This chapter describes the subledger account distribution.
This chapter covers the following topics:
OPM Financials includes OPM Accounting Preprocessor that lets you create events in SLA tables. SLA identifies eligible events and uses these events to extract data using OPM supplied extract program into extract tables.
To view the accounting preprocessor entries
Navigate to the OPM Accounting Preprocessor window.
Select Submit Process from the Actions menu.
Enter the Legal Entity for which you are running the process.
Select the Ledger associated to the Legal Entity and to which you are posting the journal entries to.
Cost Type associated to the selected legal entity displays.
Select the Fiscal Year for which the processor is run.
Select the Period of the fiscal year for which the processor is run.
Enter the date in the Open Period.
OPM retrieves the corresponding Open GL Fiscal Year for the specified date.
OPM retrieves the corresponding GL Period for the specified date.
Enter the first day of the period of the fiscal year for which the test subsidiary ledger update is being performed in Post Start Date .
Enter the last day of the period of the fiscal year for which the test subsidiary ledger update is being performed in Post End Date.
Indicate if transaction must be posted when there is no cost.
Select the sources to run the process for:
Inventory Transactions
Order Management Transactions
Product Batch Transactions
Purchasing Transactions
Costing Transactions
When you select Costing Transaction, the Cost Revaluation Parameters tab is enabled.
Select Revaluation Transactions and or Actual Cost Adjustments.
Enter the date and time that the preprocessor must start in Start Date.
Click Now to start the process immediately.
To start the process at a particular date, click the Specific Date radio button.
Enter the date you want the preprocessor to run.
Click Ok to run the process.
The reference number displays, make a note of it.
The OPM Accounting Preprocessor window displays the results of the preprocessor run. You can query the result by reference number.
To view the accounting preprocessor results
Navigate to the OPM Accounting Preprocessor window.
Select View Process from the Actions menu.
Indicates the reference number assigned for the accounting preprocessor run.
Displays the number of Extract Headers Created.
Displays the number of Extract Lines Created.
Indicates the number of rows posted to the GL table.
Schedule Status
Displays the start date and time of the accounting preprocessor in Started On.
Displays the end date and time of the accounting preprocessor in Ended On.
Displays whether the accounting preprocessor is scheduled for now or a specific date in Scheduled On.
Displays the name of the user who started the accounting preprocessor in Started By.
Abort Information
Displays the name of the user who aborted the accounting preprocessor in By.
Displays the reason for aborting the accounting preprocessor in Reason.
Criteria
Displays the Legal Entity for which you are running the process.
Displays the Ledger associated to the Legal Entity and to which you are posting the journal entries to.
Displays the Cost Type associated to the selected legal entity.
Displays the Fiscal Year for which the processor is run.
Displays the period of the fiscal year for which the processor is run.
Displays the date in the Open Period.
OPM retrieves the corresponding Open GL Fiscal Year for the specified date.
OPM retrieves the corresponding GL Period for the specified date.
Displays the first day of the period of the fiscal year for which the test subsidiary ledger update is being performed in Post Start Date.
Displays the last day of the period of the fiscal year for which the test subsidiary ledger update is being performed in Post End Date.
Indicates whether transaction was posted when there was no cost.
Displays the sources selected to run the process for:
Inventory Transactions
Order Management Transactions
Product Batch Transactions
Purchasing Transactions
Costing Transactions
Revaluation Transactions
Actual Cost Adjustments
Cost Revaluation Parameters
Enter the cost calendar you are revaluing inventory from in Prior Calendar.
Enter the cost period you are revaluing inventory from in Prior Period.
Enter the cost method you are revaluing inventory from in Prior Cost Type.
Enter the cost calendar you are revaluing to in Current Calendar.
Enter the cost period you are revaluing to in Current Period.
Enter the cost method you are revaluing to in Current Cost Type.
Enter the date you wish the cost revaluation process to post to when doing a updating the subsidiary ledger in GL Transaction Date.
In Oracle Applications Release 12, OPM Financials responsibility includes SLA Accounting menu that lets you create all user-defined accounting data. The following illustrates the OPM Cost Management - SLA process of generating and viewing accounting entries.
Create Accounting process is run to create accounting journal entries on the transaction data. SLA Create Accounting request is available from the OPM Financials Responsibility. For details, see: Create Accounting Program, Oracle Subledger Accounting Implementation Guide.
Note: You must run the Transfer Journal Entries to GL program to transfer accounting entries to GL if the option to transfer them to GL is set to No in the Create Accounting program.
Transfer to GL is an option on the Create Accounting program. If you set this to Yes, Accounting process transfers subledger journal entries to General Ledger. If you select the option, Post in GL, the journal entries are posted to General Ledger.
See: Transfer Journal Entries to GL Program, Oracle Subledger Accounting Implementation Guide.
You can view accounting events and journal entries associated with transactions using the Subledger Accounting user interface, or view the accounting events and journal entries from the various transaction inquiry windows. See: Viewing Accounting Events.
You can view accounting events and journal entries associated with transactions using the Subledger Accounting user interface (HTML). See: Accounting Events Inquiry, Oracle Subledger Accounting Implementation Guide. You can access the Subledger Accounting user interface by navigating to Accounting Events, Journal Entries, and Journal Entry Lines from the OPM Financials responsibility.
You can also view accounting events and journal entries associated with transactions by accessing the Subledger Accounting user interface from the View Transactions windows. From the View Receiving Transactions, View Material Transactions, or View Resource Transactions windows, choose tools from the menu bar, and then select View Accounting Events. The following illustrates viewing the Subledger Accounting user interface from the Material Transactions window. Other View Transactions windows use similar steps.
To view accounting events and journal entries from the Material Transactions window
Navigate to the Material Transactions window. The Find Material Transactions window appears
Enter material transaction search criteria and choose Find. The Material Transactions window displays.
Select a transaction and choose Tools from the tool bar. Select View Accounting Events and the Accounting Events User Interface displays. The View Accounting Event and accounting is enabled only after account has been done either in draft or final mode.
From View Events or Journal Entries, you can select an entry and navigate to the transaction window using the View Transaction option.
This topic describes the calculations used to build account distributions for process organizations within Oracle Subledger Accounting (SLA).
The account distribution is not impacted by whether you use standard, actual, or lot cost type to develop the item cost except in the case of production. The distribution discussion for production provides specific business cases to illustrate the differences in the journal entries under standard, actual, lot costing.
Tables shown in this topic describe which journal line types are used to create distributions. Each table shows journal line type, credit and debit calculation.
In the case of reverse transactions the same journal line type templates are used; the entries which display debits are reversed and become credits. Similarly, credits become debits.
Usually, when reversing a transaction such as an unrelease of a production batch, the quantities with positive value would now have negative value. The negative debits (negative quantities multiplied by cost) become credits.
SLA follows these rules when creating distributions.
OPM allows you to group individual inventory organizations into associations for costing purposes. These associations reduce the number of cost detail records that the system has to maintain. The accounting process uses these associations when it finds the cost for an item.
The system uses the inventory organization stored on the inventory transaction to determine the appropriate GL item cost per unit. If cost association inventory organizations are used, then the system first looks for that item’s cost in the cost association inventory organizations. If the cost does not exist, then the accounting process will not have a cost to use. If a cost for that item exists in the specific inventory organization on the transaction record, it is ignored since that inventory organization is not the cost association inventory organization.
Usually, the transaction date on the inventory record is considered as the GL posting date. This is not true in the following cases: For inventory revaluation, also referred to as cost revaluation, you can enter a GL posting date as the GL transaction date on the Fiscal Policy window for inventory revaluation.
All inventory transactions are valued in both the base or functional currency of the ledger as well as the transaction currency. The decimal precision for all amounts is determined by the currency rules setup in the Oracle General Ledger.
Throughout the Subsidiary Ledger, when a negative amount is determined for a debit, it is posted as a credit. The rule used is that a negative debit becomes a credit. Similarly, a negative credit becomes a debit entry.
On the OPM Fiscal Policy window, you can use an option to specify by legal entity whether the current period or prior period’s cost must be used for creating distributions. By default this option creates distributions using the current period’s cost. However, if you are using Actual Costing you can choose to use the prior period’s cost for building journal entries. Since this option is set at the legal entity level, all of the transactions in that legal entity use the same cost basis.
Oracle Inventory contains several types of transactions and the journal entry templates with journal line types used for each of these transactions.
The following table provides the miscellaneous receipt distribution:
| Account Title | Debit | Credit |
|---|---|---|
| INV | [Transaction Qty x Organization Total Item Cost] | |
| IVA | [Transaction Qty x Organization Total Item Cost] |
The following table provides the miscellaneous issue distribution:
| Account Title | Debit | Credit |
|---|---|---|
| INV | [Transaction Qty x Organization Total Item Cost] | |
| IVA | [Transaction Qty x Organization Total Item Cost] |
Inventory transfer functionality lets you transfer material from one organization to another (within the same legal entity or between process to discrete organizations).
In the case of inventory transfers, time taken for moving materials from a source organization to a target organization can be several days.
Inventory transfer creates two transactions one for each organization involved. At the time of shipment, the entries shown in the first table are created for the source organization shipping the material. At the time of receipt, another transaction is created for the target organization receiving the goods.
