The purpose of this appendix is to provide an understanding of balancing journal entries that are created during payroll, labor distribution, and grants processing.
In Oracle Human Resources, there is a hierarchy for payroll costing. Labor costs can be assigned at the following levels with payroll at the highest level:
payroll
element link
organization
assignment
element entry
In Human Resources and Payroll, each element is linked to a payroll using the Cost Allocation flexfield segments. Each element and payroll combination is costed using the payroll costing hierarchy, with the balancing account being an appropriate liability or cash account defined in the Element Link window.
Entries made at the lower levels override entries at higher levels.
For information on labor costs, see The Oracle HRMS Cost Allocation Key Flexfield Example, Oracle HRMS Enterprise and Workforce Management Guide.
The labor costing example includes the following parts:
labor costing
distribution adjustments
In the labor costing example, payroll is run and costed for two employees. These payroll costs are distributed to Oracle Grants Accounting and Oracle General Ledger. These costs are then adjusted using Labor Distribution.
In this example, the balancing account is payroll liability.
The following examples illustrate labor costing.
Two employees are on the monthly payroll at Oracle University. They are John Smith with a monthly salary of $2,400 and Mary Marshall with a monthly salary of $3,600. The one element is Regular Salary.
Total payroll costs are $6,000 for the current month. These costs are processed and costed from Payroll to General Ledger as shown in Table 1.
Account | Total Payroll Costs | Debit/Credit |
---|---|---|
Payroll Clearing (00.000.1500) | $6,000 | Debit |
Payroll Liability (00.000.2100) | $6,000 | Credit |
Labor schedules are established at the employee assignment level for each employee in Labor Distribution.
Table 2 shows schedule lines for John Smith.
Charging Instructions | Labor Schedule |
---|---|
GL Account 10.200.6010 | 20% |
OGM DOD Project | 80% |
Table 3 shows schedule lines for Mary Marshall.
Charging Instructions | Labor Schedule |
---|---|
GL Account 10.300.6010 | 40% |
OGM NSF Project | 60% |
Through Labor Distribution, current payroll is matched with schedule lines for each employee. Table 4 shows the distribution lines created.
Employee | Charging Instructions | Distribution Amount |
---|---|---|
John Smith | GL 10.200.6010 | $480 |
John Smith | DOD Project | $1,920 |
Mary Marshall | GL 10.300.6010 | $1,440 |
Mary Marshall | NSF Project | $2,160 |
Labor Distribution summarizes and transfers distribution lines to the appropriate General Ledger accounts and Grants Accounting projects. Table 5 shows the journal entries created by the General Ledger journal.
Journal Entries | Amount | Debit/Credit |
---|---|---|
GL 10.200.6010 | $480 | Debit |
GL 10.300.6010 | $1,440 | Debit |
Payroll Clearing | $1,920 | Credit |
Table 6 shows the labor distribution transactions that Grants Accounting imports.
Grants Accounting Project | Amount |
---|---|
DOD Project | $1,920 |
NSF Project | $2,160 |
In Grants Accounting, concurrent processes are initiated to transfer labor costs to General Ledger. Table 7 shows the journal entries created according to the AutoAccounting setup in Grants Accounting after the concurrent processes complete.
Account | Amount | Debit/Credit |
---|---|---|
GL 20.000.6000 | $4,080 | Debit |
Payroll Clearing | $4,080 | Credit |
Note: The AutoAccounting setup in Grants Accounting must include an appropriate payroll clearing account. If it is important that the payroll clearing account net to zero, then the AutoAccounting setup in Grants Accounting must generate the same payroll clearing account as defined in Labor Distribution. This labor costing example assumes that this is true.
For information on defining auto accounting, see How to Use AutoAccounting, Oracle® Public Sector Financials User's Guide.
Table 8 shows the entries for each General Ledger account. After all processes and steps are complete, the payroll clearing has a zero balance and appropriate General Ledger accounts show debit balances for labor expenditures.
Account | Example Number | Debit | Credit |
---|---|---|---|
00.000.1500, Payroll Clearing | 1. | $6,000 | |
4. | $1,920 | ||
5. | $4,080 | ||
00.000.2100, Payroll Liability | 1. | $6,000 | |
10.200.6010, General Fund.Engineering.Salary | 4. | $480 | |
10.300.6010, General Fund.Cardiology.Salary | 4. | $1,440 | |
20.000.6000, Restricted Fund.General.Salary | 5. | $4,080 |
The following example illustrates labor costing for a retropay payroll run for the past period. If distribution adjustments exist for an employee, then the application will use those adjustments to derive the corrected distribution percentages, which will override the scheduled percentages.
