Receipt Accounting R12

Brief Overview of Receipt Accounting

The following is a brief overview of the Receipt Accounting flow for either Perpetual Accruals (Online) or Periodic Accruals (Period End). This overview does not contain information associated with Encumbrance accounting. This overview is a brief summarization of the receipt accounting processes and flow.

Receiving Flow

Receiving is essentially a two-step process – you receive onto your receiving dock and then the second step is to deliver to either an Expense destination (like an office supply room) or to an Inventory destination (like a subinventory in a warehouse). There are also intermediate steps in the receiving flow process after receipt for Inspection capability to inspect the received items before delivering.

The accounting transactions essentially mirror the above receiving flow, to allow visibility of the various liabilities as products, goods and services essentially flow through the receiving business processes you will encounter accounting entries in various accounts for each step in each process.

Basic Definitions

The following are basic definitions which should be understood prior to analysis of the receipt accounting flow:

Perpetual Accruals (Online)

This transaction is automatically recorded in your general ledger at the time of receipt (unless you specified otherwise when setting up periodic costing). The inventory expense is recorded at delivery if you use Standard Delivery and at receipt if you use Direct Delivery.

Inventory items are always accrued Online; expense items can be setup to accrue either Online or at Period End as Purchasing optionally provides you with the ability to accrue non-inventory liabilities at the time of receipt. If you choose at time of receipt, Purchasing records and accrued liability and charges your receiving inspection account for each non-inventory receipt. This transaction is automatically recorded in your general ledger at the time of receipt.

Periodic Accruals (Period End)

Purchasing optionally accrues uninvoiced receipts of non-inventory items when you close a period. You can choose which periods to process. At period end, Purchasing automatically creates a balanced journal entry for each uninvoiced receipt.

When the Receipt_Accruals_Period-end is run it will generate accruals for all eligible distributions where the following criteria is met:

a) quantity_received > quantity_billed

b) accrued_flag=’N’

c) shipment_closed_date not populated

Accrual Reconciliation and Write-Off

Purchasing and Inventory provide you with a complete reconciliation report of all of your accounts payable accrual transactions. You can quickly identify any mismatched items and write-off accrual transactions from your receiving, accounts payable, inventory, and work in process subledgers.

Expense Accrual Reporting

You can use the Uninvoiced Receipts Report to analyze your uninvoiced receipt liabilities for non-inventory purchases when you create accrual entries for them in your general ledger. You can control the amount of expenses you accrue by supplier and purchasing category. You can obtain detailed information about the purchase order receipts you accrued during your accounting period.

Defining Default Accounts

Prior to implementing a receipt accounting model and entering transactions in Purchasing and Inventory, you need to define the following accounts:

Receiving Account

Enter the general ledger account to record the current balance of material in receiving and inspection. You define this in either the Define Organization or Receiving Options window (Nav > Setup > Organizations > Receiving Options) to set up this account.

Note:  This account was referred to previously as the Receiving Inspection Account in earlier releases. It is considered the same account just the name has changed in later release.  In the Oracle Purchasing User’s Guide they use both account names interchangebly.

Inventory A/P Accrual Account

• Enter a general ledger account to accumulate the inventory accounts payable accrual for this organization. This is the account used by Purchasing to accrue your payable liability when you receive your items.

• This account represents your uninvoiced receipts and is usually part of your accounts payable liabilities in the balance sheet.

• Payable relieves this account when the invoice is matched and approved.

• You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form

Expense A/P Accrual Account

• Enter a general ledger account to accumulate the expense accounts payable accrual for your purchasing installation.

• This is the account 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 (Nav > Setup > Organizations > Purchasing Options) to set up this account.

Purchase Price Variance Account

• Enter a general ledger account to accumulate purchase price variance for this organization. The purchase price variance account is usually an expense account.

• This is the variance that you record at the time you receive an item in inventory, and is the difference between the purchase order cost and an item’s standard cost. Purchasing calculates purchase price variance as:

• PPV = (PO unit price – standard unit cost) X quantity received

• You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form

Invoice Price Variance Account

• Enter a general ledger account to accumulate invoice price variance for this organization. This is usually an expense account.

• Invoice price variance is the 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.

• You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form.

Exchange Rate Gain or Loss Accounts

• Enter general ledger accounts to accumulate exchange rate gains or losses for this organization. These are usually expense accounts.

• Exchange rate gain or loss accounts are used to record the difference between the exchange rate used for the purchase order and the exchange rate used for the invoice.

• The exchange rate is taken from the purchase order only if the Invoice Match Option in the purchase order Shipments window is Purchase Order.

• If the Invoice Match Option is Receipt, the exchange rate is taken from the receipt.

• These accounts can also be used in Payables to record gains and losses at payment time and clearing time.

• Use the Financial Options window (Nav > Setup > Organizations > Financial Options) to set up this account.

Receipt Accounting Flows:

The following illustrates the accounts involved for the specific receiving and delivery transactional accounting flow for typical receiving transactions.

