Automatic Offsets and Payment Processing (Oracle Payables Help)


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Automatic Offsets and Payment Processing

Overview of Automatic Offsets and Payment Processing

If you enable Automatic Offsets, Payables automatically creates cash, discount and gain/loss distributions for each balancing segment when you create a payment using a pooled bank account. This ensures that invoices always balance by balancing segment when paid from a pooled account.

You can use Automatic Offsets in both cash and accrual basis accounting. In cash basis books, the offsetting journal entries created during payment processing balance invoice distributions directly; in accrual basis books, they balance the offsetting liability entries created when you submit Approval for your invoices. See: Automatic Offsets and Invoice Processing; Accounting Methods.

If you do not enable Automatic Offsets or create a payment using a non-pooled bank account, Payables creates payment distributions using a single account of each type. When you distribute an invoice across multiple balancing segments, the invoice will not balance by balancing segment. However, General Ledger can automatically create balancing intercompany receivable/payable entries for transactions that do not balance by balancing segment if you have enabled the Balance Intercompany Journals option for your set of books. See: Intercompany Accounting.

Pooled and Non-Pooled Bank Accounts with Automatic Offsets

If you enable Automatic Offsets, you can choose to pool any or all of your bank accounts. The cash in a pooled bank account is shared by multiple balancing segments; the cash in a non-pooled bank account is associated with a single balancing segment. If you do not enable Automatic Offsets, you can only have non-pooled bank accounts. See: Defining Banks.

As mentioned above, Automatic Offsets functions only when you make payments out of pooled bank accounts.

How Payables Builds the Offsetting Cash Accounts

When you create a payment from a pooled bank account using Automatic Offsets, Payables automatically builds the cash account for each payment distribution on the basis of the bank account's associated cash account. Payables uses the Automatic Offset Method you specified when you enabled this feature in building these cash accounts. See: Accounting Financials Options.

If you selected Balancing as your Automatic Offset Method, Payables takes the cash account associated with your pooled bank account, substitutes the balancing segment from the invoice distribution and uses that as the distribution's offsetting cash account.

If you selected Account as your Automatic Offset Method, Payables takes the account used for the invoice distribution and substitutes the account segment from the cash account associated with your pooled bank account, preserving all other segment values.

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. The default cash account for your Division A bank account, in which you have pooled funds for investment, is 101-000-1100. 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

You post the invoice and pay it out of your Division A bank account. When you create the payment, Payables automatically creates the following entries:

DR 101-000-2300 $60

DR 200-000-2300 $40

CR 101-000-1100 $60

CR 200-000-1100 $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. The default cash account for your Division A bank account, in which you have pooled funds for investment, is 101-000-1100. 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

You post the invoice and pay it out of your Division A bank account. When you create the payment, Payables automatically creates the following entries:

DR 101-100-2300 $60

DR 200-201-2300 $40

CR 101-100-1100 $60

CR 200-201-1100 $40

How Payables Generates Offsetting Discount Accounts and Entries

If you use Automatic Offsets and have chosen System Account as your Discount Distribution Method in the Payables Options window, Payables prorates the entire discount amount across your invoice distributions when you pay an invoice that crosses multiple balancing segments. The balancing segment from the offsetting invoice distribution replaces the balancing segment of your system Discount Taken account when Payables builds the accounts for these entries. See: Payment Payables Options; Accounting Financials Options.

Correcting Invalid Distributions Created by Automatic Offsets

When you enable Automatic Offsets, Payables creates payment distributions for your cash and discount entries based on the Automatic Offset Method you choose in the Payables Options window.