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SEP 2011
Author:
Version
1.0
Contents
About the Author ................................................................................................... 3 Introduction ........................................................................................................... 3 Purpose.................................................................................................................. 3 Scope ..................................................................................................................... 3 Audience ................................................................................................................ 4 Accounting in R12 Oracle Payables ........................................................................ 5
Determinants - Accounts ................................................................................................................... 5
Financial Options Accounts....................................................................................................................................... 6 Payables Options - Currency ..................................................................................................................................... 7 Payables Options - Invoice ........................................................................................................................................ 8 Payables Options - Interest....................................................................................................................................... 9 Supplier Site Accounting ........................................................................................................................................... 9 Bank Account Control ............................................................................................................................................. 10 Withholding Tax ...................................................................................................................................................... 10
Introduction
Accounting Journal Entries are embedded in every aspect of Oracle Financials Applications. Since they are Financials, you must have a good understanding of how these journals are generated and integrated. This understanding affects how you design and implement solution and it is the ground of discussion with customers representatives in this sector. They may have little knowledge of Oracle but, mostly, are good accountants.
Purpose
This whitepaper will provide a detailed overview of accounting events, entries, and source. Such an overview may help: Customers representatives design a better chart of accounts Consultants justify decisions taken to setup system parameters and options
Scope
This whitepaper will cover Oracle R12 Payables except for transactions related to: Encumbrances Oracle Internet Expenses XML Gateways and iSuppliers Automatic Offsetting
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Cash Pooling
Audience
This whitepaper is aimed to super users and functional consultants and implementers as well as applications auditors.
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Invoice
Liability Prepayment Bills Payable Discount Taken PO Rate Variance Gain PO Rate Variance Loss Expenses Clearing Miscellaneous Retainage Realized Gain Realized Loss Rounding Freight Tax Difference Account Interest Expense Interest Liability Cash Cash Clearing Bank Charges Bank Errors
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Liability Asset Liability Expense Revenue Expense Expense Expense Liability Revenue Expense Expense Expense Liability Expense Liability Asset Asset Expense Expense
Figure 1
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Figure 2
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Figure 3
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Figure 4
Figure 5
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Figure 6
Withholding Tax
Figure 7
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Determinants - Options
Payables Hierarchy
If an account can be defined in more than one place, Oracle Payables applies the following hierarchy, where lower level can override higher level(s):
Figure 8
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Payables Options
Have a role in determining accounts to be defaulted for: Prepayment Bills Payable Discount Interest
Figure 9
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Figure 10
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AP-1 Invoice
20B
Debit X X
Credit
Tax (2)
P
Freight (3)
P
X
P
X X
P
Debit X X
Credit
Tax Liability
Debit X
Credit
Interest Liability
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Expense account is usually used if invoice is entered manually. AP Accrual account is defaulted by system if invoice matched against Receipt/PO for goods items Tax (e.g., Sales Tax or VAT) is defined in Oracle EB-Tax and inserted upon invoice validation Freight account is defaulted if a line of type Freight is used and allocated to line(s) of type Item Retainage account is defaulted if invoice is matched to a service procurement PO/Receipt Liability account is sourced from Suppliers Site Quantity Variance results if, upon matching invoice to PO/Receipt, quantity entered for invoice is different from this specified in PO. For inventory items, variance booked to Inventory AP Accrual Account defined in Organization Parameters window in Inventory. For expense items, it booked to Expense AP Accrual Account Invoice Price Variance results if, upon matching invoice to PO/Receipt, price entered for invoice is different from this specified in PO. For inventory items, variance booked to Invoice Price Variance Account defined in Organization Parameters window in Inventory. For expense items, it booked to Charge Account PO Exchange Rate Variance results if, upon matching invoice to PO/Receipt, Foreign Currency Exchange Rate entered for invoice is different from this specified in PO. For inventory items, variance booked to Exchange PO Rate Variance Gain or Loss Account. For expense items, it booked to Charge Account Tax variance results if, upon matching invoice to PO/Receipt, tax on invoice is different from tax on PO. Three tax-related variances can occur: Tax Rate Variance (TRV) when there is a difference between invoice and PO distributions due to difference in tax rate. For inventory items, variance booked to Invoice Price Variance Account defined in Organization Parameters window in Inventory. For expense items, it booked to Charge Account Tax Invoice Price Variance (TIPV) when there is a difference between invoice and PO distributions due to price variance. For inventory items, variance booked to Invoice Price Variance Account defined in Organization Parameters window in Inventory. For expense items, it booked to Charge Account Tax Exchange Rate Variance (TERV) when there is a difference between the invoice and PO distributions due to exchange rate variance. For inventory items, variance booked to Exchange PO Rate Variance Gain or Loss Account. For expense items, it booked to Charge Account Tax Quantity Variance (TQV) is calculated, but is shown as a non-variance distribution
(7)
(8)
(9)
(10) Retainage account is debited upon creating an invoice of type Retainage Release (11) Interest Expense account is debited for system created invoice of type Interest on condition that Payables Option for interest = System Account. If Prorate Across Invoice selected, original invoice distribution(s) will be debited
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AP-2 Prepayment
Accounts Prepayment (12) Liability Debit X X Credit
(13) Tax Difference account is defaulted if tax applied for invoice is greater than this applied for prepayment. If it is lesser, workaround is needed to prohibit crediting Tax difference account (review 3-198 of Oracle Payables User's Guide)
AP-4 Payment
(Maturity date = Current date)
Accounts Liability Cash Clearing (14) Discount Taken (15) Withholding Tax (16) Realized Gain/ Loss (17) Debit X X X X Credit
(14) Cash Clearing account is sourced from Bank Account (15) Discount Taken account is defaulted if an accelerated cash payment term (e.g., 2/10, net/30) is used and payment is made during the discount period
(16) Withholding Tax account is credited upon payment on condition that Apply Withholding Tax = At Payment Time
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(17) Realized Gain or Loss results if Foreign Currency Exchange Rate upon payment is different from this used upon accrual (in invoice)
(18) Bills Payables account is default from either Bank Account (Organization Access> Payables Options) or Suppliers Site according to option specified in Payables Options (Note: instead of Bank Account, the form erroneously used Payment Document which is no longer available in R12)
(19) Realized Gain or Loss results if Foreign Currency Exchange Rate upon maturity is different from this used upon payment
AP-6 Clearing
Accounts Cash Clearing Bank Charges / Errors (20) Cash Realized Gain/ Loss (21) Rounding (22) Debit X X X Credit
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(20) Bank Charges or Error account is used for difference between cleared amount and transaction amount. Cash Management checks the Tolerance Differences parameter (in Bank Account Controls region of Bank Account) to determine whether the difference is due to charges or errors. (21) Realized Gain or Loss results if Foreign Currency Exchange Rate upon clearing is different from this used upon maturity (22) Rounding account may be used upon payment, maturity, or clearing if: Multiple currencies are used with bank account and payment currency does not round within payment currency precision. Functional currency amount of payments do not equal amount of liability.
Information Sources
o Oracle Payables User's Guide Release 12.1 Part No. E12797-04 o Oracle Payables Implementation Guide Release 12.1 Part No. E12795-04
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