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Posting When You Use Accrual Basis Accounting

When you use accrual basis accounting and submit the Payables Transfer to General Ledger program, Payables can transfer accounting information for both your invoices and payment transactions to the Payables General Ledger Interface table. When you submit the program, you choose to transfer invoice, payment, or all (both invoice and payment) transactions. The accounting distributions for an invoice typically debit expense or asset accounts and credit the AP liability account of an invoice. The accounting distributions for a payment typically debit the liability account and credit your cash account. When you create payments, Payables may also create distributions for discount taken and foreign currency exchange gain or loss between invoice and payment time. When you reconcile payments using Oracle Cash Management, Payables may also create distributions for cash clearing, bank charges, bank errors, and foreign currency exchange gain or loss between payment and reconciliation time.

In the following examples, US Dollars is the functional currency for your set of books and you use accrual basis accounting.

Example 1

You enter and approve an invoice for $100 with payment terms that allow you to take a 10% discount on the invoice if paid within 10 days. When you post the invoice, Payables transfers accounting distributions for the invoice expense and liability transactions.

You pay the invoice five days later, taking the 10% discount. When you post the invoice payment, Payables records the liability and cash transactions along with the appropriate discount transaction.

Example 2

You enter and approve a $100 invoice for a supplier site. You then enter and approve a $25 prepayment for the same supplier site. When you post the invoice and prepayment, Payables records the expense and liability transactions for the invoice.

You then pay the prepayment and apply the prepayment to the invoice, reducing the amount due on the invoice. You pay the remaining amount of the invoice and initiate posting to transfer payment information for the prepayment and the invoice. The prepayment journal entry credits your cash account and debits the prepayment account for the amount of the prepayment. The invoice payment journal entry credits your cash account for the reduced invoice amount and debits your liability account.

See Also

Accounting Methods

Defining Financials Options

Payables Options

Reconciling Payments with Oracle Cash Management

Payables Transfer to General Ledger Program (Posting)

Budgetary Control In Payables


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