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If you enable encumbrance accounting or budgetary control, Purchasing creates encumbrance journal entries when you reserve funds for a requisition or purchase order. If you use the perpetual accrual method in Purchasing, Purchasing reverses purchase order encumbrances when you inspect, accept, and deliver the units. If you are using the periodic accrual method in Purchasing, Payables reverses the purchase order encumbrances when you create journal entries for invoices. Payables creates encumbrance journal entries when you approve an unmatched invoice or when there is a variance between a matched invoice and the purchase order to which it is matched. See also: Encumbrance Entries in Payables.

Oracle Financials provides two predefined encumbrance types that you can use to identify requisition, purchase order, and invoice encumbrances: Commitment and Obligation. You can define additional encumbrance types in Oracle General Ledger. See also: Encumbrance Entries in Payables.

Use Requisition Encumbrance. Enable this option to encumber funds for requisitions. If you enable this option, Purchasing creates journal entries and transfers them to General Ledger to encumber funds for purchase requisitions.

Encumbrance Type. If you enable Use Requisition Encumbrance, you must select a requisition type by which you can identify your requisition encumbrance journal entries. Purchasing assigns this encumbrance type to the encumbrance journal entries it creates for purchase requisitions.

Reserve at Requisition Completion. If you enable Use Requisition Encumbrance, indicate whether you want requisition preparers to have the option to reserve funds. If you do not enable this option, only requisition approvers will have the option to reserve funds.

Use PO Encumbrance. Enable this option to encumber funds for purchase orders, purchase order matched invoices, and basic invoices (not purchase order matched). If you enable this option, Purchasing encumbers funds for purchase orders and Payables encumbers funds for variances during Approval for purchase order matched invoices. If you enable this option and enter a non-purchase order matched invoice, Payables will encumber funds for it during Approval. All Payables encumbrances are reversed during Posting. If you enable Use Requisition Encumbrance, you must also enable this option.

PO Encumbrance Type. If you enable Use Purchase Order Encumbrance, select a purchase order encumbrance type by which you can identify your purchase order encumbrance journal entries. Purchasing assigns this encumbrance type to the encumbrance journal entries it creates for purchase requisitions and purchase orders.

Invoice Encumbrance Type. If you use purchase order encumbrance, select an invoice encumbrance type by which you can identify your invoice encumbrance journal entries. Payables assigns this encumbrance type to the encumbrance journal entries that it creates when Approval approves an unmatched invoice or an invoice matched to a purchase order for which there is a variance.

See Also

Budgetary Control In Payables

Encumbrance Entries in Payables

Defining Sets of Books

Overview of Encumbrance Accounting

Defining Encumbrance Types

Entering Encumbrances