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This guide also applies to on-premise implementations

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6 Calculate Cost Distributions

This chapter contains the following:

Calculate Cost Distributions: Overview

Cost Run Results

Correct Costing

Cost and Reconcile Payments

Calculate Cost Distributions: Overview

The Calculate Payroll process automatically calculates the costs for the payroll run. Submit separate processes to calculate the cost distributions for retroactive costs, payments, cost adjustments, balance adjustments, and partial period accruals throughout the payroll cycle.

Calculate Retroactive Costing

Calculate retroactive costing to obtain accurate cost results for the payroll run after you update the original costing setup information. For example, you might update account information for costing results placed in a suspense account that were due to invalid or incomplete account numbers. The Calculate Retroactive Costing process uses the corrected setup information to recalculate costs that fall within the date range specified in the submission paramters. The process compares the recalculated costs to the original results, and negates original entries that have changed and creates new entries for the current payroll process. The process end date is the effective date for the retroactive costing process and for the accounting date when transferring the results to Oracle Fusion General Ledger. The retroactive costing process is often submitted when it is not possible or convenient to roll back and resubmit the Calculate Payroll process to recalculate the costing.

Calculate Costing of Payments

Cost payments after calculating or distributing your payments, or reconciling payments against a bank statement. The process allocates costs to the accounts you set up for each payment source, and calculates costs for all costing results that meet the submission criteria, including generated payments, voided, canceled, external, unreconciled, and reconciled payments.

Adjust Cost for a Person

Adjust costs to change the account number or to add an account if you are dividing the cost result among accounts. Reports or calculations you perform later use the adjusted costing results. Cost adjustments apply only to the costing result for that payroll run. The next time you run the payroll, the application uses the original costing setup information. To make a permanent change, for example, to an account number, you can update the costing setup information after you process the cost adjustment.

Costing of Balance Adjustment

Calculate the costing of balance adjustments to ensure that later processes or reports use the adjusted costing. You make the choice to cost a balance adjustment in the Costing and Payment Details section of the Adjust Individual Balances page. The submission parameters you enter for the Costing of Balance Adjustment process, such as the payroll name and dates, control which balance adjustment records the process costs.

Submit the process after you complete the balance adjustment or later in the accounting cycle. For example, you might include the Costing of Balance Adjustment process in each month-end accounting flow, and enter process start and end dates to ensure that you cost all balance adjustments processed during that month.

Calculate Partial Period Accruals

When a payroll period overlaps two accounting periods, or you require an estimate of costing results to close an accounting period, submit the Calculate Partial Period Accruals process to use the costs from a previous payroll period as the basis for the estimates of the current accounting period.

When you distribute the accounting, the Transfer to Subledger Accounting process creates a Partial Period Accrual and Partial Period Accrual Reversal event, with the accounting date for the:

  • Estimate for the Partial Period Accrual event as of the process date

  • Reversals for the Partial Period Accrual Reversal event as of the payroll period end date

You submit the Create Draft Accounting process to view the journal entries for the partial period accruals. Later you calculate the actual costs for the full payroll period and distribute the accounting.

Cost Run Results

Payroll Processes That Generate Costing Results: Explained

Different payroll processes create costing results during the payroll cycle. The following table lists the payroll processes that generate costing entries and describes the calculations.


Processes That Generate Costing Results

Descriptions

Recalculate Payroll for Retroactive Changes

Calculates costing for retroactive changes that were not included in the original payroll run, and records the difference found between the original entry and the retroactive result.

Calculate Payroll

Calculates the costing for the payroll run results for payroll relationships after the run results are calculated.

Calculate QuickPay

Calculates the costing for the payroll run results for a payroll relationship processed by the Calculate QuickPay process for a single employee.

Reverse Payroll Calculation

Negates the costing results generated by the Calculate Payroll process by creating costing entries that offset the original entries. The process uses the effective date of the reversal process as the accounting date to avoid creating entries for a closed accounting period. The reversal creates an audit trail, unlike the rollback action which eliminates the audit trail by deleting the original entry.

Adjust Cost for a Person

Reallocates costing results to different accounts using a manual adjustment process. An offset entry is created for the original entry based upon the amount of the new entries created. A user can reallocate the entire costing result or part of it to one or more different accounts

Costing of Balance Adjustment

Calculates the costing for the payroll run results of the Adjust Individual Balances process.

Calculate Retroactive Costing

Recalculates costing based upon retroactive changes to costing setups. The process compares the recalculated and original entries, and where different, offsets the original entries and creates new ones. The effective date of the process is used as the accounting date when transferring the results to general ledger.

Calculate Partial Period Accruals

Calculates accrual entries for a partial payroll period, prorating the costing results based on the previous results of a full period, and using as the accounting date, the date of the Partial Period Accruals process. The process also creates reversal entries with an accounting date of the payroll period end date. The process is often used when a payroll period overlaps two accounting periods.

Calculate Costing of Payments

Calculates costing for prepayments, QuickPay prepayments, and external payments. It also offsets the costing for voided payments by negating the original costing. If you reconcile payments, after payments have cleared the bank, the process creates entries that debit the clearing accounts and credit the cash accounts.

Transfer to Subledger Accounting

Creates subledger accounting events for each payroll relationship to identify the payroll costing entries that are transferred to Oracle Fusion Subledger Accounting when the Create Draft Accounting and Create Final Accounting processes are run.

Create Draft Accounting

Creates draft journal entries in Subledger Accounting. You can preview the journal entries before you run the Create Final Accounting process that transfers the entries to Oracle Fusion General Ledger.

Create Final Accounting

Creates final journal entries in Subledger Accounting. Creates journal entries, transfers the entries to Subledger Accounting, and transfers and posts them to Oracle Fusion General Ledger.

Payroll Cost Results: How They Are Calculated

Payroll processes generate costing results and create journal entries used to record your labor costs. The decisions made while setting up costing affect payroll run cost results, such as the element classification costing options, the employment level of the element, the costing type for the element, the cost allocations, and the type of cost account. Payroll processes then create costing entries for run results and payments. For the payroll run results, the application builds the account number by checking each level of the costing hierarchy. For payment results, the application uses the account number for the payment source you specified.

