Cost Accounting of expense items

Oracle Cloud Cost Management provides an additional capability for users who would like to transact
such expense items, maintain inventory balances for them, but do not want to reflect in the Inventory
Valuation for asset items.

Setup in Product Information Management

Ensure that the Inventory Item flag is set to Yes, Costing Enabled is set to Yes, and the Inventory Asset
flag is set to No.

Costing Setups

Setup two different cost profiles – one for Asset items and another for Expense items and associate
them to the Item or create a Default Cost Profile rule to automatically associate them to items when
they are encountered for the first time by the costing processor.

Asset Cost Profile

Expense Cost Profile

The cost processor identifies the appropriate cost profile to be applied on the transaction based on the
Inventory Asset flag and the Asset/Expense flag on the sub-inventory.

Asset Sub-Inventory Expense Sub-Inventory

Asset Item Asset Cost Profile Expense Cost Profile
Expense Item Expense Cost Profile Processed in Receipt Accounting

The cost processor maintains the cost, inventory balances and distributions separately based on the cost
profile. For example, the same item could have two different costs for a combination of Cost
Organization – Cost Book – Valuation Unit combination as shown below where the Item RCV-101 has
two different costs: $3.25 for the Expense Valuation Structure Type and $1.10 for the Asset Valuation
Structure Type.

Inventory Valuation is also maintained separately for Asset and Expense Valuation Structure Types

The accounting template used for such expense transactions is also different: instead of Inventory
Valuation, Expense accounting line type is used for all such transactions. In the following screen shot you
can see that a PO receipt has the following distributions: Debit Expense and Credit the Receiving
Inspection.
The Asset or Expense Valuation Structure type is available as a parameter in all reports so that you can
review the on-hand value separately by Asset and Expense Valuation Structure types.