How to Setup Use and Balance Your Ap Accrual Accounts

Topics: Invoice, Oracle Corporation, Accrual Pages: 67 (17131 words) Published: November 18, 2012

For Releases 11i to 12, this presentation describes the Oracle accrual processes for periodic (expense) and perpetual (inventory) Accounts Payables Accruals, also known as uninvoiced receipts or purchase clearing accruals. Accrual integration between A/P, Purchasing, WIP, Inventory and G/L is discussed. Setup and balancing steps, implementation and conversion issues, and frequent business issues are discussed. In addition, custom reporting is also explored, with SQL examples included.

Scope of this Paper

This paper covers Release 11i, and differences with Release 12 are noted. To the extent possible, known bug fixes are identified, as of February 26, 2008, along with an explanation of how to correct improper setups.

Much of this information can be derived from the Release 11i Oracle Purchasing Reference Manual, the Receipt Accruals Topical Essay, and sections for the Accrual Reconciliation Report, Accrual Write-Off Form, and the Accrual Write-Off Report. Please note that many changes have occurred since the Oracle Reference Manuals were published. This paper is current up to Release plus patches as noted in the paper.

Other information comes from the author’s design, development and debug experience with these accrual processes, and valuable contributions from Oracle Development teams, independent consultants and Oracle customers.

Any included SQL*PLUS scripts are deemed correct but no warranties, guarantees or other liability is assumed by the author or Douglas Volz Consulting, Inc. Please note that the SQL scripts are based on Release and some will not run properly in a Release 12 environment. In Release 12 the A/P Accrual functionality has been substantially rewritten.

Features beyond the scope of this paper include:

▪ Use of Release 12 Subledger Accounting Rules for the purchase order distribution and A/P accrual accounts

▪ Accruals and the relationship to encumbrance accounting

▪ Use of SQL*PLUS scripts to correct a specific customer situation

▪ Use of Warehouse Management System (WMS) and how this impacts inventory accounting

Why Are These Accrual Processes So Important?

These accrual processes monitor the accuracy of your receiving and payables processes, by indicating if you correctly invoiced what you received. If you do not know you received and paid for your goods correctly you do not know if you have correct margins (and overall profit).

These accrual processes add valuable controls for ensuring accurate inventory counts, proper invoice matching and vendor payments. If you under receive yet still pay the proper amount to your vendor, the perpetual accrual will demonstrate an out of balance. If you correctly receive your quantities, yet you do not match your invoices to the quantities received, again, the perpetual accrual account balances will not clear. So these accrual accounts provide a vital barometer for monitoring your receiving and invoice matching processes. So many companies fail to recognize this critical control point and do not understand how the accrual accounts validate their inventory balances and invoice liabilities.

To reemphasize this point, even with accurate cycle count policies, if your company does not reconcile receipts against invoices matched, or reconcile the accrual account balances, you could easily lose control of your vendor liabilities and suffer a large, expensive, write-off when you finally clean up your accruals. This is especially true if your receiving and payables matching processes have not been carefully defined, implemented, or controlled. As an example, one manufacturing company wrote off over $10 million, because of the above process problems. In another example a distribution company lost control over what they paid their suppliers and it took them two years to regain control their receiving and payables processes. In both examples the author found...
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