Settings That Affect Payroll Run Cost Results

Several settings affect how the application costs a payroll run result for a payroll relationship.

  • Element classification costing options

    Costing options specified on the Manage Element Classifications page determine whether the application costs elements with a specified classification and whether the application creates the costing entries as credits or debits. The costing options on this page also determine if the application can include the elements with that classification in a distribution group.

  • Element's costing type

    The costing options specify the costing type and which element input values to cost. You enter the costing options when you set up the element eligibility records by completing the information on the Costing tab of the Element Summary page or by entering the information on the Manage Costing of Elements page. The costing types determines how the application costs the payroll run result value.

    • Not Costed: The application does not cost the run result value for this element.

      Enterprises use this option for absence accruals, information elements, and some taxable (imputed) benefits.

    • Costed: The application costs the run result value and checks for costing details at levels of the cost hierarchy based on the type of account.

    • Distributed: The application costs and distributes the results over the elements included in a distribution group.

      Enterprises use distributed costing to spread employer charges, taxes, and liabilities over employee earnings.

    • Fixed Costed: The application costs the payroll run result value but restricts the check for costing details to three levels of the cost hierarchy: element entry, element, and payroll levels.

      Enterprises use fixed costing for deductions when they capture costing details only on the payroll and element levels of the cost hierarchy. For example, if the enterprise has multiple companies for a set of books and uses the same account structure for each corporation, the enterprise might use fixed costing and record the company segment at the payroll level and the remaining segments for the account that records the deduction at the element level.

  • Employment level of elements

    When you create an element you specify at which employment level the element entries are created. The element eligibility that makes the employee eligible for the element entry also determines the level of the costing hierarchy that the application uses when costing a run result.

    Typically, earnings elements are created at the assignment or terms employment level and deduction elements at the payroll relationship level. Earnings usually have a costing type of Costed and the application checks all levels of the costing hierarchy for segments with account information. For elements created at the payroll relationship level, such as statutory deductions, the application skips the department, job, and position levels of the costing hierarchy, which usually include cost center account information, and checks the payroll, element eligibility, and person payroll relationship, and element entry levels only. Deductions usually have a costing type of Fixed Costed.

  • Type of account

    The type of account determines which levels the costing process checks when building the account number. The implementation determines which levels of the costing hierarchy can include costing details. When managing the costing setup information, you can review the combined information in tables accessible from the Context area of the Accounting Distribution work area list.

    • Cost accounts: The application checks all levels of the costing hierarchy for costing details. Segments entered at each level depend on which levels the implementation restricts for entry.

    • Suspense and default accounts: The application checks the department and payroll levels of the costing hierarchy. You enter the entire number at either the department or payroll level depending on the implementation.

    • Priority accounts: The application checks the element eligibility level. If some of the segments are entered, the application completes the account number using the standard costing process. If the entire account number is entered, the application bypasses the standard costing process and uses only the priority account to cost the payroll run result value.

    • Offset number: The application checks the element eligibility level when generating the offsetting entry that balances the payroll run result values. The application completes any blank segments using the value for the same segment from the cost account.

      Enterprises might leave a segment blank when they have multiple legal entities or other levels within the organization that maintain separate balance sheets. Completing the account number by inserting the remaining values for the segments from the cost account ensures that the appropriate segment for the company or ledger is entered in the offset account and avoids additional setup time.

  • Cost allocations

    When setting up costing information, you can specify whether a cost is allocated to a single account or allocated across several accounts, in which case a costing entry is created for each account based on the percentage of the cost it should receive. For example, if you split the cost of a payroll run result value for an earnings element between two different cost centers, the costing process produces two cost entries and two offset entries.

    When the application calculates the costing results, if the total allocation does not equal 100 percent, the remaining allocation is placed in a default account. After you correct the costing setup, you can process a corrective action to cost the run result value to the appropriate account.

How the Costing is Calculated

Payroll processes create costing entries for payroll run results or payments generated at the payroll relationship level, and offset entries to balance those entries. For example, when calculating the payroll, the application costs a salary run result value as a debit to an expense account and offsets the same amount as a credit to a payroll liability account. When costing a cleared payment, the application costs a payment as a debit to a clearing account and offsets the same amount as a credit to a cash account.

The application calculates the costing result for a payroll run result value and a payment value in different ways. When building the cost account for:

  • Payroll run results: The application checks the costing hierarchy levels.

    The type of account, costing type, costing allocation, and implementation determine which levels of the costing hierarchy the application checks. The application builds the account number segment by segment, starting with the lowest and most detailed level (element entry) and checking each subsequent level to the highest and most general level (payroll) until it locates a number for a segment of the account number. The application repeats this process for each segment until the entire number is built.

    For example, to build the number for a cost center segment, the application starts with the element entry level. If it does not find a number for the cost center segment at that level, it continues up the hierarchy. If it finds a cost center number at the job level, it uses that number and does not use the one at the next higher level, the department level. When building the account number, the costing process uses the account information effective for the date earned of the payroll run.

  • Payment results: The application uses the account number for the payment source as specified on the Manage Payment Source page.

The application places invalid entries for costed payroll run result values and payments in a suspense account and incomplete entries in a default account. After editing the costing setup, you can process a corrective action to cost the entry to the appropriate account. The application offsets the original costing when the corrected account number is generated, which clears the suspense or default account.

This table lists the standard costing hierarchy levels checked when the application builds the account number for payroll run result values and where to manage these settings. The levels are checked in the sequence given in the table. For example, Element Entry is the first level checked when building each account segment. If costing details are not found for that segment, the application proceeds to the next level, the Person Element - Assignment level. When the costing process reaches the last level, the Payroll level, if the costing setup information is not found for that segment and the resulting costing account number is incomplete, the entry is costed to a Default account or, if invalid, to the Suspense account.