Transfers of material from one organization to another can be accomplished through several different ways. The material is transferred directly using a direct transfer where there is no intransit inventory. The transfer can be done as an intransit transfer where the inventory goes through an intransit stage. Intransit inventory is owned by either the sender (FOB Receiving) or the receiver (FOB Shipping) of the goods. The direct or intransit transfer are done through an Internal Sales Order. The following table summarizes the various options and features available within each type of transfer.
| Direct Transfer | Intransit Transfer |
|---|---|
| Material is transferred immediately and is decremented or incremented in the source or destination organization at the same time | Material goes into intransit and must be explicitly received in the destination organization. |
| Transactions are created using Inventory Transfers and both from and to transactions are created at the same time. | The shipment is created using Inventory Transfers and is received using the Receiving window. |
| No FOB options are applicable as transfer happens immediately. | FOB option can be either Shipping or Receiving. |
| Can also be done using Internal Orders. | Can also be done using Internal Orders. |
| Intercompany Invoicing is not supported. | Intercompany Invoicing is supported for transfers across Operating Units that are done using Internal Orders. |
| Freight and transfer credits can be used. However, freight is not applicable for Internal Order transfers. | Freight and transfer credits can be used. However, freight is not applicable for Internal Order transfers. Transfer Credit is applicable only in the case where the transfer happens within the same Operating Unit or if the invoicing is not used. Transfer Price is required in case of Intercompany Invoiced transfers. |
In all of the interorganization transfers, the distribution templates shown include both the journal created on the sending side as well as the receiving side. In case of intransit transfers, the intransit entry is also shown along with the owner of the intransit.
Interorganization transfers from a process organization to another process organization within the same operating unit use the source organization cost for the transfer. For transfers that go across operating units, a Transfer Price is required and the applicable transfer price is used as the cost of the transfer in the receiving organization.
Distribution created in the Sending Organization based on the shipping transaction
| Journal Line Type | Debit | Credit |
|---|---|---|
| IOR | Transaction Qty x Sending Org Cost + Freight + Transfer Credit | |
| INV | Transaction Qty x Sending Org Cost | |
| FRT | Freight | |
| XFC | Transfer Credit |
Distribution created in the Receiving Organization based on the receipt transaction
In case of standard costing, Inventory account is debited using the receiving organization cost and a PPV is generated:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Transaction Qty x Receiving Organization Cost | |
| IOP | Transaction Qty x Sending Organization Cost + Freight + Transfer Credit | |
| PPV | [Transaction Qty x Sending Organization Cost + Freight + Transfer Credit] – [Transaction Qty x Receiving Organization Cost] |
In the case of actual costing where the Event Fiscal Policy is set to use PO Price for Inventory account, no PPV is generated and the distribution is created as below.
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Transaction Qty x Item Cost of Receiving Organization | |
| IOP | Transaction Qty x Transfer Price |
Distribution created in the Sending Organization based on the shipping transaction
The interorg profit account is used to capture the difference between the transfer price and the item cost in the sending organization.
| Journal Line Type | Debit | Credit |
|---|---|---|
| IOR | Transaction Qty x Transfer Price | |
| INV | Transaction Qty x Sending Organization Cost | |
| Freight | Freight | |
| IOPR | [Transaction Qty x Transfer Price] – [Transaction Qty x Sending Organization Cost + Freight] |
Distribution created in the Receiving Organization based on the receipt transaction
In case of standard costing, Inventory account is debited using the receiving organization cost and a PPV is generated.
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Transaction Qty x Receiving Organization Cost | |
| IOP | Transaction Qty x Transfer Price (converted to receiving Legal Entity’s currency) | |
| PPV | [Transaction Qty x Transfer Price (converted to receiving Legal Entity’s currency)] – [Transaction Qty x Receiving Organization Cost] |
In the case of actual costing where the Event Fiscal Policy is set to use PO Price for Inventory account, PPV is generated and the distribution is created as below.
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Transaction Qty x Transfer Price (converted to receiving Legal Entity’s currency) | |
| IOP | Transaction Qty x Transfer Price (converted to receiving Legal Entity’s currency) | |
| PPV | Transaction Qty x (Transfer Price- Item Cost of Receiving Organization) |
You can transfer inventory between Discrete and Process Organizations.
Transfers between Discrete and Process Organizations use a transfer price that is set up between the organizations and a new account, interorg profit, captures the difference between the sending organization cost and the transfer price.
Receiving Organization uses actual costing
The following table provides the distribution for inventory transfers from process to discrete organization (actual costing):
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| Sending | Interorg Receivables | Transaction Qty x Transfer Price | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Sending | Freight Expense Account | Freight | |
| Sending | Interorg Profit | [Transaction Qty x Transfer Price] – [Transaction Qty x Transfer Price + Freight] | |
| Receiving | Inventory Valuation | Transaction Qty x Transfer Price | |
| Receiving | Interorg Payables | Transaction Qty x Transfer Price |
Receiving Organization uses Standard Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| Sending | Interorg Receivables | Transaction Qty x Transfer Price | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Sending | Freight Expense Account | Freight | |
| Sending | Interorg Profit | [Transaction Qty x Transfer Price] - [Transaction Qty x Sending Org Cost + Freight] | |
| Receiving | Inventory Valuation | Transaction Qty x Receive Organization Cost | |
| Receiving | Interorg Payables | Transaction Qty x Transfer Price | |
| Receiving | PPV | Transaction Qty x [Transfer Price - Receive Organization Cost] |
Receiving Organization uses Actual or Average Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | Interorg Receivables | Transaction Qty x Transfer Price | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Sending | Interorg Profit | Transaction Qty x [Transfer Price – Sending Organization Cost] | |
| Receiving | Intransit Inventory | Transaction Qty x Transfer Price + Freight | |
| Receiving | Interorg Payables | Transaction Qty x Transfer Price | |
| Receiving | Freight Expense Account | Freight | |
| After Receipt | |||
| Receiving | Inventory Valuation | Transaction Qty x Transfer Price + Freight | |
| Receiving | Intransit Inventory | Transaction Qty x Transfer Price + Freight |
Receiving Organization uses Standard Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | Interorg Receivables | Transaction Qty x Transfer Price | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Sending | Interorg Profit | Transaction Qty x [Transfer Price – Sending Organization Cost] | |
| Receiving | Intransit Inventory | Transaction Qty x Receive Organization Cost | |
| Receiving | Interorg Payables | Transaction Qty x Transfer Price | |
| Receiving | Freight Expense Account | Freight | |
| Receiving | PPV | Transaction Qty x [Transfer Price + Freight - Transaction Qty x Receive Organization Cost] | |
| After Receipt | |||
| Receiving | Inventory Valuation | Transaction Qty x Receive Organization Cost | |
| Receiving | Intransit Inventory | Transaction Qty x Receive Organization Cost |
Receiving Organization uses Actual or Average Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| After Receipt | |||
| Sending | Interorg Receivables | Transaction Qty x Transfer Price | |
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Sending | Freight Expense Account | Freight | |
| Sending | Interorg Profit | Transaction Qty x Transfer Price – [Transaction Qty x Sending Organization` Cost + Freight] | |
| Receiving | Inventory Valuation | Transaction Qty x Transfer Price | |
| Receiving | Interorg Payables | Transaction Qty x Transfer Price |
Receiving Organization uses standard costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| After Receipt | |||
| Sending | Interorg Receivables | Transaction Qty x Transfer Price | |
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Sending | Freight Expense Account | Freight | |
| Sending | Interorg Profit | Transaction Qty x Transfer Price – [Transaction Qty x Sending Organization` Cost + Freight] | |
| Receiving | Inventory Valuation | Transaction Qty x Receive Organization Cost | |
| Receiving | Interorg Payables | Transaction Qty x Transfer Price | |
| Receiving | PPV | Transaction Qty x [Transfer Price – Receiving Organization Cost] |
Intercompany Transfers with Invoicing – FOB Shipping
Receiving Organization uses Actual or Average Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | COGS | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Receiving | Intransit Inventory | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| After Receipt | |||
| Receiving | Inventory Valuation | Transaction Qty x Transfer Price | |
| Receiving | Intransit Inventory | Transaction Qty x Transfer Price |
Intercompany Invoicing Distributions (created by Intercompany Invoicing programs and not by OPM)
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| Sending | Intercompany Receivables | Transaction Qty x Transfer Price | |
| Sending | Intercompany Revenue | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Payable | Transaction Qty x Transfer Price |
Receiving Organization uses standard Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | COGS | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Receiving | Intransit Inventory | Transaction Qty x Receiving Organization Cost | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| After Receipt | |||
| Receiving | Inventory Valuation | Transaction Qty x Transfer Price | |
| Receiving | Intransit Inventory | Transaction Qty x Transfer Price |
Intercompany Invoicing Distributions (created by Intercompany Invoicing programs and not by OPM)
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| Sending | Intercompany Receivables | Transaction Qty x Transfer Price | |
| Sending | Intercompany Revenue | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Payable | Transaction Qty x Transfer Price |
Receiving Organization is Actual or Average Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| After Receipt | |||
| Sending | COGS | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| Receiving | Inventory Valuation | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price |
Intercompany Invoicing Distributions (created by Intercompany Invoicing programs and not by OPM)
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| Sending | Intercompany Receivables | Transaction Qty x Transfer Price | |
| Sending | Intercompany Revenue | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Payable | Transaction Qty x Transfer Price |
Receiving Organization set to Standard Costing
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| After Shipment | |||
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Sending | Inventory Valuation | Transaction Qty x Sending Organization Cost | |
| After Receipt | |||
| Sending | COGS | Transaction Qty x Sending Organization Cost | |
| Sending | Intransit Inventory | Transaction Qty x Sending Organization Cost | |
| Receiving | Inventory Valuation | Transaction Qty x Receiving Organization Cost | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| Receiving | PPV | Transaction Qty x [Transfer Price – Receiving Organization Cost] |
Intercompany Invoicing Distributions (created by Intercompany Invoicing programs and not by OPM)
| Organization | Journal Line Type | Debit | Credit |
|---|---|---|---|
| Sending | Intercompany Receivables | Transaction Qty x Transfer Price | |
| Sending | Intercompany Revenue | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Expense | Transaction Qty x Transfer Price | |
| Receiving | Intercompany Payable | Transaction Qty x Transfer Price |
Inventory Revaluation also known as Cost Revaluation
OPM lets you revalue inventory account balances as a result of a change in item cost between two costing periods. It is done by building additional GL journal entries in the Subsidiary Ledger to update the INV account balance in the current period.
