subinventory. If the Purchase Order for an Inventory Expense Item 
(B) has a destination of Inventory AND the expense subinventory is entered on  the Purchase Order itself, then  Oracle Purchasing uses THIS (Items ? Expense  account) FIRST; if NOT, Oracle Purchasing uses the expense account you   assigned to the subinventory.  Navigation: Items > Choose an org > Purchasing Attribute.

c) Organization:
When any item is received into an Organization?s Expense Subinventory, this  account (Organizations-Expense account) is charged against. When an EXPENSE  item is received into an Organizations Asset Subinventory this ( Organizations-Expense account) is charged against.

This account accumulates Encumbrance for this organization. This account is  used if the Organization uses AVERAGE costing.

This is the default account when you define an EXPENSE subinventory.
Navigation: Setup > Organizations > Query the Inventory Org > Organization 
classifications > Other > Inventory information > Alternate region > 
Other accounts


2) Encumbrance Account
======================
The Encumbrance is has a GL account type of an EXPENSE and is  also 
defined in 3 areas:
  a) Subinventory 
  b) Item 
  c) Organization
       
a) Subinventory - 
This account holds the value of encumbrances against ITEMS in this subinventory. This account is used for purchase order receipts and returns.
Navigation: Inventory resp > Subinventories > Define Subinventories 
              
b) Item -
This account is REQUIRED if Reverse Encumbrance parameter is set to Yes
This attribute is controlled at the Organization level only. This is the default
encumbrance account Oracle Purchasing uses when an item is received. If the 
item encumbrance account  on an item does NOT exist, Oracle Purchasing uses the
encumbrance account from the subinventory. You encumber, or reserve against 
funds, when the purchase requisition or purchase order is approved. When you 
deliver into a subinventory you reverse the encumbrance. The total receipts 
plus encumbrances equals your total funds spent. 
Navigation: Items > Choose an org > Purchasing Attribute

c) Organization -
This encumbrance account at the organization level account recognizes the 
reservation of funds when a purchase order is approved. This account is used if
Organization uses AVERAGE costing.
Navigation: Setup > Organizations > Query the Inventory Org > Organization 
classifications > other > Inventory information > Alternate region > 
Other accounts


3) Expense AP Accrual account
=============================
This account is used by Purchasing to accrue your Accounts Payable liability  for expense items at time of receipt when your Expense Accrual Option is  
At Receipt, or at period?end when your Expense Accrual Option is Period End. 

This account represents your uninvoiced receipts and is usually part of your accounts payable liabilities in the balance sheet. Use the Purchasing Options 
window to set up this account. 

To populate the Accrual account for distributions with an Expense destination 
type, the Account Generator locates the Expense AP Accrual Account that you 
specify in Define Purchasing Options as part of your application setup and 
copies it into the Accrual Account on the document. The Account Generator then 
overlays the balancing segment of the AP Accrual Account with the balancing 
segment of the charge account so that your transactions always balance by fund.
Navigation : Setup > Organizations > Purchasing Options


4) Inventory  AP Accrual account
================================
This account is used by Purchasing to accrue your payable liability for an 
organization when you receive your Inventory items. 

This account represents your uninvoiced receipts and is usually part of your 
accounts payable liabilities in the balance sheet. Payables relieves this 
account when the invoice is matched and approved. 

Navigation: Setup > Organizations > Query the Inventory Org > Organization 
classifications > Other > Inventory information > Alternate region > Other Accounts.


5) Receiving Inspection account
===============================
This account also goes by the name  - Receiving Accrual Account, and is used
to record the current balance of material in receiving and inspection.
Navigation: Purchasing > Setup > Organizations > Organizations > 
Receiving Options


6) Purchase Price Variance Account
==================================
The account records the difference between the purchase order cost and an item's standard cost  at the time you
receive an item in inventory .Purchasing calculates the PPV as:

PPV = (PO unit price ? standard unit cost) quantity received

Purchase price variance is not used for average costing. Use the Organization 
Parameters window to set this account. 

Navigation: Setup > Organizations > Query the Inventory Org > 
Organization classifications > Other > Inventory information > 
Alternate region > other accounts


7) Invoice Price Variance Account
=================================
This account records difference between the purchase order price for an 
inventory item and the actual invoice price multiplied by the quantity invoiced: 
Invoice Quantity x (Invoice Price ? PO Price) x Invoice Exchange Rate. 

Purchasing uses this account on the PO distribution when the requisition or 
purchase order is created. When Payables creates accounting entries for the 
invoice, it uses the invoice price variance account from the purchase order 
to record invoice price variance entries.

Navigation: Setup > Organizations > Query the Inventory Org > 
Organization classifications > Other > Inventory information > Alternate region
> Other accounts


8) Material
===========
This is an asset type account that tracks material cost. Under standard costing, these accounts are defaulted when you define subinventories and can be overridden.
For average costing, this account  holds your inventory and intransit values. 
Once you perform transactions, you cannot change this account.