Level of Costing Hierarchy

Accounts Checked for Costing Details

Costing Types Checked

Page Where Costing Details Are Managed

Element Entry

Cost

Fixed Costed, Costed, Distributed

Manage Element Entries

Person Element - Assignment

Cost

Costed, Distributed

Manage Costing for Persons

Person Element - Terms

Cost

Costed, Distributed

Manage Costing for Persons

Person Element - Payroll Relationship

Cost

Costed, Distributed

Manage Costing for Persons

Person - Assignment

Cost

Costed, Distributed

Manage Costing for Persons

Person - Terms

Cost

Costed, Distributed

Manage Costing for Persons

Person - Payroll Relationship

Cost

Costed, Distributed

Manage Costing for Persons

Position - Assignment

Cost

Costed, Distributed

Manage Costing of Positions

Position - Terms

Cost

Costed, Distributed

Manage Costing of Positions

Job - Assignment

Cost

Costed, Distributed

Manage Costing of Jobs

Job - Terms

Cost

Costed, Distributed

Manage Costing of Jobs

Department - Assignment

Cost, Default, Suspense

Costed, Distributed

Manage Costing of Departments

Department - Terms

Cost, Default, Suspense

Costed, Distributed

Manage Costing of Departments

Element Eligibility

Cost, Offset, Priority

Fixed Costed, Costed, Distributed

Manage Costing of Elements

Payroll

Cost, Default, Suspense

Fixed Costed, Costed, Distributed

Manage Costing of Payrolls

When building the account number for the payroll run result values for a retroactive pay element, the Recalculate Payroll for Retroactive Changes process checks for costing details as of the current payroll period and the original payroll period. This table lists the costing hierarchy levels checked when the application builds the account number for retroactive payroll run result values and where to manage these settings.


Level of Costing Hierarchy

Sequence for Checking Costing Details

Current or Original Payroll Period Checked

Accounts Checked for Costing Details

Costing Types Checked

Page Where Costing Details Are Managed

Retroactive Pay Element Entry

First level checked for costing details when building each account segment for retroactive pay elements only. If costing details are not found for that segment, the application proceeds to the next level, the Retroactive Pay Element Eligibility level.

Current

Cost

Fixed Costed, Costed, Distributed

Manage Element Entries

Retroactive Pay Element Eligibility

Next level checked for retroactive pay elements only. If costing details are not found for that segment, the application proceeds to the Element Entry level of the original payroll period.

Current

Cost

Fixed Costed, Costed, Distributed

Manage Costing of Elements

Element Entry

Next level checked.

Original

Cost

Fixed Costed, Costed, Distributed

Manage Element Entries

Person Element - Assignment

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing for Persons

Person Element - Terms

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing for Persons

Person Element - Payroll Relationship

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing for Persons

Person - Assignment

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing for Persons

Person - Terms

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing for Persons

Person - Payroll Relationship

Next level checked

Original

Cost

Costed, Distributed

Manage Costing for Persons

Position - Assignment

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing of Positions

Position - Terms

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing of Positions

Job - Assignment

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing of Jobs

Job - Terms

Next level checked.

Original

Cost

Costed, Distributed

Manage Costing of Jobs

Department - Assignment

Next level checked.

Original

Cost, Default, Suspense

Costed, Distributed

Manage Costing of Departments

Department - Terms

Next level checked.

Original

Cost, Default, Suspense

Costed, Distributed

Manage Costing of Departments

Element Eligibility

Next level checked.

Original

Cost, Offset, Priority

Fixed Costed, Costed, Distributed

Manage Costing of Elements

Payroll

Last level checked for costing information. If costing setup information is not found for that segment and the resulting costing account number is incomplete, the entry is costed to a Default account or, if invalid, to the Suspense account

Original

Cost, Default, Suspense

Fixed Costed, Costed, Distributed

Manage Costing of Payrolls

Viewing Payroll Costing Results: Points to Consider

View costing results as a starting point for resolving problems to respond to queries from managers or the financial department. You have a choice of different ways to locate and view costing results based on the work area and which type of costing result you want to view.

Work Area

There are advantages to working in either the Payroll Checklist or the Accounting Distribution work area when viewing and working with costing results.

This table contrasts the advantages of viewing costing results from the Payroll Checklist or Accounting Distribution work area.


Payroll Phase

Work Area Starting Point

Tasks

Working on the current payroll run

Payroll Checklist

Click the Payroll Checklist Task Details tab to see a list of the automatic and manual tasks included in the flow. You can view the status of the accounting tasks and navigate directly to the pages that display the costing results from the manual verification tasks.

Working on accounting tasks that cover different payroll periods or working on tasks at the end of the accounting period

Accounting Distribution

Navigate to the Accounting Distribution work area to query employee costing results for the payroll run or payments using the Person Costing Distribution search in the regional area. From the Person Process Results page you can view detailed cost distributions for costed payroll run results or costed payment results. The Accounting Distribution work area also includes related tasks that you can use when working with the costing results, such as reviewing journal entries.

Type of Costing Result

You can decide which type of costing results to view:

  • Filtered by type of account

    Navigate from the payroll flow analyics to the Person Process Results page where you can view the cost distributions, such as the payroll run results allocated to cost, suspense, default accounts, and reconciled and unreconciled payment cost results.

  • For the entire payroll flow

    Query the payroll flow from the Overview page of the Payroll Checklist or Accounting Distribution work area. From the payroll flow Processes and Reports tab, click the process for which you want to view the costing results and the application displays the results for the entire flow on the Person Process Results page

  • For one person

    To quickly locate a person's costing results, use the Person Costing Distribution search in the regional area of the Accounting Distribution work area, or the View Person Process Results task in the Tasks pane.

Costs Distributed Across Payroll Run Results: How They Are Calculated

Many enterprises distribute the costs for employer taxes, charges, and liabilities over earnings elements, such as wages, overtime, and shift pay. When you set up costing, you specify the costing for the distributed element eligibility records, and identify which elements belong to the distribution group over which the costing results are allocated.

Settings That Affect Distributed Payroll Costs

Several settings control how the costs for an earnings element are distributed:

  • Element classification of the distributed element

    The element classification determines whether you can include an element in a distribution group and whether its cost result generates a debit or credit entry. For example, deductions reduce the net pay which generates a credit entry.

