Accounting transactions in PO

Definition of Items used in Purchasing
There are 3 kinds of  Items used in Purchasing.

Expense Items -               Referred to as Item A
Inventory Expense Items - Referred to as Item B
Inventory Asset Items  -    Referred to Item C

1) Expense Items - Referred to as Item A.
These items normally have  the following attributes.
       INVENTORY_ASSET_FLAG = N
        PURCHASING_ITEM_FLAG = Y
        INVENTORY_ITEM_FLAG =  N
       
2) Inventory Expense Items - Referred to as Item B
These items normally have  the following attributes.
    INVENTORY_ASSET_FLAG = N
    PURCHASING_ITEM_FLAG = Y
    INVENTORY_ITEM_FLAG =  Y
       
3) Inventory Asset Items  - Referred to Item C
These items have  the following attributes.
    INVENTORY_ASSET_FLAG = Y
    PURCHASING_ITEM_FLAG = Y
    INVENTORY_ITEM_FLAG =  Y
    COSTING_ENABLED_FLAG = Y 

PO Account Generator
The account generator behaviour will also depend on
- the destination org (on the po shipment)
- the destination type (inventory or expense) on the po distribution

You also need to remember that the item expense account defaults from the org when items are created, but you probably need to set a specific value for an item.

PO Accountings
1. Receving A/C - Defaults fro receving options for the receving organization

2.1.  I/V A/P Accrual account A/C - Defaults from Org parameter Other Acc tab

2.2  Expense A/P accrual A/C - Default from purchasing parameter Receipt Accounting tab

3.1 PO Distribution Charge (Delivery Acc) for Non Inventory Expense A/C -  Defaults from Item Exp A/C
                            
3.2 Delivery Acc for Asset Item A/C -  Mat. A/C from
                                                                        i>Sub Inevntory
                                                                        ii>Org Parameter

3.3 PO Distribution Charge Delivery Acc for Inevntory Expense A/C -  Defaults from A/Cs in following precedence
                                                                           i>Sub Inventory Expense A/C
                                                                           ii>Expense A/c in Item Master if above A/C is not available
                                                                           iii>Expese A/C from Org parameter if above 2 A/Cs are not avaialble

3.4
When Purchase Order is created with out an item number (In case of Non_inventory Items, item number exists but the inventory field is disabled but PO can also be created for items which are not defined in inventory) with value basis as Amount (i.e. Purchase basis as Service) - The PO charge A/C needs to be manually entered.

Notes:
1. We can have two differnt distribution lines for a single shipment.
In case of inventory items if the item is received in two differnt subinventories then we can create two differnt distribution lines for the same shipment and the charge a/c would default from subinventories if exits
In case of Non-Inventory items we can manually select as many charge a/cs as required.

2. In standard PO WF For an inventory expense PO charge a/c to default from the sub-inventory level, the item must be restricted to the subinventory.

1. Inventory Asset Items
Receiving:
Receiving Inspection account @ PO price XX Dr.
                                               Inventory A/P Accrual account @ PO price XX Cr.
Delivery:
Subinventory accounts(PO Charge A/c) @ standard cost XX  Dr.
                                               Receiving Inspection account @ PO price XX Cr.
                                               Debit/Credit Purchase Price Variance
and, if applicable
       Subinventory Mat Over Head XX Dr
                                                     MOH Absorption XX Cr
PPV = (PO unit price – standard unit cost) x quantity received

Invoice:
Inventory A/P Accrual account Dr.
                                                Supplier Liability A/C cr.

2. Inventory Expense Items
Receiving:
Receiving Inspection account @ PO price XX Dr.
                                                Inventory A/P Accrual account @ PO price XX Cr.
Delivery:
Sub inv Expense A/c(PO Charge) Dr.
                                                 Reciving Valuation A/c Cr.
Invoice:
Inventory A/P Accrual account Dr.
                                                 Supplier Liability A/C cr.

3. Fixed Asset Item (Same as 4. Expense Items Accrual @ Receipt)
Receiving:
Receiving Inspection account @ PO price XX Dr.                                                       Org Parameter
                                                Expense A/P Accrual account @ PO price XX Cr.        Purchaing Parameter
Delivery:
Asset clearing accounts(PO Charge A/c) @ standard cost XX  Dr.                         item/employee
                                               Receiving Inspection account @ PO price XX Cr.
                                               Debit/Credit Purchase Price Variance                           PPV=Chrage AC
Invoice:
Expense A/P Accrual account Dr.
                                               Supplier Liability A/C cr.                                                    Supplier Site

POST Mass addition:
Asset Cost A/C Dr.                                                                                                          Asset category
                                            Asset Clearing A/C Cr.                                 