Unlike other transactions, the posting date for cost revaluation is determined by the GL transaction date (entered in the Fiscal Policy of legal entity) when the accounting preprocessor is run.
Each journal entry is created so that there is an association back to the respective item and organization. As a result, when the accounting process books entries to the table, individual entries are created for every item and organization combinations.
When the accounting process is run, the period balance entries are marked as posted. Once the transactions are posted, they are marked as posted and are not picked up again.
The following table provides the inventory revaluation distribution:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [(Prior Period Inventory Balance) x (Current Period Total Item Cost - Prior Period Total Item Cost)] | |
| IRV | [(Prior Period Inventory Balance) x (Current Period Total Item Cost - Prior Period Total Item Cost)] |
If the current period cost is less than the prior period cost, then reverse entries are created.
Subledger Entries for Average Cost Adjustment Type
The following table shows the distribution for Actual Cost Adjustment with the Average Cost Adjustment type:
| Account Title | Debit | Credit | Maintain Quantity |
|---|---|---|---|
| INV | Adjustment Quantity * (Adjustment Cost - Item Cost) | Yes | |
| CAD | Adjustment Quantity * (Adjustment Cost - Item Cost) | No |
Subledger Entries for Value Adjustment Type
The following table shows the distribution for Actual Cost Adjustment with the Value Adjustment type:
| Account Title | Debit | Credit | Maintain Quantity |
|---|---|---|---|
| INV | Adjustment Value | Yes | |
| CAD | Adjustment Value | No |
Subledger Entries for Unit Cost Adjustment Type
The following table shows the distribution for Actual Cost Adjustment with the Unit Cost Adjustment type:
| Account Title | Debit | Credit | Maintain Quantity |
|---|---|---|---|
| INV | Actual Cost Calculation Quantity * Unit Cost Adjustment | ||
| CAD | Actual Cost Calculation Quantity * Unit Cost Adjustment |
There are several stages in a production cycle; Batch Release, Step Completion, Batch Completion, and Batch Close. At each stage, different types of transactions are generated. This topic shows the event type and journal line types distribution templates used for each of these transactions.
Release represents the release of a production batch, the process in which the batch status is changed from Pending to WIP.
Note: The unrelease of a production batch is represented by the same event RELE with the debits and credits reversed. This process withdraws the batch from WIP and reinstates it as Pending.
Step is used for completing a routing step in a production batch. The resources used on the step are recorded with Routing.
Completion represents the certification of a production batch, the process of confirming an output and changing the status from WIP to Completed.
The Step and Completion are not the final reporting of usage and yield in a production batch. Even after these events occur, adjustments can still be made to ingredients, byproducts, coproducts, and product quantities. The same is the case with resource count and resource usage of production routing. The adjustments made after Step and Completion, but before the batch close, are reported as additional entries to Step and Completion at the time they occur.
Close represents the final close of a production batch indicating that all transactions have been completed. This prevents any further transactions against the closed batch and the status is changed to Close.
At each event, distributions are created for each of the ingredients, products, byproducts, and coproducts. Every activity line with Routing within an operation step has its own distribution as well.
Distributions for items that are non-stockable and non-transactable will not appear in the accounting entries in OPM.
When calculating variances at batch close, the system compares the actual amounts to the cost formula scaled amounts. The variances are only calculated for batches in legal entities using standard costs, which requires that a Cost Rollup process was performed. These variances measure differences between the actual production reported and a legal entity’s cost standard for that production.
The actual amount is derived from the actual usage of ingredients, byproducts, products, and coproduct quantities in batch records. However, the actual amounts are not compared to planned quantities in batch records, but to cost formula scaled quantities for financial variance calculations.
To determine the cost formula scaled quantity, the system finds the cost formula used to rollup the cost of the primary product. The system determines the scaling factor by comparing the planned or actual output based on a profile. After the scaling factor is determined, all ingredients, byproducts, and coproducts are scaled appropriately depending on their scale type.
However, if any ingredients, byproducts, or coproducts are not scaled proportionally, then a different method is used. First, all quantities are converted to the yield type standard unit of measure. Next, the product quantity in the batch is compared with the cost formula to determine the scaling factor. Finally, the ingredients, byproducts, and coproducts are scaled proportionally. These cost formula scaled quantities are used for variance calculations. See: Oracle Process Manufacturing Product Development User’s Guide for details on scaling functionality.
Each legal entity has a corresponding fiscal policy in OPM. Within that fiscal policy record, you can define the Cost Type to be used for building account distributions. Whether the specified cost method is a standard cost, an actual cost, or a lot cost type changes how the production event distributions are generated.
The accounting journal entries for Process Execution consists of the following variance types:
Scale the costing formula to planned quantity of the primary product in the batch and compare with the actual batch (hereafter referred to as Scale to Plan)
The accounting process uses this method to calculate variances. This is the existing method.
Scale the costing formula to actual quantity of the primary product in the batch and compare with the actual batch (hereafter referred to as Scale to Actual)
This method is similar to the Scale to Plan except for the costing formula scaling. The costing formula is scaled to the actual output of the primary product in the batch. As a result, there are no yield or usage variances for the primary product.
Use the aggregate type variances (hereafter referred to as Aggregate)
Two profile options, GMF: Subledger Variance Type for Production Bookings and GMF: Log All Subledger Variances to a Separate Table, are added to calculate production variances using the three variance types or log all variances to a separate table.
GMF: Subledger Variance Type: This profile option contains the variance type which the subledger process uses to calculate and post variances for the production transactions. Specify any of the listed variance types as a value. The valid values are, Scale to Plan, Scale to Actual, or Aggregate. The default value is Scale to Plan.
GMF: Log All Subledger Variances: This profile option calculates variances for all of the above variance types and stores them in a separate table for analysis. If this profile value is set to Yes, then the subledger process calculates variances for all of the three variance types and stores them in a separate table. If the profile value is set to No, then the subledger variances are not logged to the separate table. The default value is No.
The subsequent paragraphs provide an example of the Scale to Plan and Scale to Actual variance types.
Example:
This example describes how using the same formula and same batch yields you can achieve different results when using two variance types.
Consider that you are creating product A that consists of ingredients B and C. The costing formula for making Product A with ingredients B and C is:
100 (A) = 50 (B) + 50 (C) Costing formula
Create a planned batch for 1000 quantity for product A with 500 quantity of ingredients B and C.
1000 (A) = 500 (B) + 500 (C) Planned batch
The actual output of Product A is 900 with 450 quantity usage of ingredients B and C.
900 (A) = 450 (B) + 450 (C) Actual batch
In the case of Scaled to Plan variance type, the costing formula is scaled to the planned quantity of the primary batch and compared with the actual batch. The resulting variance is calculated as follows for this example:
Scaled Costing Formula = 1000 (A) = 500 (B) + 500 (C)
Yield Variance = (1000 - 900) x Product Cost (A)
Usage Variance = (500 - 450) x Ingredient Cost (B)
Usage Variance = (500 - 450) x Ingredient Cost (C)
In the case of Scaled to Actual variance type, the costing formula is scaled to the actual quantity of the primary batch and compared with the actual batch. Since the costing formula is scaled to actual batch and compared with the actual batch, there is no yield variance or usage variance for both product and ingredients.
The subsequent paragraphs describe the subledger postings for the Scale to Plan and Scale to Actual variance types. The subledger posting for Aggregate variance type is explained later in this topic.
In Process Execution, when a lab batch is created you can specify whether to update inventory by checking the Update Inventory box. If you do not check this box, then the work-in-process organization is set to null. In this case, no inventory transactions are created and the subledger process ignores these batches. As a result, the variances are not calculated.
You can override the planned process loss at the validity rule level. The planned process loss value is taken from the validity rule, if available. Otherwise, it is calculated from the recipe along with the theoretical loss table for the validity rule standard quantity. The Accounting process considers the planned process loss override during variance calculations.
Batch Release
Several transactions can occur within this event. These transactions include:
Release production batches
Adjustments to released quantities
Unrelease production batches
The unrelease process creates a reverse entry. Debits become credits and credits become debits, using the same template.
The following table provides the distribution for production batch release without routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Actual Ingredient Input Qty x WIP Warehouse Item Material Cost + WIP Warehouse Item Burden Cost] | |
| RCA | [Actual Ingredient Input Qty x (WIP Warehouse Item Resource Cost + WIP Warehouse Item StandardCost Adjustment Cost)] |
Batch Completion
Within OPM production batches, several inventory transactions can occur during and after a batch completion. These transactions include:
Completing production batch on the material side
Adjustment to quantities consumed and yielded which are ingredients, byproduct, and coproducts
The following table provides the distribution for production batch certification without Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Product Output Qty x Item Total Cost] | |
| WIP | Actual Product | Actual Product Output Qty x [Item Lower Level Costs + Item This Level Material Cost] |
| OVH | Actual Product Output Qty x Item This Level Overhead Cost | |
| RCA | [Actual Product Output Qty x (WIP Warehouse Item Resource Cost + WIP Warehouse Item Standard Cost Adjustment Cost)] |
Batch Completion journal entries are posted for products, coproducts, and byproducts only.
Batch Close
After a production batch is closed, variances are calculated and reported in the journal entries if standard costing is used. These variances include:
Usage Variance (USG)
Substitution Variance (SUB)
Yield Variance (YLD)
Closing Variance (CLS)
The Actual Total Product Output Quantity is calculated as the sum of the yield of all products, byproducts, and coproducts.