  • The distribution group for the distributed element specified on the Manage Costing of Element page

    The application allocates the costing result of a distributed element over the costed run result values for the elements included in the distribution group. The distribution is based on the ratio each element contributes to the total for the distribution group.

  • The special purpose primary output value on the Manage Costing of Element page

    When calculating the cost for the distributed element, the application uses the input value that has a special purpose definition of primary output value.

How Distributed Payroll Costs Are Calculated

The application allocates the cost for the distributed element's run result value over the costed run result values for the elements in the distribution group. The application allocates the cost proportionately based on the amount each element contributes to the total for the distribution group. Only elements in the distribution group that produce actual run result values have costs distributed over them.

This distribution maintains the ratio that each element's costed run result value contributes to the total for the distribution group. As an example, a salary element contributes 70 percent of the total costed run results for the distribution group, the overtime contributes 20 percent, and the commission 10 percent. The application allocates 70 percent of the employer liability to the salary, 20 percent to the overtime, and 10 percent to the commission. If the distribution group does not include a run result value for the commission, the application distributes the liability cost over the 2 remaining elements in proportion to the amount each contributes to the total.

If none of the earnings elements produce actual results, the application enters the costing result for the distributed element in a suspense account.

The application creates cost and offset entries for distributed elements. The distribution depends on how you set up costing for the distributed element on the Manage Costing of Element page. The following calculations depend on whether you set up element eligibility costing for the distributed element.

  • Costing specified for the distributed element

    The application adds the costing result proportionately to the elements in the distribution group using the standard costing hierarchy. When the process reaches the element eligibility level, the application replaces the account numbers for the segments of the distribution group elements with the account numbers specified for the distributed element.

    For example, if the costing result for the overtime wage is costed to account 50.053.5130, and the account number specified for the last segment for the distributed element is 5220, the payroll calculation process adds the amount of the distributed element to the overtime wage, and costs the result to account 50.053.5220.

  • Costing not specified for the distributed element

    The application adds the costing result of the distributed element proportionately to the elements in the distribution group using the standard costing hierarchy.

    For example, if the costing result for the overtime wage is costed to account 50.053.5130, the amount of the distributed element allocated to the overtime wage is costed to account 50.053.5130.

Example

In the following example, the distributed element is the employer pension tax and the distribution group consists of the costed run result values for the regular and overtime wages for Departments 120 and 053.

This table lists the liability and expense accounts used in the example.


Account Classification

Account Name

Account Number

Liabilities

Wages Payable

2110

Liabilities

Pension Payable

2150

Liabilities

Employee Pension Payable

2151

Liabilities

Employer Pension Payable

2152

Expense

Regular Wages

5110

Expense

Overtime

5130

Expense

Employer Pension Tax

5220

This table shows the primary output values calculated for the employee's regular and overtime pay while working for two different departments. It shows the percentage that the costed run result of each element contributes to the total for the distribution group.


Elements in Distribution Group

Division

Department

Hours

Rate (USD)

Primary Output Value

Percentage of Cost

Regular Wages

10

120

30

10

300

61.2

Regular Wages

50

053

10

10

100

20.4

Overtime Wages

50

053

6

15

90

18.4

The employer and employee each contribute a rate of 6.2 percent of the employee's gross pay to the pension fund. In this example, the elements in the distribution group constitute the gross pay. The total for the elements in the distribution group is 490 USD. The employee and employer each pay 6.2 percent of the gross pay, or 30.38 USD. The employer's share is distributed over the elements in the distribution group.

This table shows the percentage of the distributed element allocated to each department based on the amount each element contributes to the total for the distribution group.


Distributed Element

Distribution Group Element

Division

Department

Percentage of Cost

Distributed Amount (USD)

Employer Pension Tax

Regular Wages

10

120

61.2

18.60

Employer Pension Tax

Regular Wages

50

053

20.4

11.78

Employer Pension Tax

Overtime Wages

50

053

18.4

5.59

This table shows the costing entries calculated for the distributed element.


Costing Entries

Distributed element

Input Value

Distributed Input Value

Account Name

Division Department Account

Debit (USD)

Credit (USD)

Regular Wages

Pay Value

Regular Wages

10.120.5110

300

Offset

Wages Payable

00.000.2100

300

Regular Wages

Pay Value

Regular Wages

50.053.5110

100

Offset

Wages Payable

00.000.2100

100

Overtime Wages

Pay Value

Overtime

50.053.5130

90

Offset

Wages Payable

00.000.2100

90

Employer Pension Tax

Employer Pension Tax

Liability Amount

Employer Pension Tax

10.120.5220

18.60

Offset

Employer Pension Payable

00.000.2152

18.60

Employer Pension Tax

Employer Pension Tax

Liability Amount

Employer Pension Tax

50.053.5220

11.78

Offset

Employer Pension Payable

00.000.2152

11.78

Employee Pension Tax

Liability Amount

Employee Pension Payable

00.0000.2000

30.38

Offset

Wages Payable

00.000.2100

30.38

Setting Up Distributed Costing for an Element: Worked Example

This example demonstrates how to set up costing for an element whose costs are added to the elements of a distribution group.

The following table summarizes the key decisions for this scenario.


Decisions to Consider

In this Example

Which element's costs are you distributing?

Employer Union Pension Expense element

When should the costing record take effect?

January 1, 2000

Which distribution group should carry the costs of the distributed element?

Pensionable Wages

Which input value of the distributed element does the costing process use to calculate costs?

Pay Value

What is the natural account number to use for the cost account segment?

5220 Employer Union Pension Expense account

Which offset account number is used to balance this cost account?

00.000.2152 Employer Union Pension Payable liability account

In this example, the payroll manager is managing the overhead costs for the employer portion of the pension liability. The payroll manager creates an element for the employer union pension expense, and creates a distribution group that includes all the employee's wage elements. The payroll manager sets up costing so that the amount of the employer union pension expense calculated for the employee is distributed over the elements included in the distribution group. In calculating the costing, the costing process replaces the cost segments of the elements in the distribution group with the segments specified for the distributed element.

