In this article, we will learn about Accrual Accounting in Oracle Apps and also we will see Accrual Accounting Entries along with setups for the same.  

What Are these Accrual Accounts?

·         Principle of accrual accounting

·         Timing difference between receiving and invoicing

·         Represents the accrued liability from your vendors

·         Periodic accruals occurs at month-end

·         Perpetual accruals ensure that valued quantities equals accounting entries

·         Don’t accrue expenses upon receipt

AP Accrual Accounts-

·         May have multiple lines per PO

·         May have multiple PO distributions per line

·         Four stored accounts per PO distribution


Accrual Accounting Entries-

PO Receipt   

      Receiving Account                        XXX

                A/P Accrual Account                                   XXX


PO Return to Vendor

      A/P Accrual Account         XXX

               Receiving Account                           XXX


Invoice Correction

     New Charge Account          XXX

               Old Charge Account                         XXX

 
Receipt Deliveries –

Delivery to stock inventory

     Sub inventory Account         XXX

Receiving Account                              XXX

Delivery to WIP inventory

      Job OSP Account               XXX

            Receiving Account                              XXX

Month-End Period Accruals

Expense Item

       Charge Account                XXX

              Expense A/P Accrual Account                      XXX

In Oracle General Ledger, reverse the accrual entry in the following month.


Setup in Oracle Purchasing- Navigate to Purchasing Options Form

·         Set Accrue Expense Items to Period End

·         Set the Expense A/P Accrual Account

·         Use the Define Receiving Options form

·         Set the Receiving Account for each inventory organization


When Defining Purchase Orders

·         Never manually set the Accrue on Receipt Flag

·         For expense destinations, the flag should be No

·         For inventory and shop floor (OSP) destinations, the field should be Yes


Setup in Oracle Inventory

·         Use the Define Organization Parameters Form

Ø  Set the Inventory A/P Accrual Account

Ø  Use the same Inventory A/P Accrual Account for all organizations

·         Use separate accounts for each type of system account:

Ø  Expense A/P Accrual Account

Ø  Inventory A/P Accrual Account

Ø  Receiving Account(s)

Ø  Expense Purchase Order Charge Accounts

Ø  Other inventory, WIP and price variance accounts

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