In some cases, there can be a batch close variance if ingredient consumptions and product yields are recorded in a period, and in the next period the ingredient, resource, or byproduct consumptions for these batches are updated without any further product yields.
Usage Variance
When the Actual Ingredient Input quantity is greater than the Cost Formula Scaled Ingredient Input.
If the quantity difference is negative, then the template is reversed. The debits become credits and the credits shown below become debits.
The following table provides the distribution for production batch close usage variance without Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| USG | [(Actual Ingredient Input Qty - Cost Formula Scaled Ingredient Input Qty) x Batch Organization Total Item Cost] | |
| WIP | [(Actual Ingredient Input Qty - Cost Formula Scaled Ingredient Input Qty) x Batch Organization Total Item Cost] |
Substitution Variance
When different ingredients not on the cost formula are added to a batch, the following journal entries are posted.
The following table provides the distribution for production batch close substitution variance when different ingredients (not on the cost formula) are added to a batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| SUB | [Actual Substituted Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Actual Substituted Ingredient Input Qty x Batch Organization Total Item Cost] |
The following table provides the distribution for production batch close substitution variance when cost formula ingredients are missing from a batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| SUB | [Missing Cost Formula Scaled Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Missing Cost Formula Scaled Ingredient Input Qty x Batch Organization Total Item Cost] |
Yield Variance
The following table provides the distribution for production batch close substitution variance when the quantity yielded is different from the cost formula scaled amount:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Total Item Cost] | |
| WIP | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Item Material Cost + Lower Level Costs + This Level Standard Adjustment Cost] | |
| RUV | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x (Batch Organization Item Resource Cost + This Level Resource Component Cost)] | |
| OVH | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x This Level Overhead Component Cost |
The following table provides the distribution for production batch variance when products, coproducts, or byproducts are added to a batch that are not on formula:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [Actual Product Output Qty x Batch Organization Total Item Cost] | |
| WIP | [(Actual Product Output Qty + This Level Standard Adjustment x Batch Organization Item Material Cost + Item Lower Level Cost] | |
| RUV | [(Actual Product Output Qty x (WIP Organization Item Resource Cost + This Level Resource Cost)] | |
| OVH | [(Actual Product Output Qty x (This Level Overhead Component Cost)] |
The following table provides the distribution for production batch close substitution variance when the cost formula product, coproducts, or byproducts are missing from the batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Total Item Cost] | |
| WIP | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Item Material Cost + Lower Level Costs + This Level Standard Adjustment Cost] | |
| RUV | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x (Batch Organization Item Resource Cost + This Level Resource Component Cost)] |
Closing Variance
The following table provides the distribution for production batch close closing variance without Process Operation Control using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | Amount to clear out the WIP generated by all the transactions in Release and Completion events | |
| CLS | Offset to WIP entry |
There are reasons why an amount remains in WIP and is posted to the CLS variance. One of the typical reasons for getting a non-zero Close Variance is that the batch was released in one cost period when the debit to WIP would be valued at one cost, but the batch was completed in a later cost period when the credit to WIP for the same quantities would be at a different value. So there is a remaining balance in WIP that is entirely due to cost change but that needs to be cleared out.
Batch Release with POC
Within process manufacturing production batches, several transactions can occur during a batch release step:
Release production batch
Adjustment to quantities released
Unrelease production batch
The unrelease process creates an opposite entry. Debits become credits and credits become debits, using the same template.
For a batch release process, when Process Operation Control is enabled the postings are different. There is no posting to RCA because this is now done for each STEP process and the posting to WIP is at the total of material and resource cost elements.
The following table provides the distribution for production batch release with Process Operation Control using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Actual Ingredient Input Qty x WIP Warehouse Item Material Cost + WIP Warehouse Item Resource Cost +WIP Warehouse Item Burden Cost] | |
| RCA | [Actual Ingredient Input Qty x (WIP Warehouse Item Standard Cost Adjustment Cost)] |
Batch Completion with Routing
Within Process Manufacturing production batches, various inventory transactions can occur during and after a batch is completed:
Production batch completion on the material side
Adjustment to quantities consumed and yielded which are ingredients, byproduct, coproducts
The Actual Product Output Quantity is calculated as the sum of the yield of all products, byproducts, and coproducts.
For the certify process, the postings are slightly different when Process Operation Control is enabled. There is no posting to RCA because it is done for each STEP process. The posting to WIP is calculated as the total of material and resource cost elements.
The following table provides the distribution for production batch completion with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Product Output Qty x Item Total Cost] | |
| WIP | [Actual Product Output Qty x WIP Warehouse Item Material Cost + WIP Warehouse Lower level Item Burden Cost] | |
| OVH | [Actual Product Output Qty x WIP Warehouse This Level Burden Cost Component] | |
| RCA | [Actual Product Output Qty x (WIP Warehouse Item Standard Cost Adjustment Cost)] |
Step Completion with Routing
Within Process Manufacturing production batches, several transactions related to resource consumption can occur during and after the Completion phase:
Complete production batch step on the resource side
Adjustment to quantities consumed and yielded on the resource side
The following table provides the distribution for production step completion with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | [Actual Total Resource Usage x Resource Cost] | |
| RCA | [Actual Total Resource Usage x Resource Cost] |
If the batch has step dependent release of ingredients, the application also creates entries to the INV, WIP, (for the ingredients) and IVV accounts. These entries will appear as RELE entries.
Batch Close with Routing
After a production batch is closed, variances are calculated and reported through journal entries if standard cost is used:
Usage Variance (USG)
Substitution Variance (SUB)
Yield Variance (YLD)
Closing Variance (CLS)
The following three additional variances are calculated when Process Operation Control is used:
Resource Usage or Efficiency Variance (RUV)
Resource Substitution or Method Variance (RSV)
Resource Manning Variance (RMV)
The Actual Product Output Quantity is calculated as the sum of the yield of all products, byproducts, and coproducts.
Usage Variance
When the actual ingredient input quantity is greater than the cost formula scaled ingredient input:
The following table provides the distribution for production batch close usage variance with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| USG | [(Actual Ingredient Input Qty - Cost Formula Scaled Ingredient Input Qty) x Batch Organization Total Item Cost] | |
| WIP | [(Actual Ingredient Input Quantity - Cost Formula Scaled Ingredient Input Qty) x (Batch Organization Item This Level Material Cost + Batch Organization This Level Item Resource Cost + Item Lower Level Cost] | |
| OVH | [(Actual Ingredient Input Quantity - Cost Formula Scaled Ingredient Input Qty) x (Batch Organization Item This Level Overhead Cost)] | |
| RCA | [(Actual Ingredient Input Quantity - Cost Formula Scaled Ingredient Input Qty) x (This Level Standard Cost Adjustment)] |
If the quantity difference is negative, then the postings are reversed. Debits become credits and credits become debits.
Substitution Variance
The following table provides the distribution for production batch close substitution variance when different ingredients not on the cost formula are added to a batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| SUB | [Actual Substituted Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Actual Substituted Ingredient Input Qty x (Batch Organization Item This Level Material Cost + WIP Organization Item This Level Resource Cost)] | |
| RUV | [Actual Substituted Ingredient Input Qty x (Organization Item This Level Standard Cost Adjustment)] | |
| OVH | [Actual Substituted Ingredient Input Qty x This Level Overhead Component Cost] |
The following table provides the distribution for production batch close substitution variance when the cost formula ingredients are missing from the batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| SUB | [Missing Cost Formula Scaled Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Missing Cost Formula Scaled Ingredient Input Qty x (Batch Organization Item This Level Material Cost + Organization Item This Level Resource Cost + Item Lower Level Cost)] | |
| RCA | [Missing Cost Formula Scaled Ingredient Input Qty x (Organization Item This Level Standard Cost Adjustment)] | |
| OVH | [Missing Cost Formula Scaled Ingredient Input Qty x Item This Level Overhead Cost] |
Yield Variance
The following table provides the distribution for production batch close yield variance when the quantity yielded is different from the cost formula scaled amount:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Total Item Cost] | |
| WIP | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Item This Level Material Cost + Lower Level Cost] | |
| OVH | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x Batch Organization Item This Level Material Cost + Lower Level Cost + Item This Level Overhead Cost] | |
| RUV | [(Actual Product Output Qty - Cost Formula Scaled Product Qty) x (Organization Item This Level Resource Cost + Organization Item This Level Standard Cost Adjustment)] |
The following table provides the distribution for production batch yield variance when different products, coproducts, or byproducts are added to a batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [Actual Product Output Qty x Batch Organization Total Item Cost] | |
| WIP | [Actual Product Output Qty x Batch Organization Item This Level Material Cost + Lower Level Cost] | |
| RUV | [(Actual Product Output Qty x (Organization Item This Level Resource Cost + Organization Item This Level Standard Cost Adjustment)] | |
| OVH | [(Actual Product Output Qty x (Organization Item This Level Resource Cost + Organization Item This Level Overhead Cost)] |
The following table provides the distribution for production batch close substitution variance when the cost formula product, coproducts, or byproducts are missing from the batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [Cost Formula Scaled Product Qty x Batch Organization Total Item Cost] | |
| WIP | [Cost Formula Scaled Product Qty x Organization Item This Level Material Cost + Lower Level Cost] | |
| RUV | [Cost Formula Scaled Product Qty x (Organization Item This Level Resource Cost + Organization Item This Level Standard Cost Adjustment)] | |
| OVH | [Cost Formula Scaled Product Qty x (Organization Item This Level Resource Cost + Organization Item This Level Overhead Cost)] |
Resource Usage or Efficiency Variance
The following table provides the distribution for production batch close resource usage or efficiency variance when the cost formula products, coproducts, or byproducts are missing from the batch:
| Journal Line Type | Debit | Credit |
|---|---|---|
| RUV | [(Actual Total Resource Usage - (Actual Resource Count x Cost Formula Activity Factor x Cost Formula Scaled Resource Usage)) x Resource Cost] | |
| WIP | [(Actual Total Resource Usage - (Actual Resource Count x Cost Formula Activity Factor x Cost Formula Scaled Resource Usage)) x Resource Cost] |
Resource Substitution Variance
The following table provides the distribution for production batch close resource substitution variance when new resources are added to the batch routing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| RSV | [Substitute Resource Total Resource Usage x Resource Cost] | |
| WIP | [Substitute Resource Total Resource Usage x Resource Cost] |
The following table provides the distribution for production batch close resource substitution or method variance when the resources on the cost formula are not in the batch routing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| RSV | [(Cost Formula Count x Cost Formula Activity Factor x Cost Formula Scaled Resource Usage) x Resource Cost] | |
| WIP | [(Cost Formula Count x Cost Formula Activity Factor x Cost Formula Scaled Resource Usage) x Resource Cost] |
Resource Manning Variance
The following table provides the distribution for production batch close resource manning variance:
| Journal Line Type | Debit | Credit |
|---|---|---|
| RMV | [(Actual Resource Count - Cost Formula Resource Count) x Cost Formula Scaled Resource Usage x Activity Factor x Resource Cost] | |
| WIP | [(Actual Resource Count - Cost Formula Resource Count) x Cost Formula Scaled Resource Usage x Activity Factor x Resource Cost] |
Closing Variance
The following table provides the distribution for production batch close closing variance with Process Operation Control using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | Amount to clear out the WIP generated by all the transactions in Release, Certification, Step and Close events | |
| CLS | Offset to WIP entry |
One of the typical reasons for getting a non-zero Close Variance is that the batch was Released in one cost period when the debit to WIP would be valued at one cost, but the batch was Completed in a later cost period when the credit to WIP for the same quantities would be at a different value. So you have a balance left in WIP that is entirely due to cost change but that needs to be cleared out.
