purchase order encumbrances

About purchase order encumbrances [AX 2012]

An encumbrance is a reservation of budget funds that are set aside to make sure that actual expenditures do not exceed the available budget. If the encumbrance process is enabled, you can create purchase order encumbrances that are recorded in the general ledger when a purchase order is confirmed. Encumbered amounts can then be spent when vendor invoices that reference a purchase order are confirmed. Encumbered amounts on a purchase order are relieved when a vendor invoice is confirmed to spend all or part of the encumbered amount. Relieved amounts are subtracted from the amount of the purchase order encumbrance.

A pre-encumbrance is a request to reserve budget funds for planned expenditures. The funds have been requested, but have not yet been approved for a purchase order. If the pre-encumbrance process is enabled, you can create purchase requisitions with a pre-encumbered amount for the planned expenditure. The pre-encumbered amounts are then recorded in the general ledger. For information about how to create a purchase requisition and reserve budget funds for a pre-encumbrance,

When purchase requisitions are approved, you can create purchase orders for the requested amounts. When you create and confirm a purchase order for the pre-encumbered amount on a purchase requisition, a purchase order encumbrance is created for that amount. The pre-encumbered amount is then automatically relieved. This avoids having a budget reservation be counted two times in the general ledger, as both a pre-encumbrance and an encumbrance.

For information about how to create a purchase order from a purchase requisition. For information about how to enable the encumbrance and pre-encumbrance processes, see

Examples

Example 1: Encumbrance processing and pre-encumbrance processing are both enabled

A department manager in your organization creates a purchase requisition for expected purchases for the department. One of the lines in the purchase requisition is for 12,000.00 in new office furniture. The request is later approved and a purchase order is created that has a line to cover the 12,000.00 cost. The 12,000.00 pre-encumbrance on the purchase requisition is automatically relieved when the new purchase order is confirmed. The relieved amount on the purchase requisition line is then replaced by a 12,000.00 encumbrance on the purchase order.

Example 2: Encumbrance processing is enabled, but pre-encumbrance processing is not

The purchasing agent for your organization creates a purchase order for a 10,000.00 contract with an architect who is designing an addition to a building. No requisition is created. An encumbrance for that amount is created when the purchase order is confirmed.

Encumber purchase orders [AX 2012]

You can enable the encumbrance process for purchase orders. When you create and confirm purchase orders with this process enabled, a budget reservation is created to make sure that actual expenditures do not exceed the available budget.

You can also enable the pre-encumbrance process that is used for purchase requisitions. When you enable the pre-encumbrance process, the encumbrance process is also automatically enabled. If both processes are enabled, you can create purchase requisitions that set aside budget funds when the purchase requisitions are approved. You can then create a purchase order from the approved purchase requisition lines. When the purchase order is approved, an encumbrance is created for the amount of the purchase order. The pre-encumbrance is also relieved for the related lines of the purchase requisitions. This avoids having a budget reservation be counted two times in the general ledger, as both a pre-encumbrance and an encumbrance.

Enable encumbrance and pre-encumbrance processing

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Important

Budget control is often enabled when the encumbrance process is enabled. This is not required, but it can be useful if you use both encumbrances and budget control. For example, the Purchase order year-end process form is used to close purchase order encumbrances in the fiscal year that is ending and re-encumber them in the new fiscal year. The process includes an option to carry forward budget amounts to a new fiscal year. This option cannot be used unless budget control is enabled. (FRA) Budget control must be enabled for commitment documents to be created. Commitment documents can be used only by legal entities whose primary address is in France, and only if the Public Sector configuration key is selected.

1. Click Budgeting > Setup > Budget control > Budget control configuration.

2. Click Select source documents, and then select the Purchase orders and Enable budget control for line item on entry check boxes.

3. Close the form.

4. Click General ledger > Setup > General ledger parameters.

5. Click Ledger, and then click the Accounting rules FastTab.

6. Select the Use posting definitions check box. Click Yes if you are asked to confirm the selection.

Important

You should create and test all posting definitions before you select the Use posting definitionscheck box. When you select that check box, all posting definitions are active immediately. For more information, see Test Posting Definition Wizard (form). Posting definitions can be used only for the transaction posting types that are shown in the Transaction posting definitions form. Transaction posting types that are not shown in this form always use posting profiles.

