Accounting Flow for Purchase Orders, Receipts and Matched Invoices in an Encumbrance Environment

This article explains accounting entries that are expected for purchase orders with Expense or Inventory destinations, the PO receiving transactions and the AP matched invoices. 
The two choices of accrual available for Expense items in an encumbrance-enabled environment are also discussed. Expense items can be accrued at Period-End and at Receipt while Inventory Items can ONLY be accrued at Receipt



Accrue on Receipt: (AOR)The following case studies/scenarios are available for the Accrue on Receipt choice:

Case 1: Expense Destination: Create PO, Approve PO, Reserve PO/Receive PO/Invoice
Case 2: Expense Destination: Create PO, Approve PO, Reserve PO/Invoice/Receive PO
Case 3: Expense Destination: Create PO, Approve PO, Reserve PO/Receive PO/Invoice at a price greater than PO price
Case 4: Expense Destination: Create PO, Approve PO, Reserve PO/Receive PO/Invoice at a quantity greater than PO quantity
Case 5: Inventory Destination: Create PO, Approve PO, Reserve PO/Receive PO/Invoice
Case 6: Inventory Destination: Create PO, Approve PO, Reserve PO/Invoice/Receive PO

Accrue at Period-end: (APE)

The following case studies/scenarios are available for the Accrue on Period-end choice:

Case 1: Create PO /Receive PO /Deliver PO /Invoice/Run the period end program
Case 2: Create PO /Invoice/Receive PO/Deliver PO/Run the period end program
Case 3: Create PO/Receive PO/Deliver PO/Run the period end program/Invoice
Case 4: Create PO/Receive PO/Run the Period end program/Deliver PO/Run the
period end program/Invoice
Case 5: Create PO /Receive PO /Deliver PO /Invoice at a price greater than PO
Price/Run the period end program
Case 6: Create PO /Receive PO /Deliver PO /Invoice at a quantity greater than PO
Quantity/Run the period end Program

LEGEND: AOR= Accrue On Receipt, APE= Accrue at Period-End
Note:

• Corresponding offsetting accounts have same symbols.
• PO base price refers to received quantity * unit Price in PO line
• NR tax refers to Non Recoverable Tax calculated for the (received quantity * po line unit price)
• REC tax refers to Recoverable Tax calculated for the (received quantity * po line unit price)

Important Notes:

1. Accrual entries will be generated /created ONLY when the Received quantity > Billed quantity at the time of running Receipt Accruals-Period end program.

2. Under the cases mentioned above under the Period-end Section, manual reversal of journal entries are not required except for Case 3 and Case 4 since there are NO accrual entries created /generated.

3. For all these cases the account records from receiving will also be inserted into GL_BC_PACKETS, along with the other subledger tables mentioned above. These records in GL_BC_PACKETS can be viewed by querying the max(packet_id), as there are no REFERENCE fields populated for receiving records.

4. Liability a/c which is recorded at invoice price will also include the recoverable and non-recoverable tax rates.
References:

Manighandan Venkatraman & Asha Ravada, 2006. Accounting Flow against Purchase Orders, Receipts and Matched Invoices. Oracle Corporation