This method calculates the Aggregate type variances. The aggregate type variances are applicable to certain industries that might need the average unit cost of Ingredients or Products used in variance computations. These industries could also have substandard product items (SSP items) and want to record the usage of these items in producing a batch. This allows variances to be considered on a per unit of products yielded regardless of individual products.
The Aggregate method initiates the following types of variances calculation.
Evolution Variance (ECO)
Evolution Variance is the difference between the actual costing formula and the planned formula. This variance considers changes to ingredients, batch size, routing, operation, activity factor, charges, and step quantities.
The following table provides the distribution for production batch close with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ECO | (Planned Product Cost per Unit - Standard Product Cost per Unit) x Total Actual Product Qty | |
| WIP | (Planned Product Cost per Unit - Standard Product Cost per Unit) x Total Actual Product Qty |
The subsequent paragraphs describe the details of the calculations.
Planned Product Cost per Unit The planned product cost is calculated as:
Planned Product Cost per Unit = (Planned Material Cost per Unit + Planned Conversion Cost per Unit)
The following paragraphs describe how the planned material cost and conversion costs per unit are calculated:
Planned Material Cost per Unit = (Total Planned Regular Ingredient Amount - Total Planned Byproduct Amount) x (Total Planned Regular Ingredient Qty / Total Planned Yield Qty)) / Planned Standard Size
Planned Conversion Cost per Unit = (Total Planned Conversion Cost / Planned Batch Size) x (Total Planned Regular Ingredient Qty / Total Planned Yield Qty)
Standard Product Cost per Unit
The standard product cost is calculated as:
Standard Product Cost per Unit = (Standard Material Cost per Unit + Standard Conversion Cost per Unit)
The following paragraphs describe how the standard material cost and conversion costs per unit are calculated:
Standard Material Cost per Unit = (Total Standard Regular Ingredient Amount - Total Standard Byproduct Amount) x (Total Standard Regular Ingredient Qty / Total Standard Yield Qty)) / Standard Batch Size
Standard Conversion Cost per Unit = (Total Standard Conversion Cost / Standard Batch Size) x (Total Standard Regular Ingredient Qty / Total Standard Yield Qty)
Total Actual Product Quantity
The total actual product quantity is calculated as:
Total Actual Product Quantity = Total Actual Regular Ingredient Qty - Total Actual Byproduct Qty - (Total Actual Regular Ingredient Qty x Actual Process Loss)
Gain on Usage Variance (GOU)
Occasionally, materials loose their financial value over a period of time. When such materials are used in production, you have a gain. This gain is posted as the gain on usage variance. The amount of gain is the difference between the cost of devalued material and the cost of the same material if obtained at the time of batch consumption.
The following table provides the distribution for production batch close with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| GOU | (Total Planned SSP Item Amount - Total Actual SSP Item Amount) x Total Actual SSP Item Qty | |
| WIP | (Total Planned SSP Ingredient Amount - Total Actual SSP Ingredient Amount) x Total Actual SSP Ingredient Qty |
The substandard product (SSP) items are set up as new item category set in the Oracle Process Manufacturing Inventory Management application.
The byproducts are ignored.
The subsequent paragraphs describe the details of the calculations.
Total Planned SSP Item Amount
The total planned SSP Item amount is calculated as:
Total Planned SSP Item Amount = (Total Planned SSP Item Amount + Total Planned SSP Item Qty) / Total Planned SSP Item Qty
Total Actual SSP Item Amount
The total actual SSP Item amount is calculated as:
Total Actual SSP Item Amount = Total Actual SSP Item Amount / Total Actual SSP Item Qty
Substitution Usage Variance (SUB)
Substitution Usage Variance is the difference between the cost of planned ingredients and the cost of actual ingredients used in a batch. When ingredient cost is calculated, the substandard product item is valued at the regular ingredient cost. This is because the gain of SSP material usage is already recorded as the Gain on Usage variance.
The following table provides the distribution for production batch close with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| SUB | (Actual Ingredient Cost per Unit- Planned Ingredient Cost per Unit) x Actual Net Ingredient Quantity | |
| WIP | (Actual Ingredient Cost per Unit- Planned Ingredient Cost per Unit) x Actual Net Ingredient Quantity |
The subsequent paragraphs describe the details of the calculations.
Actual Ingredient Cost per Unit
The actual ingredient cost per unit is calculated as:
Actual Ingredient Cost per Unit = Total Actual Regular Ingredient Amount / ((Total Actual Regular Ingredient Qty + Total Actual SSP Item Qty) - Total Actual Byproduct Qty)
The following paragraphs describe how the total actual regular ingredient amount and cost are calculated:
Total Actual Ingredient Total Amount = ((Actual Regular Ingredient Cost) x Total Actual SSP Item Qty) + Total Actual Regular Ingredient Amount - Total Actual Byproduct
Amount Total Actual Regular Ingredient Cost = (Total Actual Regular Ingredient Amount - Total Actual By product Amount) / (Total Actual Regular Ingredient Qty - Total Actual Byproduct Qty)
Planned Ingredient Cost per Unit
The planned ingredient cost per unit is calculated as:
Planned Ingredient Cost per Unit = Total Planned Regular Ingredient Amount / ((Total Planned Regular Ingredient Qty + Total Planned SSP Item Qty) - Total Planned Byproduct Qty)
The following paragraphs describe how the total planned regular ingredient amount and cost are calculated:
Total Planned Ingredient Total Amount = ((Planned Regular Ingredient Cost) x Total Planned SSP Item Qty) + Total Planned Regular Ingredient Amount - Total Planned Byproduct Amount
Total Planned Regular Ingredient Cost = (Total Planned Regular Ingredient Amount - Total Planned Byproduct Amount) / (Total Planned Regular Ingredient Qty - Total Planned Byproduct Qty)
Net Ingredient Qty
The net ingredient quantity is calculated as:
Net Ingredient Qty = Total Actual Regular Ingredient Qty + Total Actual SSP Item Qty - Total Actual Byproduct Qty
Yield Variance (YLD)
Yield Variance is the difference between the cost of planned ingredients and the actual output.
The following table provides the distribution for production batch close with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| YLD | [{Total Actual Input Qty - (Total Actual Input Qty x Planned Process Loss)} - Total Actual Output Qty] x Average Planned Ingredient Cost | |
| WIP | [{Total Actual Input Qty - (Total Actual Input Qty x Planned Process Loss)} - Total Actual Output Qty] x Average Planned Ingredient Cost |
The subsequent paragraphs describe the details of the calculations.
Total Actual Input Qty
The total actual input quantity is calculated as:
Total Actual Input Qty = Total Actual Regular Ingredient Qty + Total Actual SSP Item Qty - Total Actual Byproduct Qty
Planned Process Loss
The planned process loss is calculated as: Planned Process Loss = (Total Planned Input Qty - Total Planned Output Qty) / Total Planned Input Qty
The following paragraphs describe how the total planned input and output quantities are calculated:
Total Planned Input Qty = Total Planned Regular Ingredient Qty + Total Planned SSP Item Qty - Total Planned Byproduct Qty
Total Planned Output Qty is the total of planned output quantity for all the products
Total Actual Output Qty
The total actual output quantity is calculated as:
Total Planned Output Qty is the total of planned output quantity for all the products
Average Planned Ingredient Cost
The average planned ingredient cost is calculated as:
Average Planned Ingredient Cost = Total Planned Regular Ingredient Amount / ((Total Planned Regular Ingredient Qty + Total Planned SSP Item Qty) - Total Planned Byproduct Qty)
Batch Size Variance (RUV)
Batch Size Variance captures the difference in resource usages by comparing the actual conversion cost at actual batch size with the planned batch size.