Navigation: Setup > Organizations > Query the Inventory Org > 
Organization classifications > other > Inventory information > 
Alternate region > other accounts 



IV) Account Generator in Oracle Public Sector Purchasing
=========================================================
The default Account Generator processes in Oracle Public Sector Purchasing 
build  a charge, budget, accrual, and variance account for each purchase 
order, release, and requisition distribution based on the distribution?s 
Expense, Inventory, or Shop Floor destination type.

Oracle Public Sector Purchasing always builds these accounts using the Account 
Generator; you cannot disable this feature.

For Inventory charge account construction, the Account Generator further 
distinguishes between asset and expense purchases based on the item and 
subinventory that you provide for the distribution.

If you select an expense item, the Account Generator disregards the 
subinventory and builds an expense charge account. 

If you select an asset item, the Account Generator evaluates the subinventory 
to decide whether to build an expense or asset charge account.

When the Account Generator locates a source account based on the distribution 
destination type, it copies complete code combinations (full Accounting 
Flexfields) from designated fields to destination Accounting Flexfields. 

The default Oracle Public Sector Purchasing processes do not build individual  
flexfield segments.  For example, to populate the Accrual account for 
distributions with an Expense destination type, the Account Generator locates 
the Expense AP Accrual Account that you specify in the Purchasing Options
window as part of your application setup, and copies it into the Accrual  
Account Flexfield in your document.


V) Defaulting rules of the  accounts on a Purchase Order Distribution
====================================================================

CHARGE ACCOUNT
==============
The account generation depends MAINLY on the destination type of the 
Purchase order.  Therefore:

A)  If the destination type is Expense and item is an Expense item, the 
Charge account comes from the Organization Items Expense account which is ?
Navigation : Items > Organization Items > Purchasing attribute > Expense account

B)  If the destination type is Inventory and the Item is an Inventory expense 
item, there exists an order, in which the sytem looks for the accounts to 
be defined. Subinventory Expense account (Expense subinventory) into which 
the item is being received. If this  Expense account is NOT  defined then 
the system looks at Organization Items Expense account, if this is also 
NOT available then The Organization parameters of the Receiving Org?s  
Expense account will be populated. 

Navigation: Setup > Organizations > Query the Inventory Org > Organization 
classifications > Organzation Parameters > Costing > Expense account

C) If the destination type is Inventory and the item is an Inventory Asset 
item, the charge account is defaulted in the following order:
1) Subinventory Material or Expense account of the Subinventory into the 
RECEIVING subinventory. 
Navigation: Inventory resp > Subinventories > Define Subinventories 

If this account does NOT exist then:
2) Material Account from the Organization Parameters of the Receiving 
organization is populated. Navigation: Setup > Organizations > Query the 
Inventory Org > Organization classifications > Organzation Parameters > Costing

For one?time or predefined items with no associated expense account, the 
Account Generator will be unable to build a charge account. In this case, 
you can either manually specify a charge account in your document or you can 
design a custom Account Generator function to build Expense destination charge 
accounts based on field values like Requestor.


BUDGET ACCOUNT
==============
If the destination type is Expense, the Budget account is built off of the 
Charge account. If the destination type is Inventory, the Budget account is 
built based in the following order:
i)Encumbrance account of the subinventory into which the item is being received.
ii)Encumbrance account defined against the item 
iii)Encumbrance account from the Organization Parameters of the Receiving Org.
If none of the above are available, then it copies the charge account.


ACCRUAL ACCOUNT
===============
If the destination type is Expense then the Accrual account is populated from 
the Purchasing Options Expense AP accrual account.
Navigation: Purchasing Resp > Setup > Organizations > Organzations > Purchasing 
Options

If the destination type is Inventory the accrual account is populated from 
the receiving Organization?s Organization Parameters region.

Navigation: Setup > Organizations > Query the Inventory Org > Organization 
Classifications > Organzation Parameters > Other accounts > Inventory 
AP accrual account


VARIANCE ACCOUNT
================
If the destination type is Expense then the Variance account is copied from 
the Charge account.

If the detsination type is Inventory, then this value is populated from 
the Organization Parameters of the receiving Organization.

Navigation: Setup > Organizations > Query the Inventory Org > Organization 
Classifications > Organzation Parameters > Other accounts > Inventory  
Price Variance account


Additional Reference documents:
Note:240928.1  Troubleshooting Encumbrance entries against a PO having an 
EXPENSE destination.
Note:242175.1  Definition of Items used in Purchasing.
Note:243641.1  CHARGE ACCOUNT defaults on PO DISTRIBUTIONS
Note:243291.1  Troubleshooting Encumbrance entries against a PO having an 

INVENTORY destination 

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