Accrual Process for Period-End Accruals

Key points for accruing expense purchases at period-end include:

• You record the total uninvoiced receipt liabilities accrued during the accounting period.

• Actual journal entries are created for the amount of the receipt liabilities, debiting the charge account and crediting the PO distribution accrual account (normally the Expense A/P Accrual Account defined in the Define Purchasing Options form).

• You reverse accrual journal entries manually at the start of the new accounting period.

• If you are using encumbrance accounting, purchase order encumbrance is relieved when the invoice(s) matched to the purchase order are posted to the general ledger.

Receiving Transactions

Purchasing does not record any accounting entries for expense during a receiving transaction if you use period-end accruals. You record all of your uninvoiced liabilities at month end using the Receipt Accruals - Period-End process.

Receipts Accruals-Period End

Use the Receipt Accruals - Period End process to create period-end accruals for your uninvoiced receipts for expense distributions. Purchasing creates an accrual journal entry in your general ledger for each uninvoiced receipt you choose using this form. If you use encumbrance or budgetary control, Purchasing reverses your encumbrance entry when creating the corresponding accrual entry.

Purchasing never accrues an uninvoiced receipt twice. Each time you create accrual entries for a specific uninvoiced receipt, Purchasing marks this receipt as accrued and ignores it the next time you run the Receipt Accrual - Period-End process. Purchasing creates accrual entries only up to the quantity the supplier did not invoice for partially invoiced receipts.

Purchasing creates the following accounting entries for each distribution you accrue using the Receipt Accruals - Period-End process:

Account	Debit	Credit
PO charge account @ Uninvoiced Quantity * PO Price	XX
Expense A/P accrual account @ Uninvoiced Quantity * PO price		XX

As soon as you open the next period, Purchasing reverses the accrual entries using the following accounting entries:

Account	Debit	Credit
Expense A/P accrual account @ Uninvoiced Quantity * PO price	XX
PO charge account @ Uninvoiced Quantity * PO Price		XX

Match, Approve, and Post an Invoice

When you enter an invoice in Payables, you match each invoice line to a specific purchase order shipment in Purchasing. You can set up Payables to ensure that you pay only for the quantity you received. If you accrue your uninvoiced receipts at period-end, Payables records the expense transactions part of the accounting transactions:

Account	Debit	Credit
PO Distribution Charge Account @ Invoice Quantity * PO Price	XX
PO Distribution Variance Account @ Invoice Quantity * (Invoice Price - PO Price)	XX
A/P Liability @ (Invoice price * Invoice Quantity)		XX

Attention: Normally, you charge the original expense account for any invoice price variances, so your PO distribution variance account is the same as the PO distribution charge account. You do not record invoice price variances for expense purchases. Purchasing uses the Account Generator to set your purchase order distribution variance account to be the same as your purchase order charge account. If you want to record your invoice price variances to a separate account, use the Account Generator to define the business rules you use to determine the correct invoice price variance account.

Complete Period Transactions

If you use encumbrance or budgetary control, Purchasing creates encumbrance journal entries in your general ledger each time you approve a purchase order. Similar to accrual journal entries, encumbrance journal entries recognize a liability towards your supplier before any invoicing transactions occur. Unlike accrual journal entries, encumbrance journal entries are not actual transactions. General Ledger tracks actual and encumbrance journal entries and balances separately.

Period-End Checklist

Purchasing provides you with complete flexibility and control for your period-end accruals. You can use the Uninvoiced Receipts Report to analyze your uninvoiced non-inventory receipts before you accrue these receipts. You can then use the Receipt Accruals - Period-End process as many times as you want to generate accrual entries for the receipts you choose.

For your period-end reconciliation, you should perform the following steps:

1. Identify the purchasing period you want to reconcile and close.

2. Enter all receiving transactions for goods and services you received during the period. Purchasing automatically creates receipt accruals for all receipts you entered up to the end of this period. To prevent any period-end disruption, Purchasing lets you provide a receipt date that is different from the date you enter the receipts. You never have to enter all the receipts for a period before the end of this period. You can enter these receipts later. You simply need to back date the receipt date.