The following table provides the distribution for production batch close with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| RUV | [(Actual Conversion Cost per Unit at Actual Batch Size - Actual Conversion Cost per Unit at Planned Batch Size) x Total Actual Product Qty] | |
| WIP | [(Actual Conversion Cost per Unit at Actual Batch Size - Actual Conversion Cost per Unit at Planned Batch Size) x Total Actual Product Qty] |
The subsequent paragraphs describe the details of the calculations.
Actual Conversion Cost per Unit at Actual Batch Size
The actual conversion cost per unit at the actual batch size is calculated as:
Actual Conversion Cost per Unit = Total Actual Conversion Amount / Total Actual Output Qty
Actual Conversion Cost per Unit at Planned Batch Size
The actual conversion cost per unit at the planned batch size is calculated as:
Actual Conversion Cost per Unit = Total Planned Conversion Cost / Total Actual Output Qty
Nonstandard Routing Variance (RSV)
The Nonstandard Routing Variance captures the substitution of resources by comparing the actual conversion cost at the actual batch size and planned conversion cost at the actual batch size.
The following table provides the distribution for production batch close with Routing using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| RSV | [(Actual Conversion Cost per Unit - Planned Conversion Cost per Unit) x Total Actual Product Qty] - RUV | |
| WIP | [(Actual Conversion Cost per Unit - Planned Conversion Cost per Unit) x Total Actual Product Qty] - RUV |
The subsequent paragraphs describe the details of the calculations.
Actual Conversion Cost per Unit
The actual conversion cost per unit at the actual batch size is calculated as:
Actual Conversion Cost per Unit = Total Actual Conversion Amount / Total Actual Output Qty
Planned Conversion Cost per Unit
The planned conversion cost per unit at the actual batch size is calculated as:
Planned Conversion Cost per Unit = Total Planned Conversion Cost / Total Actual Output Qty
Batch Variance Rounding (CLS)
The following table provides the distribution for production batch close closing variance with Process Operation Control using standard costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | Amount to clear out the WIP generated by all the transactions in Release, Certification, Step, and Close events. | |
| CLS | Offset to WIP entry. |
One of the typical reasons for getting a non-zero Close Variance is that the batch was released in one cost period when the debit to WIP is valued at one cost. The batch was completed in a later cost period when the credit to WIP for the same quantities is at a different value. As a result, you have a balance left in WIP that is entirely due to a cost change but it needs to be cleared out.
Within OPM production batches, several transactions can occur during a batch release:
Production batch release
Adjustment to quantities released
Production batch unrelease
The unrelease process creates an opposite entry. Debits become credits and credits become debits, using the same template.
The following table provides the distribution for production batch releases without Routing using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Ingredient Input Qty x Batch Organization Total Item Cost] | |
| WIP | [Actual Ingredient Input Qty x (Organization Item Total Material Cost)] |
Batch Completion
Within OPM production batches, inventory transactions occur during and after a batch is certified:
Completion of production batch on the material side
Adjustment to quantities consumed and yielded which are ingredients, byproduct, and coproducts
The Actual Product Output Quantity is calculated as the sum of the yield of all products, byproducts, and coproducts.
The following table provides the distribution for production batch completion without Routing using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Product Output Qty x Organization Total Item Cost] | |
| WIP | [Actual Product Output Qty x (Organization Item Material Cost + Ingredient Cost + Organization Item Resource Cost)] | |
| RCA | [Actual Product Output Qty x (Organization Item Material Cost + Ingredient Cost + Organization Item Resource Cost)] | |
| OVH | [Actual Product Output Qty x (Organization Item Overhead Cost)] | |
| ALC | [Actual Product Output Qty x (Organization Item GL Allocation Cost)] |
Batch Close
When a production batch is closed, no detailed variances are calculated for companies using actual costing. The remaining WIP amount is cleared and posted as the CLS account, Closing Variance (CLS).
Closing Variance
The following table provides the distribution for production batch close closing variance without Process Operation Control using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | Amount to clear out the WIP generated by all the transactions in Release and Certification events | |
| CLS | Offset to WIP entry |
There are reasons why amounts are posted to the close variance:
You can get a non-zero close variance if the batch was released in one cost period and the debit to WIP is valued at one cost, but the batch was completed in a later cost period when the credit to WIP for the same quantities is valued at a different cost. This results in a left over balance WIP due to the cost change and must be cleared out.
If you book batches using average cost with PWAC, then batches will have either a positive or a negative difference. During the period, they balance each other out.
If you select an average actual costing with PMAC, then the costs include period ending balance which results in a variance.
Batch Release with Routing
Within OPM production batches, transactions can occur during a batch release:
Release production batch
Adjustment to quantities released
Unrelease production batch
Adjustment to quantities released Unrelease production batch The unrelease process creates an opposite entry. Debits become credits and credits become debits, using the same template.
For the release process, the postings are slightly different when Process Operation Control is enabled. There is no posting to RCA because it is done for each STEP process. The posting to WIP is calculated at the total of material and resource cost elements.
The following table provides the distribution for production batch release with Routing using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Ingredient Input Qty x Organization Total Item Cost] | |
| WIP | [Actual Ingredient Input Qty x (Organization Item Total Material Cost)] |
Batch Completion with Routing
Within OPM production batches, inventory transactions can occur during and after a batch is certified:
Completion of production batch on the material side
Adjustment to quantities consumed and yielded which are ingredients, byproduct, coproducts
For the certify process, the postings are slightly different when Routing is enabled. There is no posting to RCA because it is done for each STEP process. The posting to WIP is calculated at the total of material and resource cost elements.
The Actual Product Output Quantity is calculated as the sum of the yield of all products, byproducts, and coproducts.
The following table provides the distribution for production batch completion with Routing using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Actual Product Output Qty x Organization Total Item Cost] | |
| WIP | [Actual Product Output Qty x (Organization Item Material Cost + Organization Item Resource Cost)] | |
| OVH | [Actual Product Output Qty x (Organization Item Overhead Cost)] | |
| ALC | [Actual Product Output Qty x (Organization Item GL Allocation Cost)] |
Step Certification with POC
Within OPM production batches, several transactions related to resource consumption can occur during and after the certification phase:
Step completion of production batch on the resource side
Adjustment to quantities consumed and yielded on the resource side
The following table provides the distribution for production step certification with Routing using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | [Actual Resource Count x Actual Resource Usage x Resource Cost] | |
| RCA | [Actual Resource Count x Actual Resource Usage x Resource Cost] |
If the batch has step dependent release of ingredients, the application also creates entries to the INV, WIP for the ingredients, and IVV accounts.
Batch Close with Routing
When a production batch is closed, variances are not calculated for Actual Costing companies. Any remaining WIP amount is cleared and posted to the CLS account: Closing Variance (CLS)
The following table provides the distribution for production batch close with Routing using actual costing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| WIP | Amount to clear out the WIP generated by all the transactions in Release and Certification events | |
| CLS | Offset to WIP entry |
There are three reasons why amounts are posted to the close variance:
You might get a non-zero close variance if the batch was released in one cost period and the debit to WIP is valued at one cost, but the batch was completed in a later cost period when the credit to WIP for the same quantities is valued at a different cost. This results in a left over balance WIP due to the cost change and must be cleared out.
If you book batches using average cost with PWAC, then batches will have either a positive or a negative difference. During the period, they balance each other out.
If you select an average actual costing with PMAC, then the costs include period ending balance which results in a variance.
For Order Management, accounts for revenue are done through AutoAccounting in Oracle Receivables since Invoicing is done in Oracle Receivables. Oracle Receivables builds the journal entries for Sales, Accounts Receivable, Tax, Discounts, Allowances, and Freight. SLA is responsible for posting journal entries for the inventory impact of the shipment. Similarly, returns, credit memos, and debit memos are processed through Oracle Receivables. SLA also reports the financial impact on inventory for returns affecting inventory balances.
Depending on your business needs, you may require deferred accounting rules, which you can create by selecting the Deferred Revenue check box during Accounting Rule definition in Oracle Receivables. Deferred accounting rules let you defer revenue to an unearned revenue account until you are ready to specify the revenue recognition schedule.
At the time of shipment with COGS (OPM):
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Shipment Qty x Source Organization Total Item Cost | |
| COGS | [Shipment Qty x Source Organization Total Item Cost] |
At the time of shipment with DCOGS (OPM):
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Shipment Qty x Source Organization Total Item Cost] | |
| DCOGS | [Shipment Qty x Source Organization Total Item Cost] |
Recent guidelines is to consider the contractual terms of the sale in deciding when and what part of the revenue related to a sale can be recognized in the books. The contract terms may include acceptance provisions, cancellation provisions, refund clauses, fiscal funding clauses, delivery clauses, and others. These are together called as contingencies that hold back revenue recognition. The key principle is that the revenue and expenses matching should only happen in the period in which the contingencies are removed and revenue is actually earned. Both the cost of sales and revenue are deferred until the revenue is actually earned.
The material at the customer site is still owned by the supplier and hence the supplier cannot recognize revenue and cost of sales. When customer consumes the material or transfers it to their inventory, then it is considered as removal of the contingency thereby releasing the hold on the revenue for the supplier.
You can run a set of concurrent processes to record sales order and revenue recognition transactions and to create and cost COGS recognition transactions. These COGS recognition transactions adjust deferred and earned COGS in an amount that synchronizes the percentage of earned COGS to earned revenue on sales order shipment lines. Run the following concurrent programs:
Record Order Management Transactions concurrent program that records new sales order transaction activity such as shipments and RMA returns in Oracle Order Management.
Revenue Recognition concurrent program determines the percentage of recognized or earned revenue related to invoiced sales order shipment lines in Oracle Receivables.