Prerequisites

  1. Set up the Cost Allocation key flexfield.
  2. Create costing for element eligibility records for each of the pensionable earnings elements, such as the regular wages and overtime wages.
  3. Create an element group for the distribution on the Manage Object Groups page named Pensionable Wages that includes the pensionable earnings elements.

Create Costing for a Distributed Element

  1. In the Accounting Distribution work area, click the Manage Costing of Elements task.
  2. On the Manage Costing of Elements page, search for the element eligibility record for the Employer Union Pension element.
  3. In the Search Results section, select the row for the Employer Union Pension and click Create.
  4. Enter 1/1/00 as the effective start date when the costing is available for use, and then click Continue.

    As a best practice, enter the same effective start date you specified for the element eligibility record.

  5. On the Create Costing of Element page, complete the fields in the Costing Information section, as shown in this table.

    Field

    Value

    Costing Type

    Distributed

    Distribution Group

    Pensionable Wages

    Transfer to GL

    Yes


  6. In the Costed Input Values section, click Add to add a row for the input values. Complete the fields as shown in this table.

    Field

    Value

    Input Value

    Pay Value

    Costed

    Yes


  7. In the Cost Accounts section, select 5220 for the natural account segment.

    In this example, the only segment of the Cost Allocation key flexfield that must be entered is the natural account segment for the employer liability.

  8. In the Offset Accounts section, complete the fields as shown in this table.

    In this example, the costing for the offset account is to the payable liability account, and the segments for the Division and Department use values specified for the balance sheet.

    Field

    Value

    Division

    00

    Department

    000

    Natural Account

    2152


  9. Click Submit.

Partial Period Accruals: Points to Consider

When you calculate and distribute accounting results for partial period accruals, you enter payroll dates when you submit payroll flows. The dates you enter and the flows you select depend on when you are processing the cost estimates.

Date Parameters

The date parameters determine which costing results are referenced and in which accounting month. When you submit the Partial Period Accrual process, you specify the following dates:

  • Previous Period Date

    Select a previous payroll period for the Calculate Partial Period Accruals process that represents the type of costs you expect to incur in the current payroll period. Most of the time, you select the latest payroll period to use as the basis, but if the latest payroll period includes holidays or other circumstances that result in atypical expenses, such as excessive paid time-off, or a variance in overtime pay, you might select an earlier payroll period.

  • Process Date

    Enter a process date for the Calculate Partial Period Accruals process that corresponds to the end date of the accounting period that includes the costs you are estimating.

  • Process End Date

    When you submit the processes to distribute your accounting, you enter a process end date, which is the accounting date used to create accounting events in Oracle Fusion Subledger Accounting, and journal entries that are transferred and posted to Oracle Fusion General Ledger. When you distribute the accounting for partial period accrual results, enter the process end date that corresponds to the end of the accounting period that includes the costs you are estimating.

Payroll Flow Pattern to Use

Depending on your accounting practices and when you submit the processes to calculate and distribute the accounting for cost estimates, consider how to submit the processes.

Connect the Process to an Active Flow

Connect the Calculate Partial Period Accruals process to an active flow that includes the distribute accounting processes, such as the best practice flow for a weekly payroll.

Create a New Flow Pattern

Create a new flow pattern to calculate partial period accruals and distribute accounting for the estimated cost results. For example, you might create a flow pattern for:

  • Occasional use

    For example, you might create a flow pattern for the accounting periods such as the end of quarter or year-end when you need to quickly close the accounting period. You can create a separate flow pattern that includes the automatic tasks to Calculate Partial Period Accruals, Transfer to Subledger Accounting, Create Draft Accounting, Create Final Accounting, and the manual tasks to verify the results after each automatic process.

  • Month-end accounting

    For example a flow pattern that includes tasks to calculate partial period accruals, to cost payments that have reconciled by month's end, and to distribute the accounting for these results.

Partial Period Accruals: How They Are Calculated

Estimate the costs for the payroll period based on the costing results of a previous payroll period using the Partial Period Accrual process. The process creates estimated costs using as the accounting date the process date of the Partial Period Accruals for the estimates, and the payroll period end date for the reversals. When you later calculate the actual costing results, the distribution processes creates journal entries for the actual run results.

You submit the Partial Period Accrual process when last payroll period overlaps two accounting periods, or when you require an estimate for an accounting period you must close quickly, for example at the end of a quarter.

Settings That Affect Partial Period Accruals

The date parameters of the Calculate Partial Period Accruals process control how the estimates are calculated. The Previous Period Date parameter determines which payroll period to use as the basis for estimating the costing results. The Process Date parameter determines the accounting date used to record the accruals.

If your estimate spans two accounting periods, you can calculate the accruals for the days that remain in the current accounting period by specifying the last day of the accounting period as the process date. For example, if the weekly payroll ends on July 29 and the accounting period ends on July 31, you enter a process date of July 31 to estimate the costing results for July 30 and July 31.

You can also submit the process to estimate costs in advance of the close of the accounting period. For example, if your accounting periods ends June 30, and the payroll process date for your last weekly payroll is June 30, to estimate the costs for the full payroll period in advance, you enter June 30 as the process date.

How Partial Period Accruals Are Calculated

The Calculate Partial Period Accruals process uses the costing results of a previous payroll period to calculate the costing. The process prorates the costs based on the number of days of the payroll period that fall in the current accounting period, with the costs calculated for the referenced period as if each day of the payroll period included the same cost results.

When you distribute the accounting information for the partial period accruals, the Transfer to Subledger Accounting process creates:

  • Partial Period Accrual events for the estimated costing results, using the process date as the accounting date

  • Partial Period Accrual Reversal events to negate these estimates, using the payroll period end date as the accounting date

When you calculate the payroll for the actual payroll period and distribute the accounting results, the Transfer to Subledger Accounting process creates Run Cost events, and the Create Draft Accounting process creates journal entries for the costing results.