3. Enter and match all invoices you received during the period for your receipt accrual entries. You should make sure that you solve all posting holds problems in Payables before accruing receipts. Purchasing creates accrual journal entries for all purchase orders you received and did not match to an invoice. If you matched a purchase order to an invoice, Purchasing does not accrue the corresponding receipts. Purchasing does not accrue any purchase order that you closed on or before the end of the accrual period you choose. If the invoice is on posting hold, Payables has not yet accounted for the liability corresponding to the invoice. Under these conditions, the liability corresponding to this invoice would not appear in your books for the period. Payables lets you recognize this liability in the following period.

4. Close your accounts payable period corresponding to the purchasing period for your receipt accrual entries.

Note: The List of Values for period end accruals does not require the Accounts Payable period to be closed, however it's strongly recommended that closed periods are used, as the receipt accruals process will not pick up invoices entered after the accruals process is run for the period.rcvaccov

5. For period-end accruals of expense purchases, run the Uninvoiced Receipts Report. Use this report to analyze your uninvoiced receipts. The Uninvoiced Receipts Report lets you use the same selection criteria for your uninvoiced receipts as the Receipt Accruals - Period-End process. You always know exactly what you accrue and for what amount.

6. For period-end accruals of expense purchases, use the Receipt Accruals - Period-End process as many times as you need. You can use the search criteria to choose what you want to accrue and accrue your receipts steps by steps. You create accruals for a specific purchasing period. Purchasing automatically accrues all uninvoiced receipts your entered up to the end of the accrual period you specify.Each time you use the Receipt Accruals - Period-End process, Purchasing creates an unposted journal entries batch in your general ledger for your receipt accruals. If you are using encumbrance, Purchasing creates another journal entries batch in your general ledger corresponding to the encumbrance reversal entries for the uninvoiced receipts you accrued.

Purchasing never accrues your uninvoiced receipt twice. Each time you create accrual entries for a specific uninvoiced receipt, Purchasing marks this receipt as accrued and ignores it the next time you use the Receipt Accruals - Period-End process. Purchasing creates accrual entries only up to the quantity your supplier did not invoice for your partially invoiced receipts.

7. Post Accrual and Encumbrance Reversal journal entry batches in your general ledger (See the following section to identify Accrual and Encumbrance Reversal journal entry batches.)

8. Perform all the steps you need to close your accounting period and generate your period-end reports and financial statements in your general ledger.

9. Use your general ledger system to reverse all the receipt accrual and encumbrance reversal batches you created for your period-end accruals.

10. Close the purchasing period for your receipt accruals. When you close a purchasing period, Purchasing automatically un-marks all the receipts you previously accrued to make sure you can accrue these receipts again if they are still uninvoiced in the next period

Introduction

Follow the below steps to create Period-End accruals:

• Close the AP period for which the period end accruals needs to be created. Navigation: Payables > Accounting > Control Payables Periods.
• Run the Unvoiced Receipts Report (URR) from Purchasing responsibility with the following parameters

- Include Online Accruals = NO
- Accrued Receipts = NO
- Include closed POs = NO
- Period = Specify the period for which reconciliation needs to be carried out

Note down the accrual amount balance shown in URR

• Ensure PO and GL periods are Open. Also the next PO and GL period should be either in future or Open status.  Navigation: Purchasing > Accounting > Control Purchasing Periods
• Submit the Receipt Accruals - Period-End process from Purchasing responsibility for the period which needs accrual generation and reconciliation. The Receipt Accruals - Period-End program creates the following accounting entries for each PO distribution eligible for accrual.
  
