Automatic Offsets and Invoice Processing (Oracle Payables Help)


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Automatic Offsets and Invoice Processing

Overview of Automatic Offsets and Invoice Processing

If you enable Automatic Offsets, Payables automatically allocates an invoice's liability amount across multiple balancing segments according to the balancing segments on the invoice distributions. This ensures that invoices always balance by balancing segment.

Payables creates the liability distributions when you submit Approval for an invoice. You cannot overwrite the accounts, since Payables does not display online the offsetting account for each invoice distribution. However, you can review the liability distributions on the Expense Distribution Detail Report; see: Expense Distribution Detail Report.

If you do not enable Automatic Offsets, Payables records the invoice liability using the liability account on the invoice, which defaults from the supplier site. When you distribute invoice distributions across multiple balancing segments, the invoice will not balance by balancing segment. However, General Ledger can automatically create intercompany balancing entries when you post the invoice if you have enabled the Balance Intercompany Journals option for your set of books. See: Intercompany Accounting.

How Payables Builds the Offsetting Liability Accounts

When you use Automatic Offsets and submit Approval for an invoice, Payables automatically builds the offsetting liability account for each invoice distribution on the basis of the default liability account for the invoice. The liability account for an invoice defaults from the supplier site; however, you can override it during invoice entry. See: Accounting Region of the Suppliers and Supplier Sites windows; Invoices Window Reference.

When you enable Automatic Offsets, Payables gives you a choice of two different methods for building your offsetting accounts on the basis of this default, Account or Balancing. See: Accounting Financials Options.

If you select Balancing as your Automatic Offset Method, Payables takes the default liability account for the invoice, substitutes the balancing segment from the invoice distribution and uses that as the distribution's offsetting liability account.

If you select Account as your Automatic Offset Method, Payables takes the account used for the invoice distribution and substitutes the account segment from the default liability account for the invoice, preserving all other segment values.

Suggestion: Use this option if you want to carry all the detail from your invoice distributions on your offsetting accounts. For example, if you are a manufacturing company and you use a product segment to record sales information, you may want to capture product segment values in your expense account, your liability account and your cash account.

Example. You enable Automatic Offsets using the Balancing method, and your Accounting Flexfield structure is Balancing Segment-Cost Center-Account. Your default liability account for supplier site ABC is 101-000-2300. You enter an invoice for supplier site ABC and distribute it as follows:

DR 101-100-4500 $60

DR 200-201-4610 $40

Payables records the following liability account offsets automatically when you approve the invoice:

CR 101-000-2300 $60

CR 200-000-2300 $40

Example. You enable Automatic Offsets using the Account method, and your Accounting Flexfield structure is Balancing Segment-Cost Center-Account. Your default liability account for supplier site ABC is 101-000-2300. You enter an invoice for supplier site ABC and distribute it as follows:

DR 101-100-4500 $60

DR 200-201-4610 $40

Payables records the following liability account offsets automatically when you approve the invoice:

CR 101-100-2300 $60

CR 200-201-2300 $40

Prepayments and Automatic Offsets

When you enter a prepayment, you can create only one item distribution and one tax distribution for your prepayment; see Prepayment Restrictions. If you have a prepayment that crosses multiple balancing segments, you must split it up into the appropriate number of prepayments, since Payables does not support multiple distributions for prepayments.

If you use Automatic Offsets, Payables automatically creates liability distributions based on your chosen Automatic Offset Method, just as it does for any other invoice.

Invoice Adjustments and Automatic Offsets

If you adjust an invoice distribution account or the liability account for an unpaid invoice, you must submit Approval again to pay or post the invoice. When you resubmit Approval, Payables automatically adjusts the balancing liability distributions created by Automatic Offsets. See: Adjusting Invoice Distributions.

Attention: When an invoice is paid or partially paid, you cannot adjust any accounting information on the invoice. Payables prevents you from updating or reversing any of the invoice distributions for paid or partially paid invoices because Payables has already created the payment distributions based on the current invoice accounting lines.

Prorating Tax, Freight and Miscellaneous Expenses with Automatic Offsets