7. Select one or both of the following check boxes:

o    Select Enable encumbrance process to create encumbrances only.

o    Select Enable pre-encumbrance process to create both pre-encumbrances and encumbrances. If you select this check box, the Enable encumbrance process check box is automatically selected.

Note

(FRA) The pre-encumbrance process must be enabled for commitment documents to be created. Commitment documents can be used only by legal entities whose primary address is in France, and only if the Public Sector configuration key is selected.

8. Close the form.

About posting definitions [AX 2012]

Posting definitions are an alternative to posting profiles. You can use both posting definitions and posting profiles to create subledger journal lines for originating transactions that meet selected criteria. However, posting definitions and posting profiles are not interchangeable. You might have to use both to meet your organization’s needs.

You use posting definitions instead of posting profiles for the transaction types that you select in the Transaction posting definitions form. Posting profiles are used for any transaction type that is not set up to use posting definitions.

Posting definition considerations

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You might want to use posting definitions in the following circumstances:

• You have to generate multiple, balanced ledger entries based on attributes such as transaction types and accounts. Use posting profiles if you need only one offset ledger entry.
• You have to support encumbrance accounting for purchase orders and pre-encumbrance accounting for purchase requisitions. Posting profiles cannot be used for encumbrance and pre-encumbrance accounting.

Posting definitions do not replace posting profiles. Even when you use posting definitions for offset accounts and encumbrance accounting, you still need posting profiles for the originating entry.

You should test posting definitions before you start to use them. When you select the Use posting definitions check box in the General ledger parameters form, all posting definitions become active. 

Important

To use posting definitions for budget register entries, you must also make the following selections: Select the Enable budget appropriation check box in the Ledger area of the General ledger parameters form. Select a budget journal in the Budget parameters form.

Prepare to create posting definitions

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To prepare to create posting definitions, you might want to create diagrams or tables that illustrate each definition. For example, list the transaction data that a user might enter, and then list the entries that must be generated for the ledger accounts.

You can use posting definition versions with effective dates. For example, you can create a future version of a posting definition to post to a different ledger account in a new fiscal year.

You can link from one posting definition to another when you create posting definitions. This means that the criteria for the definition that you linked to are considered in addition to the criteria for the current posting definition. This saves time because you do not have to re-enter criteria on the Entries FastTab in the Posting definitions form for the current posting definition if you already entered those lines for another definition.

In the diagrams or tables, include any links that you might use. Make sure that the lines in any posting definitions that you are linking to are unique to avoid conflicts with the current posting definition.

The following restrictions apply when you create links in posting definitions:

• Any posting definition can either link to another posting definition or be linked to from another posting definition, but not both. However, posting definitions that link to other posting definitions can link to multiple posting definitions.
• You can set up links only among posting definitions that are in the same module.
• You can assign a posting definition to any transaction type, but the transaction type must be in the same module as the posting definition. View the Transaction posting definitions form to see which module a transaction type is in.

In the Posting definitions form, you can assign priority numbers to entry lines to control the order in which the lines are evaluated. The lines with the lowest number are evaluated first, starting with 1, and then 2, and so on. When a match is found, the other match criteria are ignored. Also, only the criteria in the group that match the originating transaction create generated entries.

Create posting definitions and assign them to transaction posting types

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Use the Posting definitions form to specify the match criteria and to define the entries to generate when the match occurs. Use the Transaction posting definitions form to assign posting definitions to transaction types..

After you complete the setup in both the Posting definitions form and the Transaction posting definitions form, select the Use posting definitions check box in the General ledger parameters form to use posting definitions for your legal entity.

Set up posting definitions [AX 2012]

Posting definitions are used to define ledger line entries that will be generated when a match exists between an originating transaction and the match criteria that you specify.