The Process Hierarchy section of the View Person Process Results page displays the results of the Calculate Partial Period Accruals process. If you did not correct the costing results of the previous period, your accrual costing results include the costing results placed in the default and suspense accounts. If you did correct the costing results, for example by processing cost adjustments or retroactive costing, the accrual process displays the:

  • Original and adjusted costing results

  • Retroactive costing results only

Example

If you have a partial payroll period at the end of July, such as a weekly payroll that begins Saturday, July 29 and ends Friday, August 3, and your accounting periods are monthly, to estimate the costs for the current accounting period, you enter a process date of July 31. If the estimated cost is 100 USD, distributing the accounting for the Partial Period Accrual process creates:

  • Partial Period Accrual entries for two-fifths of the estimated cost

    40 USD is debited to the cost account and 40 USD is credited to the offset account, with an accounting date of July 31

  • Partial Period Reversal entries for the estimated cost

    40 USD is credited to the cost account, and 40 USD debited to the offset account, with the accounting date of 3 August

When the actual cost results become available in August, the Transfer to Subledger Accounting process creates Run Cost events for the payroll period ending August 3, and the Create Draft Accounting and Create Final Accounting processes create journal entries for the entire payroll period.

FAQs for Cost Run Results

Why didn't the search return payroll costing results for an accounting period?

Results returned from the Overview page of the Accounting Distribution work area for costing depend on the process date submitted as the parameter for the costing process. Adjust the dates to include processes such as QuickPay when a pay period overlaps two accounting periods. For example, you create a QuickPay for a termination with the following dates: payroll period end date of July 2 to pick up the recurring entries, payment date of June 29, and an accounting period of July 1 to July 30. When you search for the QuickPay, to view the QuickPay with the other costed run results processed for the July 2 payroll period end date, enter a Start Date for the search criteria earlier than July 1.

Why do payroll costing results differ for workers with the same position in the same department?

Results might vary if you allocate costs to different accounts at the person costing or element entry level. Identify the elements that vary and then review the costing setup information, and the costing information you entered for the element entries for the workers for that payroll run.

Correct Costing

Correcting Costing for Payroll Run Results: Points to Consider

When reviewing costing results for a payroll run, you can identify and correct entries, such as invalid or unallocated costs placed in suspense and default accounts, and missing or incorrectly entered cost allocations. There are several types of correction, including marking entries for retry, cost adjustments, and retroactive costing.

The type of correction depends on the:

  • Payroll phase

  • Volume of changes and whether the corrections will serve as a basis for costing future payroll runs

Payroll Phase

The choice of what type of correction to process depends on the phase of the payroll, whether it is before or after you run a process such as the Calculate Prepayments process locks the payroll run results to preserve data integrity. A lock would require you to reverse or roll back the prepayments before you could correct the costing setups and retry the payroll run. In practice, most enterprises avoid delays involved in processing payments for their employees, and either correct costing results before processing payments or correct them later with cost adjustments or retroactive costing.


Review and Correct Costing Results

Scenario

Action

Before running a process that locks the payroll run results

Your enterprise usually reviews payroll run and costing results before processing payments, for example, in enterprises that run weekly payrolls that generate project-based costing.

If the correction affects numerous records, roll back the payroll calculation, correct the costing setups, and retry the payroll run.

If the correction affects few records, correct the costing setups. Mark those records for retry and retry the payroll.

After running a process that locks the payroll run results

Your enterprise proceeds directly to payments after reviewing and correcting payroll run results and addresses costing corrections at a later time, for example in enterprises that have tight deadlines between date earned and date paid.

If the correction affects numerous records, correct the costing setups, and process retroactive costing.

If the correction affects few records, processing cost adjustments.

Volume of Changes and Future Processing

If you have completed the payroll run, and have started processing prepayments, the choice of how to correct the results depends on the number of corrections and whether you are changing costing setups or allocations required for processing future payroll runs.

As a guideline, process:

  • Cost adjustments when you have a few entries to correct and the effective date of the costing adjustment is for an open accounting period.

    Adjust a person's costing entry for the payroll run, such as the amount or percent allocated, the distribution, and the account numbers. Changing the information for the costing entry by processing an adjustment does not alter the original costing setup. The application uses the original costing setup in the next payroll run. The application uses the adjusted costing entry in reports or in later calculations performed against that entry. After you process a cost adjustment you must transfer the adjusted costing entries by running the Transfer to Subledger Accounting and the Create Accounting processes.

  • Retroactive costing to correct numerous errors, or to use the corrected costing setup as a basis for costing future payroll runs.

    Process retroactive costing if the effective date of the change to the costing setup would have produced a different result if the costing setup had been in place at the time of the original payroll run. For example, run retroactive costing after correcting an invalid account number in the costing setup that caused the application to place the entries in a suspense account.

    The payroll period used to recost the entries is the current payroll period, the one that contains the process end date. The process end date is the effective date of the retroactive costing process. It is also the accounting date used when transferring costing results to Oracle Fusion General Ledger.

    When you enter the process end date, you usually enter the date that corresponds to the payroll period end date. To ensure that you include payroll results that require recosting, such as a supplemental run, QuickPay processes, and balance adjustments for the payroll, specify a start date that coincides with the date when the updates to the costing setups begin.

    Process retroactive costing to correct the costing setup information for a payroll run when you intend to use the same information for the next payroll run. You can correct the costing setup information, run retroactive costing, and the application uses the revised costing setup information the next time you run the payroll.

    After you process a retroactive costing, you must transfer the costing entries by running the Transfer to Subledger Accounting and the Create Accounting processes. When you run these processes, the application picks up any retroactive costing entries between the start and end dates you enter when you submit the process, and creates accounting entries based on the process end date used in the retroactive costing process.

The following example illustrates different approaches. If a department manager notifies you after reviewing the payroll costing that you should divide the cost of an employee's wages between their cost center and another manager's to cover the cost of the employee's work while on loan to the second cost center, you could process a cost adjustment to allocate the appropriate percentage to each cost center. That allocation would apply to the current payroll result only and would not change the standard costing used to allocate the employee's wages in the next payroll run. If a department manager informs you that a reorganization of administrative departments at the start of the fiscal year requires that you cost the results to a different department, you would correct the costing setup and process retroactive costing.