Generate COGS Recognition Events concurrent program creates and costs COGS recognition events for new sales order shipments/returns and changes in revenue recognition and credits for invoiced sales order shipment lines.
Refer to the Oracle Receivables User's Guide for more information on the concurrent programs.
The following are the changes to the accounting entries created at various stages.
At the time of shipment [OPM]
| Journal Line Type | Debit | Credit |
|---|---|---|
| Deferred COGS | Transaction Qty x Item Cost | |
| INV | Transaction Qty x Item Cost |
When customer is billed for the entire quantity (distribution created in AR and not in OPM)
| Journal Line Type | Debit | Credit |
|---|---|---|
| Receivables | Transaction Qty x Item Sale Price | |
| Deferred Revenue | Transaction Qty x Item Sale Price |
When a portion of revenue is recognized a revenue recognition event is created using the Revenue Accounting Module in AR.
Accounting entry in AR
| Journal Line Type | Debit | Credit |
|---|---|---|
| Deferred Revenue | Transaction Qty x Item Sale Price x Recognition % | |
| Revenue | Transaction Qty x Item Sale Price x RMA Qty x Item Cost x Recognized % |
An additional entry is also created OPM to reflect the earned revenue.
| Journal Line Type | Debit | Credit |
|---|---|---|
| COGS | Transaction Qty x Item Cost x Recognition % | |
| Deferred COGS | Transaction Qty x Item Cost x RMA Qty x Item Cost x Recognized % |
Before any revenue recognition
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | RMA Qty x Item Cost | |
| DCOGS | RMA Qty x Item Cost |
After a portion of revenue is recognized
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | RMA Qty x Item Cost | |
| COGS | RMA Qty x Item Cost x Recognized % | |
| DCOGS | RMA Qty x Item Cost x Recognized % |
These orders represent a shipment in Order Management with a corresponding receipt raised in Oracle Receivables to record the transfer of items from one organization to another. The transfer can either be Direct or Intransit. When an intransit transfer is shipped, the inventory is held in an intransit account until the goods are received.
The Accounting process considers interorganization transfer charges when booking internal order shipments. Transfer credit is defined in the Inventory Shipping Network as a percentage which is applied to the cost of the shipped quantity. The Accounting process books this value under XFC (transfer credit in internal orders) while posting Oracle Order Management and Oracle Purchasing entries in OPM. Only a predefined percentage (a predefined percentage of the sending organization's cost) is supported for internal orders. If the predefined percentage is set up in the shipping networks, then the Accounting process uses it to calculate transfer credits.
If the INV: Intercompany Invoice for Internal Orders profile option is set to No, then the entries are booked as uninvoiced internal orders.
Internal Orders - Direct Transfer with Order Management
The following table shows the distribution for direct internal orders when the accounting process is run after the order has shipped:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Shipment Qty x Ship Organization Item Cost] | |
| IOR | [Shipment Qty x Ship Organization Item Cost] |
Internal Orders - Direct with Purchasing
The following table provides the distribution for direct internal orders when the item is received and the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Receipt Qty x Receive Organization Item Cost] | |
| IOP | [Receipt Qty x Ship Organization Item Cost converted to Receive Organization Currency] | |
| PPV | [Receipt Qty x (Ship Organization Item Cost - Receive Organization Item Cost)] |
Internal Orders - Intransit Transfer
FOB Receiving
Shipping Organization to Intransit Inventory (Uninvoiced) The FOB point is established between the from and to organizations in the Inventory Shipping Network window. FOB point determines the owner of the intransit inventory and the transport, and transfer expenses.
The bookings are posted for the Shipping legal entity.
The following table provides the distribution for internal orders with intransit inventory when the accounting process is run for Order Management after shipment of the material:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Shipment Qty x Ship Organization Item Cost] | |
| ITR | [Shipment Qty x Ship Organization Item Cost] |
Intransit Inventory to Receiving (Uninvoiced)
The bookings are posted for the Shipping legal entity.
The following table provides the distribution for received intransit orders when the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| IOR | [Receipt Qty x Ship Organization Item Cost] + Transfer Credit | |
| ITR | [Receipt Qty x Ship Organization Item Cost] | |
| XFC | Transfer Credit |
Intransit Inventory to Receiving Organization (Uninvoiced)
The bookings are posted for the Receiving legal entity.
The following table provides the distribution for received intransit orders when the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Receipt Qty x Receive Organization Item Cost] | |
| IOP | [Receipt Qty x Ship Organization Item Cost converted to Receive Organization Currency] + Transfer Credit | |
| PPV | [Receipt Qty x (Ship Organization Item Cost Converted to Receive Organization Currency- Receive Organization Item Cost)] - Transfer Credit |
FOB Shipping
Shipping Organization to Intransit Inventory (Uninvoiced)
The bookings are posted for the Shipping legal entity.
The following table provides the distribution for shipped internal orders with intransit inventory when the accounting process is run for Order Management:
| Journal Line Type | Debit | Credit |
|---|---|---|
| IOR | [Shipment Qty x Ship Organization Item Cost] +Transfer Credit | |
| XFC | Transfer Credit | |
| INV | [Shipment Qty x Ship Organization Item Cost] |
Shipping to Intransit Inventory (Uninvoiced)
The bookings are posted for the Receiving legal entity.
The following table provides the distribution for shipped internal orders with intransit inventory when the accounting process is run for Order Management:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ITR | [Shipment Qty x Receive Organization Item Cost] | |
| IOP | [Shipment Qty x Ship Organization Item Cost] + Transfer Credit | |
| PPV | [Receipt Qty x (Receive Organization Item Cost - Ship Organization Item Cost converted to Receive Organization Currency)] - Transfer Credit |
Intransit Inventory to Receiving Organization (Uninvoiced)
The bookings are posted for the Receiving OPM Legal Entity.
The following table provides the distribution for received internal orders with intransit inventory when the subledger is run for the Purchasing entity:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Receipt Qty x Receive Item Cost] | |
| ITR | [Receipt Qty x Receive Organization Item Cost] |
The Intercompany Invoicing routines are modified to retrieve information on internal orders containing OPM items. Invoicing of internal orders is done only for those orders that cross operating units. The Accounting process books entries for internal orders differently when such orders are invoiced with invoicing between two different operating units. The subsequent topics describe the templates used for recording journal entries for invoiced internal orders. Refer to the Oracle Inventory User’s Guide for more details on Intercompany Invoicing functionality.
If the INV: Intercompany Invoice for Internal Orders profile option is set to Yes, then the entries are booked as invoiced internal orders.
The profile options, INV: Intercompany Invoice for Internal Orders and CST: Transfer Pricing Option, work closely with one another. If the INV: Intercompany Invoice for Internal Orders profile values is set to either Yes or No, and the CST: Transfer Price Option profile value is set to No, then the Accounting process books the entries as uninvoiced internal orders.
If the INV: Intercompany Invoice for Internal Orders profile values is set to Yes and the CST: Transfer Price Option profile value is set to Yes - price as not incoming cost, then the Accounting process books different entries along with the generated Profit in Inventory (PIN) account. If the INV: Intercompany Invoice for Internal Orders profile values is set to Yes and the CST: Transfer Price Option profile value is set to Yes - price as incoming cost, then the Accounting process books different entries and does not include the Profit in Inventory (PIN) account.
Invoiced Orders and FOB Receiving
Shipping Organization to Intransit Inventory (Invoiced)
The FOB point is established between the from and to organizations in the Inventory Shipping Network window. The FOB point determines the owner of the intransit inventory and the transport, and transfer expenses.
The bookings are posted for the Shipping OPM Legal Entity.
The following table provides the distribution for internal orders with intransit inventory when the subledger is run for Order Management after shipment of the material:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Shipment Qty x Ship Organization Item Cost] | |
| ITR | [Shipment Qty x Ship Organization Item Cost] |
Intransit Inventory to Receiving Organization (Invoiced)
The bookings are posted for the Shipping legal entity.
The following table provides the distribution for received intransit orders when the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| COGS | [Shipment Qty x Ship Organization Item Cost] | |
| ITR | [Shipment Qty x Ship Organization Item Cost] |
Intransit Inventory to Receiving Organization (Invoiced)
The bookings are posted for the Receiving legal entity.
The following table provides the distribution for received intransit orders when the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Receipt Qty x Receive Organization Item Cost] | |
| AAP | [Receipt Qty x Transfer Price] | |
| PPV | [Receipt Qty x (Receive Organization Item Cost - Ship Organization Item Cost)] | |
| PIN | Receipt Qty x [Transfer Price - Ship Organization Item Cost] |
Note: The profit in inventory (PIN) is booked only when the CST: Transfer Pricing Option profile option is set to price as not incoming.
The Transfer Price is referred to as the price that is charged by one part of a legal entity for products and services it provides to another part of the same legal entity, in order to calculate each division's profit and loss separately. To use the Advanced Pricing feature, set up the INV: Advanced Pricing for Inter Company Invoicing profile option to Yes. Refer to the Oracle Inventory User’s Guide, Oracle Order Management User’s Guide, and Oracle Advanced Pricing User’s Guide for more details on setting up the transfer pricing.
Intransit Inventory to Receiving Organization (Invoiced)
Note: Refer to this topic when the CST: Transfer Pricing Option profile option is set to price as incoming.
The bookings are posted for the Receiving OPM Legal Entity.
The following table provides the distribution for received intransit orders when the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Receipt Qty x Receive Organization Item Cost] | |
| AAP | [Receipt Qty x Transfer Price] | |
| PPV | [Receipt Qty x (Receive Organization Item Cost - Ship Organization Item Cost)] |
FOB Shipping
Shipping Organization to Intransit Inventory (Invoiced)
The bookings are posted for the Shipping legal entity.