Receive For Inventory

The receiving accounting entries for inventory destination receipts (Inventory) are:

Receive For Expense

The receiving accounting entries for expense destination receipts (Expense) are:

For expense destinations, the PO distribution accrual account is the Expense A/P Accrual Account set in the Purchasing Options window.  – VIMP

For inventory destinations, the purchase order distribution accrual account is the Inventory A/P accrual account for the receiving organization.    – VIMP

Delivery From Receiving Inspection to Inventory

With the Receiving Transactions window, you can move material from receiving inspection to inventory.

Delivery From Receiving Inspection to Expense Destinations

With the Receiving Transactions window, you can also move material from receiving inspection to expense destinations. The accounting entries are:

Purchase Order Receipt to Inventory

You can use the Receipts window to receive material directly from a supplier to inventory. This is referred to as Direct Delivery.

Even though it is one step process to the user, it still consists of a receive and deliver transaction, it is just isn’t transparent to the user.

Inventory uses the quantity and standard cost of the received item to update the receiving inspection and subinventory balances. Here is the deliver portion of the Direct Delivery:

Purchase Order Receipt to Expense Destinations

You can use the Receipts window to receive material directly from a supplier to the expense destination. This is referred to as Direct Delivery.

Even though it is one step process to the user, it still consists of a receive and deliver transaction, it is just transparent to the user.

Here is the receive portion of the Direct Delivery:

Here is the deliver portion of the Direct Delivery:

Accounting Flow For Receiving Returns

Return to Supplier From Receiving

You use the Returns window to return material from receiving inspection or from inventory to a supplier.

If you use receiving inspection and you have delivered the material into inventory, you must first return the goods to receiving before you can return to your supplier.

For a return from inspection, Purchasing decreases the receiving inspection balance, and reverses the accounting entry created for the original receipt.

For example, for Return to Supplier from receiving for Expense Destination the accounting entries would be:

Return To Supplier From Inventory or Expense Destinations

When you do not use receiving inspection, the return to supplier transaction updates the same accounts as the direct receipt to the inventory or expense destination, with reverse transaction amounts.

For example, for Return To Receiving for Expense Destination the accounting entries would be:

Accounting Flow For Receiving Corrections

Correction From Receiving

You use the Corrections window to correct transactions from receiving inspection or from inventory to a supplier.

For a Correction, Purchasing places negative accounting entries to correct the original receiving accounting against the receiving inspection balance and negative accounting entries against the A/P accrual account created for the original receipt.

For negative Corrections against receiving for Inventory Destination the accounting entries would be

Correction From Inventory or Expense Destinations

When you do not use receiving inspection, the Correction transaction updates the same accounts as the direct receipt to the inventory or expense destination, with negative transaction amounts for negative corrections being made.

For example, for negative Corrections for Expense Destination the accounting entries would be:

For negative Corrections for Inventory Destination the accounting entries would be:

Note: Noted Correction Differences Between 11i and R12 Accounting

As per Oracle development : R12-RECEIPT CORRECTION DOES NOT CREATE NEGATIVE ACCOUNTING ENTRIES, please note that, although in 11i the accounting data is directly posted to GL and the negative correction transactions are displayed with negative values, in R12 the accounting is first posted to SLA and then to GL. While posting to SLA, the accounting values are considered to be debit or credit merely by their nature with respect to the account.

So a -ve credit from an account is basically a positive debit value with respect to that account. Thus, when posted to SLA it gets posted as positive debit value. Similar is the case for -ve debit being posted as +ve credit. This is the reason positive accounting entries can be seen in SLA. Only in base tables is it seen the negative accounting entries. Please note that the accounting is by no means erroneous in this case. As compared to 11i, this is not really a design change per se, its just how the accounting logic is and how it is displayed in SLA.

If it is desired to recognize a negative correction txn in SLA, this can be done very easily by either drilling down to the transaction or referring the primary quantity being displayed for that transaction in the SLA report. For a negative correction txn, this value will be negative.

Note:

Positive corrections (essentially adding quantity to an existing receipt or delivery transaction) would essentially be accounted similar to as being like a new receipt, the difference (delta) in the new quantity would be newly accounted similarly to a receipt and delivery as noted above  in the first sections of this paper concerning receipt and delivery accounting flows.

Note:

If statutory or legislative requirements in your country or locale do not allow negative accounting entries, you must seek relief via either localization support team or via customization. It is long established functionality for negative corrections to yield negative accounting entries with Oracle Applications.

Receipts Accruals-Period End

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.

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.

As soon as you open the next period, Purchasing reverses the accrual entries using the following accounting entries:

Match, Approve, and Create Accounting Entries for an Invoice

When you enter an invoice in Payables, you match each invoice distribution to a specific purchase order distribution or to a purchase order distribution for a receipt transaction in Purchasing. You can set up Payables to ensure that you pay only for the quantity you received.

If you accrue your uninvoiced receipts at period-end, Payables records the expense transactions part of the accounting transactions.

Ref 1   : Oracle Purchasing User’s Guide, Chapter Overview Of Receipt Accounting.

Ref 2   : Doc ID 563100.1