Payroll Cost Adjustments: Explained

When you complete a payroll run, you can process a cost adjustment to change the account number, or add an account if you are dividing the cost result among accounts. The application uses the adjusted costing entry in reports or in later calculations performed against that entry.

Cost adjustments, such as correcting the cost account number, apply only to the costing result for that payroll run. The next time you run the payroll, the application uses the original costing setup information. To ensure that the updates apply in later payroll calculations, after you complete the cost adjustment, update the account information on the appropriate costing setup pages.

In practice most enterprises process cost adjustments when only a few costing results require adjustment. If you have numerous records, consider updating the costing setup information, and then processing retroactive costing which simultaneously corrects the costing entry for the current and subsequent payroll runs.

To review a list of cost adjustments processed for a payroll run, navigate to the payroll flow's Summary tab. If you do not know which payroll flow includes an adjustment, search by process and by person on the Person Process Results page.

After you process a cost adjustment, you distribute the costing results by completing the Transfer to Subledger Accounting, Create Draft Accounting, and Create Final Accounting processes.

Corrective Actions for Payroll Costing Results: Examples

These examples illustrate how to correct, adjust, or update costing information for a payroll run in several typical scenarios.

Correcting Costing for Current or Future Entries

You learn that you need to divide the cost for an employee's wages between two cost centers after you have started processing the payments for that run. If the correction applies to the:

  • Current payroll period only, process a cost adjustment to allocate the appropriate percentage to each cost center. The adjustment does not change the original costing which costs the employee's wages to a single cost center. The next time you process a payroll run, the costing process creates costing entries for the employee based on the original costing setup information.

  • Current and future payroll runs, correct or update the costing setup and process retroactive costing.

Correcting Incorrect Costing

After reviewing a report on the costing for their departments, a manager notifies you that an employee's costing is wrong. You review the costing distribution for the person by querying the person's costing result from the Person Process Results page in the Accounting work area, and then by reviewing the cost information on the Cost Distribution page.

If the account number, allocation, or amount is incorrect, review the costing setup information, including any costing information entered for the person for the payroll run at the element entry level. If you are reviewing and correcting other payroll run results, correct the cost account or amount, mark the record for retry, and retry the payroll run. If the payroll run is complete, process a cost adjustment or retroactive costing.

Correcting Incomplete Costing

You review the costing analytics on the Summary tab of the payroll flow. The graph shows that the application has placed a costing entry in the default account. Clicking the bar that displays the default records navigates to the costing distribution page where you can view further details about the costing entry.

Updating Costing for Future Change

The accounting department notifies you that an account that funds the salaries of employees assigned to a project will close at the end of the quarter and that you must use a different account to fund and cost the wages at the start of the next quarter.

You can query the latest payroll period costing entries in subledger accounting to determine which departments, positions, and workers are paid from that project fund. You can update the costing setup for the employee's wage element by specifying the date on which the new costing setup takes effect, and update the funding source account number. If your department created positions funded by that source account, you could query those positions and update the cost account number for the funding source in the Manage Costing of Positions page.

FAQs for Correct Costing

When do I cost a payroll balance adjustment?

You can submit a process to calculate the costing details of an individual balance adjustment as soon as you process the balance adjustment, or if you cost processes later in the accounting cycle, the application costs all the balance adjustments that fall between the start and process date specified when you submit the Costing of Balance Adjustment process. After costing the balance adjustment, distribute the accounting by submitting the Transfer to Subledger Accounting, Create Draft Accounting, and Create Final Accounting processes.

Can I correct payroll costing results from the Person Results page?

No, results on this page are view-only. However, you can use other pages to make corrections.

If you have not started the prepayments process or created accounting entries, you can navigate to the Person Process Results page from the Payroll Checklist work area or the Calculations work area and roll back the person's record, or correct the error and mark it for retry, so that when you retry the payroll run, the application recosts the entry.

If you have created accounting entries or do not want to retry or roll back the payroll calculation, navigate to the Accounting work area and use the Person Costing Distribution search in the regional area to query the person's record. Locate the costing entry on the Costing Person Process Results page and process a corrective action such as a cost adjustment or retroactive costing.

Can I view an audit trail of corrections for payroll costing results?

It depends on the process used to correct the results. Rolling back or retrying a process eliminates the audit for the error that occurred. For example, rolling back the process deletes the costing entries. Reversing a process negates the entries, but maintains an audit trail. Processing a cost adjustment or running retroactive costing after correcting the costing setup retains a record of the original costing entry produced by the Create Final Accounting process.

How can I revise the payroll costing information for a temporary period of time?

To change the costing for a few people for the current payroll run, update the costing information for each person's element entries before you run the payroll. If the change impacts many people in your department such as a cost center allocation, update the appropriate costing setups based on the date the changes take effect.

For example, to cost someone's wages for a car allowance to a different cost, update the person's element entry costing information for the wages before you run the payroll. If the person is entitled to the allowance for a longer period, override the existing costing by editing the person's costing setup information for the recurring wages element. When the time elapses, end the record for the person's costing setup information to have the application use the original costing setup information to calculate the costs for the recurring wages element.

If you have already submitted the costing and realize the costing results are incorrect, you must process a cost adjustment or submit a retroactive costing process.

Why can't I find my cost adjustment in the payroll flow search results?

The Overview search page of the Accounting work area displays the search results for payroll flows. If you submit a cost adjustment from the Cost Distribution page to correct a specific costing entry, you can access and view that cost adjustment from the Summary tab analytics of the payroll flow that includes the costing result you adjusted, or access it from the Person Process Results page.

Cost and Reconcile Payments

Costing Payroll Payments: Explained

Cost payments after calculating, distributing, or reconciling the payment. The process of calculating cost for your payments involves:

  • Submitting the Calculate Costing of Payments process

  • Verifying the costing results

  • Correcting the costing results, if necessary

The costing information captured by these processes depends on how you set up your the payment costing, such as which payment sources to cost, whether to reconcile them and to which accounts, and whether to transfer and post the generated journal entries to Oracle Fusion General Ledger.

Submit the Calculate Costing of Payments Process

The submission parameters for the Calculate Costing of Payments process determine which payments the process includes when it calculates costs for voided, canceled, external, unreconciled, and reconciled payments.

