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Accounting for Fixed-Rate Payments

Suspense Account

During the Payables Transfer to General Ledger Program, when you transfer cross-currency payments, the resulting accounting entry consists of two currencies: the invoice currency and the payment currency. Payables ensures that the entry balances in your functional currency. The entry, however, does not balance in the entered currency.

During the Payables Transfer to General Ledger Program, General Ledger identifies cross-currency entries created in Payables. These entries have a category of 'Cross-Currency'. For each of these entries, General Ledger separates the entries by currency before balancing them. General Ledger ignores the out of balance errors. Then General Ledger creates a balancing journal entry that is charged to a clearing account. A clearing account is called a 'Suspense Account' in Oracle General Ledger.

Note: The entry to the clearing account will always be zero in your functional currency because the journal entry already balances in your functional currency.

You do not need to enable suspense accounting for your set of books to create cross-currency payments in Payables. You only need to define a suspense account for journal entries created by cross-currency payments.

When defining a Suspense Account for your set of books in the Suspense Accounts window in General Ledger, enter a source of Payables. See: Defining Suspense Accounts.

Rounding Account

Payables creates journal entries in the transaction currency and your functional currency for all invoices and payments. Payables continues to record gains and losses in the Gain/Loss Accounts you assign. When you pay invoices in a different currency than the payment currency, Payables uses the Rounding account that you define in the Currencies region of the Payables Options window to record the rounding error.

For example, your functional currency is FRF and you enter an invoice in 1000 FRF and enter Euro as the Payment Currency. The Payment Amount converts to 152.53917 Euro, at the fixed conversion rate of 6.555693, and is rounded to 152.54 Euro. The payment, converted back to your functional currency is 1000.0054, which is rounded to 1000.01. The .01 FRF difference is recorded in the Rounding account.

FIXED-RATE PAYMENT RESTRICTIONS

PURCHASE ORDER MATCHING. If you match an invoice to a purchase order, the purchase order must be in the same currency.

SINGLE CURRENCY. You can pay an invoice in only one associated fixed-rate currency.

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