The following table provides the distribution for shipped internal orders with intransit inventory when the accounting process is run for Order Management:
| Journal Line Type | Debit | Credit |
|---|---|---|
| COGS | [Shipment Qty x Ship Organization Item Cost] | |
| INV | [Shipment Qty x Ship Organization Item Cost] |
Shipping to Intransit Inventory (Invoiced)
Note: Refer to this topic when the CST: Transfer Pricing Option profile option is set to price as not incoming.
The bookings are posted for the Receiving legal entity.
The following table provides the distribution for shipped internal orders with intransit inventory when the accounting process is run for Order Management:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ITR | [Shipment Qty x Receive Organization Item Cost] | |
| IOP | [Shipment Qty x Transfer Price converted to Receive Organization Currency] | |
| PPV | [Shipment Qty x (Receive Organization Item Cost - Ship Organization Item Cost converted to Receive Organization Currency)] | |
| PIN | [Shipment Qty x (Transfer Price converted to Receive Organization Currency - Ship Organization Item Cost)] |
Note: The profit in inventory (PIN) is booked only when the CST: Transfer Pricing Option profile option is set to price as not incoming.
Shipping to Intransit Inventory (Invoiced)
Note: Refer to this topic when the CST: Transfer Pricing Option profile option is set to price as incoming.
The bookings are posted for the Receiving legal entity.
The following table provides the distribution for shipped internal orders with intransit inventory when the accounting process is run for Order Management:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ITR | [Shipment Qty x Receive Organization Item Cost] | |
| IOP | [Shipment Qty x Transfer Price] | |
| PPV | Shipment Qty x [Transfer Price - Receive Organization Item Cost] |
Intransit Inventory to Receiving Organization (Invoiced)
The bookings are posted for the Receiving legal entity.
The following table provides the distribution for received internal orders with intransit inventory when the accounting process is run for Purchasing:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | [Receipt Qty x Receive Organization Item Cost] | |
| ITR | [Receipt Qty x Receive Organization Item Cost] |
Purchase order receipts from Oracle Purchasing result in two accounting entries. The first entry records the receipt of goods into receiving inspection.
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Qty Received x PO price | |
| AAP | Qty Received x PO Price |
For returns and corrections or adjustments, the amount is included as a debit or credit depending on the sign of the amount.
The following table provides the distribution for purchasing vendor receipts including vendor returns and adjustments to receipts when the Book at Item Cost is enabled in the Event Fiscal Policy:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Qty Received x Item Cost | |
| ISP | Qty Received x PO Price | |
| PPV | (PO Price - Unit Cost)] x Qty Received |
When the Event Fiscal Policy is set at Book at PO Price, then the following distribution is created:
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Qty Received x PO Price | |
| ISP | Qty Received x PO Price |
Landed Cost Adjustments
Landed cost adjustments in an LCM-enabled organization are posted to the LCA account.
The following table provides the distribution in an LCM-enabled organization for a PO at reciept, when the Book at Receipt is enabled in the Event Fiscal Policy:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Qty Received x Receipt Price | |
| AAP | Qty Received x PO Price | |
| LCA | Qty Received x (Receipt Price - PO Price) |
The following table provides the distribution in an LCM-enabled organization for a PO at delivery, when the Book at PO Price is enabled in the Event Fiscal Policy:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Qty Received x Receipt Price | |
| INV | Qty Received x Receipt Price |
The following table provides the distribution in an LCM-enabled organization for a PO at receipt, when the Book at Item Cost is enabled in the Event Fiscal Policy:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Qty Received x Receipt Price | |
| AAP | Qty Received x PO Price | |
| LCA | Qty Received x (Receipt Price - PO Price) |
The following table provides the distribution in an LCM-enabled organization for a PO at delivery, when the Book at Item Cost is enabled in the Event Fiscal Policy:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Qty Received x Receipt Price | |
| INV | Qty Received x Item Cost | |
| LCA | Qty Received x (Item Cost-Receipt Price) |
This supports centralized procurement, volume discounts, and consolidation of interactions with the user's suppliers and customers and so on. These are supported for process organizations.
Drop shipment is a process where goods are shipped from a company's supplier directly to the company's customer. The goods do not physically pass through the company's warehouse facilities. Drop shipment is a major business trend and businesses expect their ERP systems to support and streamline the processes to meet their needs in this area. Oracle's existing drop shipment support is limited to one operating unit, and assumes that both the supplier and the customer are external parties.
There is a need for an extension of the current solution to support internal parties. Accordingly, drop shipments should be possible where the supplier is a related party (another organization of the same enterprise). Drop shipment should also be possible where the customer is a related party (another organization of the same enterprise). All intercompany accounting to transfer the liability for goods and related costs should be automated.
With Global Procurement, Oracle Purchasing enables material requested by an organization in one Operating Unit, Legal Entity, and Ledger to be procured through a different Operating Unit, Legal Entity, and Ledger. Receiving allows receipts in an organization against Post originating in any Operating Unit, Legal Entity, Ledger, if the ship-to organization on the PO is that organization.
In external drop shipment scenarios where shipments are made directly from the supplier to the customer, intercompany revenue and COGS are fully recognized. The revenue and COGS deferrals take place only in the customer-facing booking operating unit.
OPM Cost Management supports and performs the accounting for both physical and financial flows in intercompany transactions. Many companies distribute goods from a central location to parties located in other locations. These goods, or drop shipments, can pass to a controlled entity or subsidiary in the country of sales before shipping to the customer.
Corporations create a diverse set of operating unit, organization, entity, and ledger combinations to facilitate this business flow. Global procurement enables Oracle Purchasing to request material from these operating unit combinations to other operating units. Oracle Inventory creates transactions that do not generate material movements, but are used for invoicing and accounting purposes. Procurement and sales transactions are performed across these operating units.
Transactions can impact several organizations and operating units requiring a complex sequence of linked accounting entries. This functionality supports:
Shared procurement services: If a purchase order is placed by one operating unit, and shipped to another operating unit, then the procurement operating can invoice the receiving operating unit. The invoice is posted at either the purchase order price or the transfer price. The accounting transactions represents a transfer of ownership between the operating units.
Ownership transfer for shipments: You can generate a transfer of ownership when shipping a sales order where the operating units are separate for selling and shipping. The intercompany invoice uses the transfer price.
Drop ship across ledgers: On a drop shipment sales order, the warehouse organization and sales order organization can use different ledgers. Intercompany relationships: You can define chains of operating units for selling, procurement, shipping, and receiving. Ownership of the goods is transferred during transactions.
Intercompany invoices are generated between all operating units, and accounting transactions represent ownership transfer between all operating units in the chain.
Account Distribution for Dropship and Global Procurement:
The following flow of activities demonstrates this scenario for drop shipment and global procurement:
A Simple Supplier
Receipt Receiving and then delivering or direct delivery. Only the receive transaction is recorded. The deliver to inventory transaction goes to material transaction table and is accounted as the PO Receipt transaction.
The following accounting entries are recorded:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Receipt Qty x PO price | |
| AAP | Receipt Qty x PO Price |
A Return to Vendor Transaction for the above receipt
Only the return to vendor transaction creates a row. The return to receiving transaction will not have a row in this table.
The following accounting entries are recorded:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Adjustment Qty x PO price | |
| AAP | Receipt Qty x PO Price |
Procuring Operating Unit (OU) is PRU and Receiving Operating Unit (OU) is Vision.
The owning organization in the transaction flow are both process organizations. The procuring owner organization is PR1 and receiving owner organization is PL1.
There are two journals created, one for the procuring organization and another for the receiving organization.
Entry 1: Against PR1 (Procuring OU = PRU) Logical Receiving in PR1
| Journal Line Type | Debit | Credit |
|---|---|---|
| Clearing Account | Receipt Qty x PO price | |
| AAP | Receipt Qty x PO Price |
Entry 2: Against PL1 (Receiving OU = Vision)
If the intercompany entries are created using the PO Price, then the entries are as follows (Receive in PL1):
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Receipt Qty x PO price | |
| ICACC | Receipt Qty x PO Price |
If the intercompany entries are created using the Transfer Price, then the entries are as follows:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Receipt Qty x Transfer price | |
| ICACC | Receipt Qty x Transfer price |
If the intercompany entries are created either Transfer Price or PO Price, then the following entries are created:
Logical Receipt to Inventory in PR1
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Receipt Qty x PO price | |
| Clearing | Receipt Qty x PO price |
Logical Interorganization to Inventory in PR1
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Receipt Qty x PO price | |
| ICCOGS | Receipt Qty x PO price |
Physical Receipt in PL1
| Journal Line Type | Debit | Credit |
|---|---|---|
| INV | Receipt Qty x PO price or Transfer Price | |
| ISP | Receipt Qty x PO price or Transfer Price |
Two transactions are created. One for adjusting the receive transaction and another to adjust the already accounted delivery line.
The accounting entries for the adjustment to the receive line are as follows:
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Receipt Qty x Price Adjustment | |
| AAP | Receipt Qty x Price Adjustment |
The accounting entries for the adjustment to the delivery line are as follows:
| Journal Line Type | Debit | Credit |
|---|---|---|
| Retroactive Price Adjustment Account (on Receiving Options for the Org) | Receipt Qty x Price Adjustment | |
| ISP | Receipt Qty x Price Adjustment |
Receipt and Delivery of an Expense Item
Both receipt and delivery lines are created as there is no impact to inventory from receiving an expense item.
| Journal Line Type | Debit | Credit |
|---|---|---|
| ISP | Receipt Qty x PO Price | |
| AAP | Receipt Qty x PO Price | |
| EXP | Receipt Qty x PO Price | |
| ISP | Receipt Qty x PO Price |