  Purchase order distribution Charge Account Dr
    Purchase order distribution Accrual Account Cr
  
  
• Unless manually changed at purchase order entry, the charge account will be the Employee Expense Account or Item Expense Account, the Accrual account will be  (PO unit price+NR tax per unit) *( sum received quantity against the distribution in Receiving Transactions table until the last day of the period for which the period end program is run )

• Once the process completes successfully, run the URR again with the following parameters

- Include online accruals = NO
- Accrued Receipts = YES
- Include Closed POs = NO
- Period = Specify the period for which reconciliation needs to be carried out

• Note down the accrual amount shown in URR at this point and compare it with the accrual amount shown in URR when it was run the first time with the parameter 'Accrued Receipts = NO'

Comparing the URR report balance before and after the Period end Program run:

Conclusion

·         If the accrual amount shown in URR with the parameter 'Accrued Receipts = YES' is same as the one shown in URR with the parameter 'Accrued Receipts = NO', it confirms that the accrual has been generated for all the uninvoiced purchase order receipts by the Period end accrual process.

·         If the accrual amount shown in URR with the parameter 'Accrued Receipts = YES' does not match with the one shown in URR with the parameter 'Accrued Receipts = NO', identify the POs that are missing when compared with the first report.

Logic behind this process

·         URR is intended to show all the purchase order receipts that are not billed (Received qty > Billed qty) along with the amount to be accrued for all these receipts.

·         If a PO is created with accrue_on_receipt_flag as NO, the accrued_flag in PO distributions will be null till the receipt is created and the period end accrual is generated. Once the accrual is generated, the accrued_flag becomes Y.

·         Hence URR is submitted the first time with the parameter 'Accrued flag' as NO before running the period end accrual process which shows all the PO distributions that are eligible to get accrued.

·         After running the period end accrual process, URR is submitted again with the parameter 'Accrued flag' as YES which shows all the PO distributions that are accrued by the period end accrual process as the accrued_flag becomes Y for the POs when the accrual is generated.

·         If both the accrual amounts are same, it gives a confirmation that accrual is generated for all the eligible PO distributions where the received qty is greater than billed qty.

Troubleshooting steps

Action/Validation	Script	Inference	Action plan/Corrective action
1. Run this script A which gives the total amount to be accrued that should be shown in URR when it is run for the first time with the parameter 'Accrued Receipts' as NO	SELECT pod.po_distribution_id, pod.distribution_num, poh.segment1, pll.quantity_received, pll.quantity_billed, pll.price_override, pll.closed_code, pll.closed_date, pod.rate, pod.nonrecoverable_tax, NVL(pod.Rate,1)*(pll.Quantity_received-pll.quantity_billed)* (pll.Price_Override+ (NVL(pod.NonRecoverable_Tax,0)/ pod.Quantity_Ordered) ) AS accrual_amount FROM po_distributions_all pod, po_line_locations_all pll, po_headers_all poh WHERE pll.accrue_on_receipt_flag = 'N' AND NVL(pod.accrued_flag,'N') = 'N' AND pll.quantity_received > 0 AND pll.quantity_received > pll.quantity_billed AND nvl(pll.closed_date,sysdate) > to_date('&URR_period_end_date','dd-Mon-rr') and pll.closed_for_receiving_date <= to_date('&URR_period_end_date','dd-Mon-rr') AND poh.org_id = &org_id AND pod.line_location_id = pll.line_location_id AND pll.po_header_id = poh.po_header_id	The accrual amount returned by this script should match with the accrual amount shown in URR. If it does not match, then   it confirms that there is a discrepancy with URR	Upgrade the files CSTVPEAB.pls and CSTVURRB.pls to the highest file version available. For highest file versions, please refer to Note.1145884.1. After ensuring that URR has the highest file version, run the same script  and see whether the accrual amount matches. If not, please raise a Service Request with Oracle support.
2. After completing the Receipt Accrual-Period end process and on running the URR second time with the parameter 'Accrued Receipts' as YES, compare the accrual balance shown in URR with the accrual balance shown in URR run previously. If there is a difference, run the script B which will return the PO distributions that did not get picked up for accrual generation.	SELECT pod.po_distribution_id, pod.distribution_num, poh.segment1, pll.quantity_received, pll.quantity_billed, pll.price_override, pll.closed_code, pll.closed_date FROM po_distributions_all pod, po_line_locations_all pll, po_headers_all poh WHERE pll.accrue_on_receipt_flag = 'N' AND pod.accrued_flag <> 'Y' AND pll.quantity_received > 0 AND pll.quantity_received > pll.quantity_billed AND nvl(pll.closed_date,sysdate) > to_date('&URR_period_end_date','dd-Mon-rr') and pll.closed_for_receiving_date <= to_date('&URR_period_end_date','dd-Mon-rr') AND poh.org_id = &org_id AND pod.line_location_id = pll.line_location_id AND pll.po_header_id = poh.po_header_id	If this script returns records, it confirms that accrual is not generated for the PO distributions returned by this script	Upgrade the relevant code file CSTVPEAB.pls to the highest file version available. For highest file versions, please   refer to Note.1145884.1. After ensuring that Receipt Accruals-Period end process has the highest file version, fresh set of accruals need to be created for that period by repeating the period end accrual process. But before submitting the period end accrual process, accrual flag of PO distributions need to be reset to "N". Hence 'Reset period end accrual flag' program needs to be submitted from Purchasing responsibility and once it gets completed, submit the Receipt Accrual-Period end process and a fresh set of accruals will get generated for the same period. Now run the script again which should not return any records and the accrual amount in URR should match with the one shown in URR which was run prior to period end accrual process.

