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Oracle Apps Accounting for Purchase to Pay

Discussion in 'General' started by apps_expert, Mar 22, 2009.

  1. apps_expert

    apps_expert Forum Expert

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    Chennai, India
    Oracle Apps Accounting for Purchase to Pay Cycle

    One of the most common business scenarios in Oracle Apps is Purchase to pay. That is when companies purchase goods and receive them in their inventory and raise an invoice for it and later pay the supplier. This purchase to pay cycle has many intermediate accounting steps, specially from localisation perspective. However I am going to demonstrate here the accounting entries carried out in Base Apps when for the Purchase to pay cycle when you track goods from receipt stage to pay stage.

    The transactions carried out in the system for this cycle are:

    1. Receive Goods

    2. Deliver Goods to inventory

    3. Raise an Invoice for the supplier against the purchase order

    4. Make payment to supplier.

    The accounting entries are:

    RECEIVE|Accrual Liability||1
    INVOICE|Accrual Liability|1|
    INVOICE|Voucher's Payable||1
    PAYMENT|Voucher's Payable|1|

    You might have different names for your accounts but these are the Debit-Credit transactions. Notice how In-Transit gets knocked off between Receive and Deliver. Next Accrual Liability get's knocked off between Receive-Deliver and Invoice. The point to note here is that to find your outstanding liability, that is, goods received but not invoiced you would want to find the total credit balance in Accrual Liability account.

    Next again note that Voucher's payable is the account that get's hit when you create an invoice with payables. This again get's knocked off when you make the payment. Please remember that I am only talking about standard invoices here. Again, if you want to find total goods invoiced but not yet paid you would query the total credit balance in Voucher's payable account. (you may have a different name in your system).

    So in essence the final entry is just simply, Bank Credit to Inventory Debit! Simple and sweet!

    Hope this was useful!

  2. Sadik

    Sadik Community Moderator Forum Guru

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    very nice article....
  3. nice article ..
  4. stevejb

    stevejb Guest

    Thanks for breakdown. Very concise
  5. erpzhao

    erpzhao Active Member

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    Wonderful, Great work and super article!
  6. balajikapps

    balajikapps Guest

    Very Very exceleant example.

    Balaji Krishnamurthy