Example of Consigned Inventory Accounting of an Interorganization Transfer Across Business Units

An interorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain.

The following is an example of accounting performed by Oracle Cost Accounting and Oracle Receipt Accounting in a simple purchase order with an interorganization transfer of goods across profit center business units. The goods remain in consigned status until ownership changes in the receiving organization. This example illustrates:

• Transactions captured in Oracle Inventory Management and interfaced to Cost Accounting and Receipt Accounting.

• Transactions captured in Oracle Supply Chain Financial Orchestration and interfaced to Cost Accounting and Receipt Accounting.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

Scenario

Supplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M1-Seattle, who in turn transfers the consigned goods to inventory organization M2-LA. Inventory organizations, M1-Seattle and M2-LA, are in different business units.

Interfaced Transactions

Inventory Management sends the following transactions to Receipt Accounting and Cost Accounting:

• Supplier Advanced Network Devices (AND-Fresno).

• Consignment Purchase Order #1000.

• Purchase Order price USD 100.

• Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed.

• Receipt and put away transactions performed in M1-Seattle inventory organization in consigned status.

• Goods transferred in consigned status from inventory organization M1-Seattle to M2-LA.

• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M2-LA through M1-Seattle.

Supply Chain Financial Orchestration sets up the trade agreement, accounting rule sets, and associated purchase orders, and the information flows into Receipt Accounting and Cost Accounting. The transfer from M1-Seattle to M2-LA is based on trade agreement SFO #123 which has the following terms:

• Intercompany transfer price is USD 120.

• Intercompany invoicing is set to Yes.

• Profit tracking is set to Yes.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

Receipt Accounting generates distributions under inventory organization M1-Seattle for the shipment from supplier AND-Fresno to M1-Seattle.

Subledger	Event Type	Accounting Line Type	Amount in Functional Currency +Dr/-Cr	Functional Currency	Basis of Amount
Receipt Accounting	PO Receipt	Consigned Clearing	100	USD	PO Price
Receipt Accounting	PO Receipt	Consigned Accrual	-100	USD	PO Price
Receipt Accounting	PO Delivery	Consigned Inventory	100	USD	PO Price
Receipt Accounting	PO Delivery	Consigned Clearing	-100	USD	PO Price

Cost Accounting generates distributions under inventory organization M1-Seattle for the interorganization transfer from M1-Seattle to M2-LA.

Subledger	Event Type	Accounting Line Type	Amount in Functional Currency +Dr/-Cr	Functional Currency	Basis of Amount
Cost Accounting	In-Transit Shipment	Consigned In-Transit	100	USD	PO Price
Cost Accounting	In-Transit Shipment	Consigned Inventory	-100	USD	PO Price
Cost Accounting	Consigned Trade In-Transit Issue	Consigned Receivable	100	USD	PO Price
Cost Accounting	Consigned Trade In-Transit Issue	Consigned In-Transit	-100	USD	PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the interorganization transfer from M1-Seattle to M2-LA.

Subledger	Event Type	Accounting Line Type	Amount in Functional Currency +Dr/-Cr	Functional Currency	Basis of Amount
Receipt Accounting	Consigned Trade Receipt Accrual	Trade Clearing	100	USD	PO Price
Receipt Accounting	Consigned Trade Receipt Accrual	Consigned In-Transit	-100	USD	PO Price
Receipt Accounting	Consigned Trade In-Transit Receipt	Consigned Clearing	100	USD	PO Price
Receipt Accounting	Consigned Receipt Consumption	Trade Clearing	-100	USD	PO Price
Cost Accounting	In-Transit Receipt	Consigned Inspection	100	USD	PO Price
Cost Accounting	In-Transit Receipt	Consigned In-Transit	-100	USD	PO Price
Cost Accounting	In-Transit Delivery	Consigned Inventory	100	USD	PO Price
Cost Accounting	In-Transit Delivery	Consigned Inspection	-100	USD	PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle.

Subledger	Event Type	Accounting Line Type	Amount in Functional Currency +Dr/-Cr	Functional Currency	Cost Element	Basis of Amount
Receipt Accounting	Trade Receipt Accrual	Trade Clearing	100	USD	Not applicable	PO Price
Receipt Accounting	Trade Receipt Accrual	Accrual	-100	USD	Not applicable	PO Price
Cost Accounting	Trade In-Transit Receipt	Trade In-Transit	100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Receipt	Trade Clearing	-100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Issue	Intercompany Cost of Goods Sold	100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Issue	Trade In-Transit	-100	USD	Material	PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change of ownership from M1-Seattle to M2-LA.

Subledger	Event Type	Accounting Line Type	Amount in Functional Currency +Dr/-Cr	Functional Currency	Cost Element	Basis of Amount
Receipt Accounting	Trade Receipt Accrual	Trade Clearing	100	USD	Not applicable	PO Price
Receipt Accounting	Trade Receipt Accrual	Accrual	-100	USD	Not applicable	PO Price
Cost Accounting	Trade In-Transit Receipt	Trade In-Transit	100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Receipt	Trade Clearing	-100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Issue	Intercompany Cost of Goods Sold	100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Issue	Trade In-Transit	-100	USD	Material	PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA.

Subledger	Event Type	Accounting Line Type	Amount in Functional Currency +Dr/-Cr	Functional Currency	Cost Element	Basis of Amount
Cost Accounting	Transfer to Owned Issue	Consigned Inventory Offset	100	USD	Material	PO Price
Cost Accounting	Transfer to Owned Issue	Consigned Inventory	-100	USD	Material	PO Price
Receipt Accounting	Trade Receipt Accrual	Trade Clearing	120	USD	Not applicable	Transfer Price
Receipt Accounting	Trade Receipt Accrual	Intercompany Accrual	-120	USD	Not applicable	Transfer Price
Cost Accounting	Trade In-Transit Receipt	Trade In-Transit	100	USD	Material	PO Price
Cost Accounting	Trade In-Transit Receipt	Trade In-Transit	20	USD	Profit in Inventory	Internal Markup
Cost Accounting	Trade In-Transit Receipt	Trade Clearing	-120	USD	Material	Transfer Price
Cost Accounting	Transfer to Owned (Receipt)	Inventory Valuation	100	USD	Material	PO Price
Cost Accounting	Transfer to Owned (Receipt)	Inventory Valuation	20	USD	Profit in Inventory	Internal Markup
Cost Accounting	Transfer to Owned (Receipt)	Trade In-Transit	-100	USD	Material	PO Price
Cost Accounting	Transfer to Owned (Receipt)	Trade In-Transit	-20	USD	Profit in Inventory	Internal Markup

Inventory organization M2-LA returns the goods to supplier AND-Fresno. The return of the consignment is executed in two parts:

• An interorganization transfer from M2-LA to M1-Seattle. The accounting is the same as simple purchase order return transactions.

• A consignment return from M1-Seattle to the supplier. The accounting is the same as regular return to supplier transactions.