After you create posting definitions, you must assign them to transaction types using the Transaction posting definitions form. Transaction posting definitions specify transaction attributes, such as purchase order item codes or vendor invoice account codes, and identify which posting definitions to use with a specific transaction type

Prerequisites

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• To use posting definitions for budget register entries, you must make the following selections:
• Select the Enable budget appropriation check box on the Accounting rules FastTab in the Ledger area of the General ledger parameters form.
• Select a budget journal in the Budget parameters form.
• If the Public Sector configuration key is selected, you must do the following to use posting definitions for year-end closing and opening in General ledger:
• Select the Create closing transactions during transfer check box on the Fiscal year close FastTab in the Ledger area of the General ledger parameters form.
• Create a closing account in the Main accounts - chart of accounts: %1 form.

Create posting definitions

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1. Click General ledger > Setup > Posting > Posting definitions.

2. Click New to create a posting definition.

3. Enter a name and description for the posting definition. You can enter additional details on the Memo FastTab.

4. Select the module that the posting definition applies to.

5. Specify the effective and expiration dates.

Note

To modify an existing post definition, click New version and enter new effective and expiration dates. You can modify or add match criteria and generated entries.

6. On the Entries FastTab, under Match criteria, click Add, and select an account structure. In the Match account number field, enter the account segments that must be in the originating transaction.

7. Optional: If you have multiple lines of match criteria, in the Priority field, enter a number to indicate the order in which the match criteria should be processed. Lines that have a priority of 1 are processed first.

8. Under Generated entries, click Add, and select an account structure. In the Generated account number field, enter the account segments where a ledger line will be generated when a match exists.

9. In the Generated debit/credit field, select Same if the generated entry is the same as the originating one. Select Balancing to balance the generated and originating entries.

Important

To generate closing entries for the public sector, select Balancing. The first account that you enter will automatically be the offset (balancing) account, even if you select Same.

10.                  Optional: To link to an existing posting definition, click the Linked definitions FastTab and then click Add. Linked posting definitions must be associated with the same module.

The Linked definitions FastTab is displayed only if the current posting definition is not linked to another posting definition. If it is already linked to another definition, the Used as link in FastTab is displayed.

11.                  Optional: To test the posting definition, click Test. A test lets you enter sample transaction data and then view the system-generated ledger lines that will result when the posting definition is used.

Assign posting definitions to transaction posting types [AX 2012]

After you create posting definitions, follow these steps to assign the posting definitions to transaction types and specify the transaction attributes.

1. Click General ledger > Setup > Posting > Transaction posting definitions.

2. Click the tab that contains the transaction type to set up posting definitions for, and then select the transaction type. For example, click the Purchasing tab, and then select Purchase order.

3. Click New.

4. In each field, select the attributes to use with the posting definition for this transaction type. The specific fields that are available vary, depending on the tab that you clicked.

5. In the Posting definition field, select the posting definition to associate with the criteria that you selected.

Test Posting Definition Wizard (form) [AX 2012]

Click General ledger > Setup > Posting > Posting definitions. Select a posting definition and then click Test.

Use this wizard to validate the selected posting definition version by entering a sample transaction and viewing the system-generated entries. These entries are collections of account numbers, simulated amounts of 1.00, and indicators of whether the entry is a debit or credit.

All criteria are evaluated for the selected posting definition version. This includes the criteria for posting definitions that are linked to the selected definition

Examples: Posting definitions [AX 2012]

Before you read this topic, you should be familiar with posting definitions and transaction posting definitions.

Note

For information about how to use posting definitions in the public sector, search for the “Examples: Posting definitions (Public sector)” topic.

The following examples can be set up in the Posting definitions form. (Click General ledger > Setup > Posting > Posting definitions.) Each example contains these sections:

• Posting definition – Match criteria
• Posting definition – Generated entries
• Transactions with the accounts, dimension values, and amounts
• Ledger entries generated from the posting definition

When a match occurs between the accounts and dimension values in the Match criteria pane for the posting definition and the accounts and dimension values on the transaction, ledger entries are generated based on the Generated entries pane for the posting definition.