Assume that two employees are on a monthly payroll at Oracle University. They are John Smith with a monthly salary of $2,400, and Mary Marshall, with a monthly salary of $3,600. The one element is Regular Salary.
The total payroll cost is $6,000 for the past month, that is December 2006.
Labor Schedule of John Smith for December 2006
Charging Instructions | Labor Schedule |
---|---|
GL Account 10.200.6010 | 20% |
OGM DOD Project | 80% |
Labor Schedule for Mary Marshall for December 2006
Charging Instructions | Labor Schedule |
---|---|
GL Account 10.300.6010 | 40% |
OGM NSF Project | 60% |
Oracle Labor Distribution enables you to match the current payroll with the schedule lines for each employee. The following table shows the distribution lines that the PSP: Create Distribution Lines process creates.
Distribution Lines for John Smith and Mary Marshall
Employee | Charging Instructions | Distribution Amount |
---|---|---|
John Smith | GL 10.200.6010 | $480 |
John Smith | DOD Project | $1,920 |
Mary Marshall | GL 10.300.6010 | $1,440 |
Mary Marshall | NSF Project | $2,160 |
The application enables you to summarize and transfer the distribution lines to the appropriate General Ledger accounts and Grants Accounting projects.
After the Distributions were summarized and transferred, it was found that the labor schedule for Mary Marshal was incorrect and adjustments needed to be made so that the effective distributions are as below.
Adjusted Distribution Percentages for Mary Marshall for December 2006
Charging Instructions | Adjusted Percentage |
---|---|
GL Account 10.300.6010 | 50% |
OGM NSF Project | 50% |
A retropay payroll is run for the past month of December 2006. The amounts paid for regular salary element for Mary Marshal and John Smith are $100 each. The following table shows the distribution lines that the PSP: Create Distribution Lines process creates. Notice that the corrected distribution percentages are used for Mary Marshal.
Employee | Charging Instructions | Distribution Amount |
---|---|---|
John Smith | GL 10.200.6010 | $20 |
John Smith | DOD Project | $80 |
Mary Marshall | GL 10.300.6010 | $50 |
Mary Marshall | NSF Project | $50 |
Labor Distribution summarizes and transfers distribution lines to the appropriate General Ledger accounts and Grants Accounting projects. The following table shows the journal entries created by the General Ledger journal.
Journal Entries Created by the General Ledger Journal
Journal Entries | Amount | Debit/Credit |
---|---|---|
GL 10.200.6010 | $20 | Debit |
GL 10.300.6010 | $50 | Debit |
Payroll Clearing | $70 | Credit |
The following table shows the labor distribution transactions that Grants Accounting imports.
Labor Distribution Transactions Imported by Grants Accounting
Grants Accounting Project | Amount |
---|---|
DOD Project | $80 |
NSF Project | $50 |
In Grants Accounting, concurrent processes are initiated to transfer labor costs to General Ledger. The following table shows the journal entries created according to the Auto Accounting setup in Grants Accounting after the concurrent processes complete.
Journal Entries Created According to the Auto Accounting Setup in Grants Accounting
Account | Amount | Debit/Credit |
---|---|---|
GL 20.000.6000 | $130 | Debit |
Payroll Clearing | $130 | Credit |
The following table shows the entries for each General Ledger account. After all processes and steps are complete, the payroll clearing has a zero balance and the corresponding General Ledger accounts show debit balances for labor expenditures.
General Ledger Journal Account Entries for Labor Costing
Account | Table Number | Debit | Credit |
---|---|---|---|
00.000.1500, Payroll Clearing | $200 | ||
6 (GL import) | $70 | ||
8 (Grants to GL) | $130 | ||
00.000.2100, Payroll Liability | $200 | ||
10.200.6010, General Fund.Engineering.Salary | 6 (GL import) | $20 | |
10.300.6010, General Fund.Cardiology.Salary | 6 (GL import) | $50 | |
20.000.6000, Restricted Fund.General.Salary | 8 (Grants to GL) | $130 |
The logic for distribution adjustments is the same as that of regular Labor Distribution transactions.
The following examples illustrate distribution adjustments in the labor costing example.
