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O A W P A R12 O P: Racle Pplications Hite Aper Ccounting in Racle Ayables
O A W P A R12 O P: Racle Pplications Hite Aper Ccounting in Racle Ayables
O A W P A R12 O P: Racle Pplications Hite Aper Ccounting in Racle Ayables
SEP 2011
Contents
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Accounting in R12 Oracle Payables
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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Accounting in R12 Oracle Payables
Cash Pooling
Audience
This whitepaper is aimed to super users and functional consultants and implementers as well
as applications auditors.
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Accounting in R12 Oracle Payables
Determinants - Accounts
Payables Journal Entries are controlled by the definition of:
1. Financials options
2. Payable options
3. Supplier Site
4. Bank Account
5. Withholding Tax
6. Invoice
7. EB-Tax
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Accounting in R12 Oracle Payables
Figure 1
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Accounting in R12 Oracle Payables
Figure 2
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Accounting in R12 Oracle Payables
Figure 3
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Accounting in R12 Oracle Payables
Figure 4
Figure 5
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Accounting in R12 Oracle Payables
Figure 6
Withholding Tax
Figure 7
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Accounting in R12 Oracle Payables
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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Accounting in R12 Oracle Payables
Payables Options
Have a role in determining accounts to be defaulted for:
Prepayment
Bills Payable
Discount
Interest
Figure 9
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Accounting in R12 Oracle Payables
Figure 10
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Accounting in R12 Oracle Payables
AP-1 Invoice
20B
Tax (2)P X
Freight (3)P X
Retainage (4) P X
Liability (5)
P X
Retainage (10) P X
Tax X
Liability X
Interest Liability X
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Accounting in R12 Oracle Payables
(1) 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
(2) Tax (e.g., Sales Tax or VAT) is defined in Oracle EB-Tax and inserted upon invoice validation
(3) Freight account is defaulted if a line of type Freight is used and allocated to line(s) of
type Item
(4) Retainage account is defaulted if invoice is matched to a service procurement PO/Receipt
(5) Liability account is sourced from Suppliers Site
(6) 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
(7) 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
(8) 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
(9) 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
(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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Accounting in R12 Oracle Payables
AP-2 Prepayment
Accounts Debit Credit
Prepayment (12) X
Liability X
Prepayment X
Tax Difference (13) X
(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 Debit Credit
Liability X
Cash Clearing (14) X
Discount Taken (15) X
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Accounting in R12 Oracle Payables
(17) Realized Gain or Loss results if Foreign Currency Exchange Rate upon payment is different
from this used upon accrual (in invoice)
Liability X
Withholding Tax X
(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)
Cash Clearing X
Discount Taken X
(19) Realized Gain or Loss results if Foreign Currency Exchange Rate upon maturity is different
from this used upon payment
AP-6 Clearing
Accounts Debit Credit
Cash Clearing X
Rounding (22)
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Accounting in R12 Oracle Payables
(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
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