b) Performing Accrual reconciliation by comparing the accrual balances in General ledger and sub ledger

In the previous method, it has been verified whether the accrual is generated by period end accrual process for all the PO distributions which are eligible to get accrued. But it has not been verified whether the accrual generated has been transferred to GL correctly. Hence the next stage is to compare the accrual amount in GL and accrual amount generated in Receiving subledger which should be same as the one shown in URR run for the second time.

Reconciliation steps

Note: Accrual Reconciliation should be performed only at month end after completing the period end accrual process. The reconciliation steps and troubleshooting steps given below is applicable only if the reconciliation is done at month end immediately after generating the accruals for that month using period end accrual process.

Example: Let us say, Accrual reconciliation needs to be done as of Aug-10 (till Aug-10). In such case, reconciliation should be carried out by comparing the accrual balance in GL for the period Aug-10 and accrual balance shown in URR for the period Aug-10. But this reconciliation should be done only after completing the Receipt accruals-period end process run for the period Aug-10.

• It is highly recommended that je_category used in SLA and GL for Period end Accruals should be 'Accrual' and je_category used in SLA and GL for Online Accruals should be 'Receiving'. Please refer to Note.555547.1 to verify this set up. If this set up is not in place,accrual amount shown in Account Analysis report will not match with the one shown in URR if the transactions involve both online accruals and period end accruals. Hence it may need a huge amount of effort in doing the period end accrual reconciliation which are documented in the troubleshooting steps given in this document.
• Run the Receipt Accrual-Period end process and generate the accruals followed by Create Accounting process. Transfer these accrual entries to GL and post the entries.
• Run the Account Analysis report(180 char) from GL > View > Requests specifying the accrual account and the period for which / till which reconciliation needs to be done as beginning period and ending period and the balance type as Actuals. Consider only the source Cost Management and category 'Accrual' and 'Receiving'(if period end accruals has the je_category set up as Receiving)and consider only the credit balances which are the original accruals created by period end accrual process. Based on these considerations, note down the accrual balance from this report output.
• Run the URR with the paramter 'Accrued Receipts' as YES and note down the accrual amount which needs to be compared with the accrual amount shown in Account analysis report.