Note

To associate a posting definition with a specific transaction type, use the Transaction posting definitions form. (Click General ledger > Setup > Posting > Transaction posting definitions.) After you associate a posting definition with a transaction type and select Use posting definitions in the General ledger parameters form, all transactions of the selected transaction type must use posting definitions.

Example: Purchase order encumbrances

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When you enable encumbrance processing by selecting Enable encumbrance process in the General ledger parameters form, posting definitions must be used to record encumbrances to the general ledger for any accounts that should be reserved. In most cases, all expense accounts are reserved on the balance sheet.

Posting definitions for encumbrances are set up for the Purchasing module in the Posting definitions form. Then, in the Purchasing area of the Transaction posting definitions form, you can select the Purchase order transaction type to associate the posting definition with purchase orders.

All voucher transactions for purchase order encumbrances must balance, which means that debits must equal credits, in each unique dimension on a voucher.

Posting definition – Match criteria

Account structure	Match account number	Priority
Account Structure - P&L	*	1

*A blank value in the Match account number field means that all matching accounts in the defined account structure are part of the matching rule.

Posting definition – Generated entries

Account structure	Generated account number	Generated debit/credit
Balance	300143 - - (Encumbrance account)	Same
Balance	300144 - - (Reserve for encumbrance account)	Balancing

Transactions with the accounts, dimension values, and amounts

The accounts and dimension values come from the accounting distributions that you enter for a purchase order line, or they come from the accounts and dimensions that are automatically generated based on the default settings for vendors, items, categories, and dimension templates.

Account + Dimensions	Debit	Credit
606400-OU_1-OU_3566-Training	250.00

Ledger entries generated from the posting definition

Generated ledger entries are created to record the encumbrances.

Account + Dimensions	Debit	Credit	Comment
300143-OU_1-OU_3566-Training	250.00
300144-OU_1-OU_3566-Training		250.00

In this example, any account that is part of Account Structure - P&L matches the posting definition criteria. Therefore, when 606500-OU_1-OU_3566-Training is evaluated, generated entries are created for the accounts that are defined in the Generated entries pane for the posting definition.

Example: Budget appropriations

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When you enable budget appropriation by selecting Enable budget appropriation in the General ledger parameters form, posting definitions must be used to record budget register entries to the general ledger. When a budget control configuration is active and is turned on, posting definitions and transaction posting definitions can be used to support the recording of appropriation, revision, transfer, project, fixed asset, and supply and demand forecast entries to the general ledger.

A posting definition for budget register entries that has a budget type of Original budget, and that has appropriations enabled, can be set up by selecting the Budget module in the Posting definitions form. Then, in the Budget area of the Transaction posting definitions form, you can use budget codes to associate the posting definition with budget register entries that have a budget type of Original budget.

When budget appropriations and posting definitions are enabled, the budget register entries are recorded for budget control and in the general ledger.

Posting definition – Match criteria

Account structure	Match account number	Priority
Account Structure - P&L	*	1

*A blank value in the Match account number field means that all matching accounts in the defined account structure are part of the matching rule.

Posting definition – Generated entries

Account structure	Generated account number	Generated debit/credit
Account structure	300145 - - (Estimated revenue account)	Same
Account structure	300146 - - (Appropriation account)	Balancing

Transactions with the accounts, dimension values, and amounts

You enter the accounts, dimension values, and amounts for the budget account entry in the Budget register entry form. (Click Budgeting > Common > Budget register entries > All budget register entries. Click Budget register entry.)

Account + Dimensions	Debit	Credit	Comment
606400-OU_1-OU_3566-Training		250.00

Ledger entries generated from the posting definition

Generated ledger entries are created to record the original budget in each dimension.

Account + Dimensions	Debit	Credit	Comment
300145-OU_1-OU_3566-Training		250.00
300146-OU_1-OU_3566-Training	250.00

In this example, any account that is part of Account Structure - P&L matches the posting definition criteria. Therefore, when 606400-OU_1-OU_3566-Training is evaluated, the generated ledger entries are created.