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Accrual Process for Period-End Accruals

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

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. See: 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:

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