Example of Accounting of Global Procurement Trade Transactions into Expense
Oracle Receipt Accounting and Oracle Cost Accounting process transactions and create distributions for global procurement purchases that are received into expense destinations rather than inventory, and for services that are expensed.
The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a global procurement flow into expense. It illustrates:
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Transactions that are captured in Oracle Supply Chain Financial Orchestration and interfaced to Receipt Accounting and Cost Accounting.
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Accounting entries that Receipt Accounting and Cost Accounting generate for the forward flow of goods or services from the supplier, through the intermediary distributor, to the final receiving organization.
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Accounting entries that Receipt Accounting and Cost Accounting generate for the return flow from the receiving organization to the supplier.
Scenario
China Supplier ships the goods to US Inc. and the goods flow through an intermediary distributor, China Ltd.
Transactions from Supply Chain Financial Orchestration
The global procurement trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain Financial Orchestration, and the transactions flow into Receipt Accounting and Cost Accounting based on this setup:
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Purchase Order (PO) price from China Supplier to China Ltd is USD 50.
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Intercompany transfer price from China Ltd to US Inc is USD 100.
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Intercompany invoicing is set to Yes.
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Profit tracking is set to Yes.
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Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in cost organization CO1.
Analysis
Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.
Accounting Entries
The following figure illustrates the accounting entries for the forward flow from China Ltd (sold-to legal entity) to US Inc (receiving legal entity).
Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.
The following table describes those receipt and cost accounting entries.
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 |
50 |
USD |
Not Applicable |
PO Price |
Receipt Accounting |
Trade Receipt Accrual |
Accrual |
-50 |
USD |
Not Applicable |
PO Price |
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Receipt |
Trade Clearing |
-50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
10 |
USD |
Overhead |
Overhead Rate |
Cost Accounting |
Trade In-Transit Receipt |
Overhead Absorption |
-10 |
USD |
Overhead |
Overhead Rate |
Cost Accounting |
Trade In-Transit Issue |
Intercompany COGS |
50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Issue |
Trade In-Transit |
-50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Issue |
Intercompany COGS |
10 |
USD |
Overhead |
Overhead Rate |
Cost Accounting |
Trade In-Transit Issue |
Trade In-Transit |
-10 |
USD |
Overhead |
Overhead Rate |
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Receivable |
100 |
USD |
Not Applicable |
Transfer Price |
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Revenue |
-100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
Supplier Invoice |
Accrual |
50 |
USD |
Not Applicable |
PO Price |
Receipt Accounting |
Supplier Invoice |
Liability |
-50 |
USD |
Not Applicable |
PO Price |
Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost Accounting generates distributions under cost organization CO2 and inventory organization M2.
The following table describes those receipt and cost accounting entries.
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 |
Transfer Price |
Receipt Accounting |
Trade Receipt Accrual |
Intercompany Accrual |
-100 |
USD |
Not Applicable |
Transfer Price |
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
100 |
USD |
Material |
Transfer Price |
Cost Accounting |
Trade In-Transit Receipt |
Trade Clearing |
-100 |
USD |
Material |
Transfer Price |
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Accrual |
100 |
USD |
Not Applicable |
Transfer Price |
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Liability |
-100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
PO Receipt |
Receiving Inspection |
100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
PO Receipt |
Trade In-Transit |
-100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
PO Delivery |
Expense |
100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
PO Delivery |
Receiving Inspection |
-100 |
USD |
Not Applicable |
Transfer Price |
US Inc. returns goods directly to China Supplier.
The following figure illustrates the accounting entries for the return flow from legal entity US Inc. to legal entity China Ltd .
Receipt Accounting generates distributions under business unit US West and inventory organization M2. Cost Accounting generates distributions under cost organization CO2 and inventory organization M2.
The following table describes those receipt and cost accounting entries.
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
Cost Element |
Basis of Amount |
---|---|---|---|---|---|---|
Receipt Accounting |
Trade Return Accrual |
Intercompany Accrual |
100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
Trade Return Accrual |
Trade Clearing |
-100 |
USD |
Not Applicable |
Transfer Price |
Cost Accounting |
Trade In-Transit Return |
Trade Clearing |
100 |
USD |
Material |
Transfer Price |
Cost Accounting |
Trade In-Transit Return |
Trade In-Transit |
-100 |
USD |
Material |
Transfer Price |
Receipt Accounting |
Return to Receiving |
Receiving Inspection |
100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
Return to Receiving |
Expense |
-100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
Return to Supplier |
Trade In-Transit |
100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
Return to Supplier |
Receiving Inspection |
-100 |
USD |
Not Applicable |
Transfer Price |
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Liability |
100 |
USD |
Not Applicable |
Transfer Price |
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Accrual |
-100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.
The following table describes those receipt and cost accounting entries.
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
Cost Element |
Basis of Amount |
---|---|---|---|---|---|---|
Receipt Accounting |
Trade Return Accrual |
Intercompany Accrual |
50 |
USD |
Not Applicable |
PO Price |
Receipt Accounting |
Trade Return Accrual |
Trade Clearing |
-50 |
USD |
Not Applicable |
PO Price |
Cost Accounting |
Trade In-Transit Return |
Trade Clearing |
50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Return |
Cost Variance* |
10 |
USD |
Overhead |
Overhead Rate |
Cost Accounting |
Trade In-Transit Return |
Trade In-Transit |
-50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Return |
Trade Clearing |
-10 |
USD |
Overhead |
Overhead Rate |
Cost Accounting |
Trade In-Transit Return Receipt |
Trade In-Transit |
50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Return Receipt |
Trade In-Transit |
10 |
USD |
Overhead |
Overhead Rate |
Cost Accounting |
Trade In-Transit Return Receipt |
Intercompany Cost of Goods Sold |
-50 |
USD |
Material |
PO Price |
Cost Accounting |
Trade In-Transit Return Receipt |
Intercompany Cost of Goods Sold |
-10 |
USD |
Overhead |
Overhead Rate |
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Revenue |
100 |
USD |
Not Applicable |
Transfer Price |
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Receivables |
-100 |
USD |
Not Applicable |
Transfer Price |
Receipt Accounting |
Supplier Invoice |
Liability |
50 |
USD |
Not Applicable |
PO Price |
Receipt Accounting |
Supplier Invoice |
Accrual |
-50 |
USD |
Not Applicable |
PO Price |
*Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance.