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For an invoice, Payables creates offsetting liability distributions; for a payment, Payables creates offsetting cash and discount taken distributions. This helps to ensure that each set of accounts remains balanced by balancing segment. Otherwise, Payables records offsetting entries using the liability account from the supplier site, the cash account associated with the bank account used for payment, and the discount account specified in the Payables Options window.

Automatic Offsets was created for the government and higher education sectors where it is mandated by law that transactions be balanced to the balance segment level. However, some companies may benefit from the option of having self-balancing sets of accounts. For example, if you have a product segment in your account, Automatic Offsets would allow you to track cash and AP liability by product.

The level of detail that Automatic Offsets provides is only recommended either if it is mandated by law or if it is necessary to produce a balance sheet at a balancing segment level. There are restrictions associated with enabling Automatic Offsets. Be sure you understand the impact of Automatic Offsets before deciding to implement this feature. See: Automatic Offsets Restrictions.

Alternatively, you can set up Intercompany Accounting in Oracle General Ledger so that General Ledger automatically creates the intercompany accounting entries necessary to balance a transaction at the balancing segment level. If you choose to use Intercompany Accounting rather than Automatic Offsets, your Payables transactions that cross multiple balancing segments will not balance at the balancing segment level until you transfer them to General Ledger and submit the Journal Import program. See: Intercompany Accounting.

By enabling Automatic Offsets within Payables, Payables will automatically allocate the liability, discount taken, and gain and loss entries for a given invoice across multiple balancing segments, according to the balancing segments of the invoice distributions. If you pay an invoice from a pooled bank account, Payables will also automatically allocate the cash entry across multiple balancing segments, according to the balancing segments on the invoice distributions. If you pay from a non-pooled bank account, Payables records the cash entry using the one Cash Account you specify in the Banks window. Entries in accounts other than liability, cash, discount taken, or realized gain/loss must have manual journal entries made in your general ledger in order to keep the entries balanced at the balancing segment level. Automatic Offsets will not affect these accounts.

If you do not enable Automatic Offsets, Payables records the liability, cash, discount taken, and gain and loss entries in the accounts you specify in the Payables Options and Banks windows. These accounts have one balancing segment each, so if you enter transactions that cross multiple balancing segments, you may want to consider using the Intercompany Accounting feature to balance these transactions during posting.

This document includes the following topics:

Automatic Offsets and Invoice Processing

• Overview of Automatic Offsets and Invoice Processing

• How Payables Builds the Offsetting Liability Accounts

• Prepayments and Automatic Offsets

• Invoice Adjustments and Automatic Offsets

• Prorating Tax, Freight and Miscellaneous Expenses with Automatic Offsets

• Overview of Automatic Offsets and Payment Processing

• Pooled and Non-Pooled Bank Accounts with Automatic Offsets

• How Payables Builds the Offsetting Cash Accounts

• How Payables Generates Offsetting Discount Accounts and Entries

• Correcting Invalid Distributions Created by Automatic Offsets

Automatic Offsets Restrictions

See Also

Enabling Automatic Offsets

Intercompany Accounting

Automatic Interest