Depriciation :
Depriciation expense A/C Dr.                                                                         Asset - Expense A/C
                                                  Accumulate Depriciation Exp Cr.                 Asset Category

4. Expense Items Accrual @ Receipt
Receiving:
Receiving Inspection account @ PO price XX Dr.
                                                Expense A/P Accrual account @ PO price XX Cr.
Delivery:
Item Expense A/c(PO distribution charge A/C) @ PO price XX Dr.
                                                Receiving Inspection account @ PO price XX Cr.
Encumbrance @ PO price XX Dr.
                                                Reserve for Encumbrance @ PO price XX Cr.
Invoice:
Expense A/P Accrual account Dr.
                                                 Supplier Liability A/C cr.

5. Expense Receipts Accruals–Period End
There would be no accounting in exepnse material receving and delivery.
When an invoice is created and matched to the PO for the expense item, charge a/c is debited to Supplier Liability A/C.
PO Charge A/C (Item Exp./Sub Exp.) Dr.
                                    Supplier Liability A/C Cr.

Purchasing does not record any accounting entries for expense during a receiving transaction if you use period–end accruals. You record all of your uninvoiced liabilities at month end using the Receipt Accruals – Period–End process. Use the Receipt Accruals – Period End process to create period–end accruals for your uninvoiced receipts for expense distributions. Purchasing creates an accrual journal entry in your general ledger for each uninvoiced receipt you choose using this form. If you use encumbrance or budgetary control, Purchasing reverses your encumbrance entry when creating the corresponding accrual entry.
Purchasing never accrues an uninvoiced receipt twice. Each time you create accrual entries for a specific uninvoiced receipt, Purchasing marks this receipt as accrued and ignores it the next time you run the Receipt Accrual – Period–End process. Purchasing creates accrual entries only up to the quantity the supplier did not invoice for partially invoiced receipts.

Purchasing creates the following accounting entries for each distribution you accrue using the Receipt Accruals – Period–End process:
PO charge account @ Uninvoiced Quantity x PO unit Price XX  Dr.
                                                                Expense A/P accrual account @ Uninvoiced Quantity x PO price XX  Cr.

As soon as you open the next period, Purchasing reverses the accrual entries using the following accounting entries:
Expense A/P accrual account @ Uninvoiced Quantity x PO price XX  Dr.
                                                                 PO charge account @ Uninvoiced Quantity x PO unit Price XX Cr.

6. Standard Invoice
Charge Acoount Dr.
                     Supplier Liability A/C Cr.

Encumbrance Accounting
1. PO Approval/Fund reserved
Encumbrance (Budget A/C in PO distribution) A/C Dr.

When the program - Create Journal runs in GL the encumbrance A/C is created and after posting into GL the Reserve Encumbrance A/C is credited.
So Final Accounts
Encumbrance A/C Dr.
                      Reserve for Encumrance Cr.

2. Receving
Recving Inspection A/C Dr.
                         A/P Accrual A/C cr.

3. Delivery
Inv valuation  Dr.
                        Receiving Inspection Cr.
                        Encumbrance Reversal Cr.
   Purchase price variance or rate variance

4. Invoice
In case of matched with a PO, Payables encumbers funds for variances during Payables Invoice Validation for purchase order and receipt matched invoices.
If you enter a non-purchase order matched invoice, Payables will encumber funds for it during Payables Invoice Validation.
All Payables encumbrances are reversed when you create accounting entries. If you enable Use Requisition Encumbrance, you must also enable this option.

Expense Items
Receiving:
Reciving Valuation A/c Dr.

                                  
Expense A/P Accrual A/c Cr.
Delivery:
Expense A/c Dr.

                                  
 Reciving Valuation A/c Cr.

Inventory Expense Items
Receiving:
Reciving Valuation A/c Dr.

                                  
Inv. A/P Accrual A/c Cr.
Delivery:
Expense A/c Dr.

                                  
 Reciving Valuation A/c Cr.

Asset Items
Receiving:
Reciving Valuation A/c Dr.

                                  
Inv. A/P Accrual A/c Cr.
Delivery:
Mat. Valuation A/c Dr.

                                  
 Reciving Valuation A/c Cr.

Oracle Applications Fusion Cloud - Inventory

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