Example of Tax Accounting for Internal Drop Shipments
This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting for internal drop shipment.
Scenario
Vision Operations drop ships the goods to the customer of Singapore Operations.
Transactions from Oracle Supply Chain Financial Orchestration
The 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:
-
Vision Operations acquires goods locally at the cost of USD 12.
-
Intercompany transfer price from Vision Operations to Singapore Operations is USD 15, with the following tax details:
-
Exclusive Tax A = 1.5 USD.
-
Recoverable and nonrecoverable portions are both same, that is, 50%.
-
-
Order is for 1 unit.
-
Profit tracking is set to Yes.
-
Intercompany Invoicing is set to Yes.
-
Vision Operations books a profit of USD 3 (USD 15 transfer price - USD 12 PO price).
Analysis
Receipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.
Accounting Entries
Accounting entries are created for shipment of goods from the legal entity Vision Operations to the other legal entity Singapore Operations.
The following table describes the accounting entries for the shipping organization, that is, for Vision Operations:
|
Subledger |
Event Type |
Account Line Type |
Cost Element |
Amount in Functional Currency +Dr/-Cr |
|---|---|---|---|---|
|
Cost Accounting |
Sales Order Shipment |
Trade In Transit |
Item Cost |
12 |
|
Cost Accounting |
Sales Order Shipment |
Inventory Valuation |
Item Cost |
-12 |
|
Cost Accounting |
Trade In Transit Issue |
Intercompany Cost of Goods Sold |
Item Cost |
12 |
|
Cost Accounting |
Trade In Transit Issue |
Trade In Transit |
Item Cost |
-12 |
|
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Receivable |
Transfer Price |
15 |
|
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Revenue |
Transfer Price |
-15 |
|
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Intercompany Receivable |
Total Tax |
1.5 |
|
Accounts Receivable |
Intercompany Accounts Receivable Invoice |
Tax Liability |
Total Tax |
-1.5 |
The following table describes the accounting entries for the receiving organization, that is, for Singapore Operations:
|
Subledger |
Event Type |
Account Line Type |
Cost Element |
Amount in Functional Currency +Dr/-Cr |
|---|---|---|---|---|
|
Receipt Accounting |
Trade Receipt Accrual |
Trade Clearing |
Transfer Price |
15 |
|
Receipt Accounting |
Trade Receipt Accrual |
Trade Clearing |
Nonrecoverable Tax |
0.75 |
|
Receipt Accounting |
Trade Receipt Accrual |
Intercompany Accrual |
Transfer Price |
-15 |
|
Receipt Accounting |
Trade Receipt Accrual |
Intercompany Accrual |
Nonrecoverable Tax |
-0.75 |
|
Cost Accounting |
Trade In Transit Receipt |
Trade In Transit |
Item Cost |
12 |
|
Cost Accounting |
Trade In Transit Receipt |
Trade Clearing |
Item Cost |
-12 |
|
Cost Accounting |
Trade In Transit Receipt |
Trade In Transit |
Nonrecoverable Tax |
0.75 |
|
Cost Accounting |
Trade In Transit Receipt |
Trade Clearing |
Nonrecoverable Tax |
-0.75 |
|
Cost Accounting |
Trade In Transit Receipt |
Trade In Transit |
Profit In Inventory |
3 |
|
Cost Accounting |
Trade In Transit Receipt |
Trade Clearing |
Profit In Inventory |
-3 |
|
Cost Accounting |
Trade Sales Issue |
Deferred Cost of Goods Sold |
Item Cost |
12 |
|
Cost Accounting |
Trade Sales Issue |
Trade In Transit |
Item Cost |
-12 |
|
Cost Accounting |
Trade Sales Issue |
Deferred Cost of Goods Sold |
Nonrecoverable Tax |
0.75 |
|
Cost Accounting |
Trade Sales Issue |
Trade In Transit |
Nonrecoverable Tax |
-0.75 |
|
Cost Accounting |
Trade Sales Issue |
Deferred Cost of Goods Sold |
Profit In Inventory |
3 |
|
Cost Accounting |
Trade Sales Issue |
Trade In Transit |
Profit In Inventory |
-3 |
|
Cost Accounting |
Cost of Goods Sold Recognition |
Cost of Goods Sold |
Item Cost |
12 |
|
Cost Accounting |
Cost of Goods Sold Recognition |
Deferred Cost of Goods Sold |
Item Cost |
12 |
|
Cost Accounting |
Cost of Goods Sold Recognition |
Cost of Goods Sold |
Nonrecoverable Tax |
0.75 |
|
Cost Accounting |
Cost of Goods Sold Recognition |
Deferred Cost of Goods Sold |
Nonrecoverable Tax |
-0.75 |
|
Cost Accounting |
Cost of Goods Sold Recognition |
Cost of Goods Sold |
Profit In Inventory |
3 |
|
Cost Accounting |
Cost of Goods Sold Recognition |
Deferred Cost of Goods Sold |
Profit In Inventory |
-3 |
|
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Accrual |
Transfer Price |
15 |
|
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Liability |
Transfer Price |
-15 |
|
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Accrual |
Nonrecoverable Tax |
0.75 |
|
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Liability |
Nonrecoverable Tax |
-0.75 |
|
Accounts Payable |
Intercompany Accounts Payable Invoice |
Tax Recoverable |
Recoverable Tax |
0.75 |
|
Accounts Payable |
Intercompany Accounts Payable Invoice |
Intercompany Liability |
Recoverable Tax |
-0.75 |