If you are reconciling payments, you can also control which payments to cost by specifying the Mode parameter when you submit the process.


Mode Parameter

Payments

All

Costs unreconciled and reconciled payments and is the predefined parameter.

Uncleared

Costs payments that are recently issued and not yet costed.

Cleared

Costs reconciled payments.

Select this parameter after you process a monthly reconciliation file in Oracle Fusion Cash Management. After you transfer the results to General Ledger, it is easier to reconcile the Cash in the Bank account in General Ledger with the actual balance of the bank account.

The frequency with which you submit the Calculate Costing of Payments process depends on your accounting practices. Many enterprises submit the process before or on the regular payment date to cost generated payments. If you reconcile payments and pay employees by issuing checks, you might resubmit the process several days after the payment date to cost the reconciled payments, and again on the last business day of the month or the last date of the bank statement cycle to simplify reconciling balances and bank statements with General Ledger and Cash Management.

Verify Costing Results for Payments

The Calculate Costing of Payments process generates a list of payments costed for each payroll relationship. As the payments are costed, the analytics for the Clearing Account Summary show the payment amounts costed to the payroll liability and cash accounts. If you reconcile payments and have set up cash clearing accounts, the analytic shows the payment amounts costed to the payroll liability, cash clearing, and cash accounts.

You can view the costing entries on the Person Process Results page. The process debits the payroll liability accounts and credits the cash accounts. If you reconcile payments, the process creates entries that debit the payroll liability accounts and credit the cash clearing accounts. When the payments clear, you can resubmit the process to create entries that debit the cash clearing accounts and credit the cash accounts.

If you void a payment, the process offsets the costing for voided payments by negating the original costing. The Cancel Payment flow includes a process to void the payments. The costing for the canceled payment is negated when the void is processed in the flow.

Correct Costing Results for Payments

Most Costing of Payment errors are resolved during the initial implementation by correcting the account numbers entered when you set up your payment sources. After that initial period, you may only encounter a few occasions in which you need to correct the costing information.

The Costing of Payments process supports standard task actions to correct costing results, such as retry and roll back. For example, the accounting department might inform you that payments for a specific payment source should use a different account number. You can roll back the Costing of Payments process for the external payment records that were costed using the incorrect account number, update the costing setup information for the payment source, and resubmit the Costing of Payments process to negate the original costing and create the correct costing.

After you review the costing results, and make any necessary corrections, you can distribute the accounting information.

Reconciling Payroll Payments: Explained

Oracle Fusion Global Payroll integrates with Oracle Fusion Cash Management, which facilitates the reconciliation of bank statements with payment transactions. The process of reconciling your payments involves transferring the payment information to Cash Management, costing the payments, and distributing the accounting information

In most enterprises, a payroll manager usually performs the tasks to transfer payments to Cash Management, cost the payroll payments, and distribute the accounting information. A cash manager, with the appropriate Cash Management duty roles, usually performs the reconciliation tasks. You reconcile payments after you receive the bank statement and reconciliation file for the payments, which usually occurs on a weekly or monthly basis, depending on the frequency of your payroll run, the volume of your payments, and your arrangements with the bank.

The following figure shows the sequence of tasks involved in reconciling payments.

Tasks performed in Global Payroll and Cash Management to reconcile payments

Calculate Costing of Payments

You cost payments after calculating or generating the payments by submitting the Calculate Costing of Payments process. This process creates cost results allocated to the accounts you set up during implementation, such as the payroll liability, cash clearing, and cash accounts. The costing process calculates costs for voided, canceled, external, unreconciled, and reconciled payments. For example, the process calculates costs for unreconciled payments, creating cost results that debit the payroll liability accounts and credit the cash clearing accounts.

Distribute Accounting

After you review the costing results, and make any necessary corrections, you can distribute the accounting information. You distribute accounting by submitting the Transfer to Subledger Accounting, Create Draft Accounting, and Create Final Accounting processes to create journal entries, and transfer and post them to Oracle Fusion General Ledger.

Transfer Payments Information to Cash Management

In most enterprises, you transfer the payment information after you process the tasks to calculate and generate your payments, and submit your payment files to the banks, such as prenotification files for electronic funds transfers, or positive pay files and reconciliation files for check payments. The process transfers all payments to Cash Management that fall within the process start and end date specified when you submit the process. After the transfer, you can view the list of payroll relationship payment actions included in the transferred batch on the Person Process Results page.

Reconcile Payments Automatically or Manually

After receiving the bank statement file from the bank, you can reconcile payments in Cash Management automatically or manually. You manually reconcile payments by matching them to bank statement lines or resolve reconciliation issues after autoreconciliation. The reconciliation process captures discrepancies between the amount reported in the bank statement and the payment information that was transferred to Cash Management. If the amount falls within the allowable range permitted for discrepancies, the payment is marked reconciled and the difference is allocated to a Reconciliation Differences account in Oracle Fusion General Ledger. If the difference is outside the allowed tolerance, then the unreconciled item is referred to a Cash Management or payroll manager for research and resolution.

Monitor Reconciliation Status

As a payroll manager, you can monitor the reconciliation process from the Checklist, Accounting Distribution, or Cash Management work areas. Depending on the statuses that you set up, you can determine, for example, whether the bank has cleared a payment or rejected it. To monitor the status:

  • Use the payroll flow page of the Checklist or Accounting Distribution work area to view the payment amounts distributed from the payroll liability, the cash clearing, and the cash accounts.

    The Clearing Account Summary analytics on the Summary tab of the payroll flow display the amounts costed to each account.

  • Use the Overview and Manage Bank Statement pages of the Cash Management work area to view the status of bank statement lines.

Resubmit Calculate Costing of Payments and Distribute Accounting

After the bank reconciliation file indicates that the payment cleared, resubmit the Calculate Costing of Payments process to calculate costs for the reconciled payments. Submitting the process debits the cash clearing account and credits the cash account. Submit the Transfer to Subledger Accounting, Create Draft Accounting, and Create Final Accounting processes to distribute the accounting results, and to transfer and post the journal entries to General Ledger.