After the payroll was distributed, it was determined that only 50% of John Smith's time should have been charged to the DOD project instead of 80%. The other 30% should be charged to the General Fund.Engineering.Salary account, 10.200.6010.
After adjusting the distribution in the Distribution Adjustments window, the entries in the Adjusted Distributions region of the Distribution Adjustments window are as shown in Table 9, with the calculations shown in parentheses.
Charging Instructions | Amount | Calculations |
---|---|---|
DOD Project | -$1,920 | |
DOD Project | $1,200 | ($2,400 x 50%) |
GL 10.200.6010 | $720 | ($2,400 X 30%) |
Unaccounted Balance | $0.00 |
After the distribution adjustment is entered and approved, Labor Distribution creates General Ledger journal entries as shown in Table 10.
Account | Amount | Debit/Credit |
---|---|---|
GL 10.200.6010 | $720 | Debit |
Payroll Clearing | $720 | Credit |
After the distribution adjustment is entered and approved, the Grants Accounting import is created as shown in Table 11.
Project | Amount |
---|---|
DOD Project | -$1,920 |
DOD Project | $1,200 |
The Grants Accounting transfer to General Ledger process creates the import and posting entries shown in Table 12 using AutoAccounting.
Account | Amount | Debit/Credit |
---|---|---|
Payroll Clearing | -$720 | Credit |
GL 20.000.6000 for DOD Project | -$720 | Debit (1,200-1,900) |
Table 13 shows the entries for each General Ledger account transaction. Labor Distribution processes all adjustments as positive or negative debits and the clearing account as positive or negative credits.
Account | Example Number | Debit | Credit |
---|---|---|---|
00.000.1500, Payroll Clearing | 1. | $6,000 | |
4. | $1,920 | ||
5. | $4,080 | ||
7. | $720 | ||
8. | -$720 | ||
00.000.2100,Payroll Liability | 1. | $6,000 | |
10.200.6010, General Fund.Engineering.Salary | 4. | $480 | |
7. | $720 | ||
10.300.6010, General Fund.Cardiology.Salary | 4. | $1,440 | |
20.000.6000, Restricted Fund.General.Salary | 5. | $4,080 | |
8. | -$720 |
After the payroll was distributed, it was determined that Mary Marshall should have only 10% of her time charged to the General Fund in General Ledger instead of 40%. The other 30% should be charged to the NSF Project.
After adjusting the distribution in the Distribution Adjustments window, the entries in the Adjusted Distributions region of the Distribution Adjustments window are as shown in Table 14, with the calculations shown in parentheses.
Charging Instructions | Amount | Calculations |
---|---|---|
GL 10.300.6010 | -$1,440 | |
NSF Project | $1,080 | ($3,600 x 30%) |
GL 10.300.6010 | $360 | ($3,600 x 10%) |
Unaccounted Balance | $0.00 |
After the distribution adjustment is entered and approved, Labor Distribution creates General Ledger journal entries as shown in Table 15.
Account | Amount | Debit/Credit |
---|---|---|
GL 10.300.6010 | -$1,080 | Debit |
Payroll Clearing | -$1,080 | Credit |
The Grants Accounting import is created as shown in Table 16.
Project | Amount |
---|---|
DOD Project | $1,080 |
The Grants Accounting transfer to General Ledger creates import and posting entries using AutoAccounting as shown in Table 17.
Account | Amount | Debit/Credit |
---|---|---|
Payroll Clearing | $1,080 | Credit |
GL 20.000.6000 (for DOD Project) | $1,080 | Debit |
Table 18 shows the entries for each General Ledger account transaction. Labor Distribution processes all adjustments as positive or negative debits and the clearing account as positive or negative credits.
Account | Example Number | Debit | Credit |
---|---|---|---|
00.000.1500, Payroll Clearing | 1. | $6,000 | |
4. | $1,920 | ||
5. | $4,080 | ||
7. | $720 | ||
8. | -$720 | ||
10. | -$1,080 | ||
11. | $1,080 | ||
00.000.2100, Payroll Liability | 1. | $6,000 | |
10.200.6010, General Fund.Engineering.Salary | 4. | $480 | |
7. | $720 | ||
10.300.6010, General Fund.Cardiology.Salary | 4. | $1,440 | |
10. | -$1,080 | ||
20.000.6000, Restricted Fund.General.Salary | 5. | $4,080 | |
8. | -$720 | ||
11. | 1,080 |