Example of Tax Accounting for a Consigned Inventory Transaction
This example illustrates tax accounting performed by Oracle Receipt Accounting and Oracle Cost Accounting for a consigned inventory transaction in the supply chain. This transaction uses a tax point basis of delivery, that is, taxes are accounted at receipt of the goods.
Scenario
The supplier makes a consigned shipment to the inventory organization based on a consigned purchase order (PO) for USD 1,000 with the following tax details:
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Tax A delivery basis = 10%. Recoverable and nonrecoverable portions are both 50%
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Tax B invoice basis = 20%. Recoverable and nonrecoverable portions are both 50%
Tax Details at Receipt and Invoice
Tax details at the consigned receipt of goods are:
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Item value = USD 1,000
-
Tax A delivery basis = 15%, which is changed from 10% estimated at the time of PO. Recoverable and nonrecoverable portions are both 50%, or USD 75, that is, USD 1,000 * 15% * 50%.
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Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable and nonrecoverable portions are both 50%, or USD 125, that is, USD 1,000 * 25% * 50%.
Tax details at the time of invoice are:
-
Item value = USD 1,000
-
Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both both 50%, however taxes are not recalculated because this transaction uses a tax point basis of delivery.
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Tax B invoice basis = 30%, which is changed from 25% estimated at the time of receipt. Recoverable and nonrecoverable portions are both 50%, or USD 150.
Analysis
Receipt Accounting and Cost Accounting create accounting distributions when the consigned good are received, when the status changes from consigned to owned, and when the invoice is accounted.
Tax Accounting Entries
Receipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of consigned goods:
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
Cost Element |
Basis of Amount |
---|---|---|---|---|---|---|
Receipt Accounting |
Consigned PO Receipt |
Consigned Clearing |
1,000 |
USD |
Material |
PO Price |
Receipt Accounting |
Consigned PO Receipt |
Consigned Clearing |
75 |
USD |
Tax |
Tax A Delivery-Based Nonrecoverable: USD 1,000 * 15% * 50% |
Receipt Accounting |
Consigned PO Receipt |
Consigned Clearing |
125 |
USD |
Tax |
Tax B Invoice-Based Nonrecoverable: USD 1,000 * 25% * 50% |
Receipt Accounting |
Consigned PO Receipt |
Consigned Accrual |
-1,200 |
USD |
Not applicable |
Not applicable |
Cost Accounting |
Consigned PO Delivery |
Consigned Inventory* |
1,200 |
USD |
Not applicable |
Not applicable |
Receipt Accounting |
Consigned PO Delivery |
Consigned Clearing |
-1,200 |
USD |
Not applicable |
Not applicable |
*PO price plus nonrecoverable taxes A and B.
Receipt Accounting and Cost Accounting generate the following accounting entries at the time of change of status from consigned to owned stock:
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
Cost Element |
Basis of Amount |
---|---|---|---|---|---|---|
Receipt Accounting |
Consigned Receipt Consumption |
Consigned Accrual |
1,000 |
USD |
Material |
PO Price |
Receipt Accounting |
Consigned Receipt Consumption |
Consigned Accrual |
75 |
USD |
Not applicable |
Tax A Delivery-Based Nonrecoverable: USD 1,000 * 15% * 50% |
Receipt Accounting |
Consigned Receipt Consumption |
Consigned Accrual |
125 |
USD |
Not applicable |
Tax B Invoice-Based Nonrecoverable: USD 1,000 * 15% * 50% |
Receipt Accounting |
Consigned Receipt Consumption |
Consigned Clearing |
-1,200 |
USD |
Not applicable |
Not applicable |
Cost Accounting |
Transfer to Owned Issue |
Consigned Inventory Offset |
1,000 |
USD |
Material |
PO Price |
Cost Accounting |
Transfer to Owned Issue |
Consigned Inventory Offset |
75 |
USD |
Nonrecoverable Tax |
Tax A Delivery-Based Nonrecoverable |
Cost Accounting |
Transfer to Owned Issue |
Consigned Inventory Offset |
125 |
USD |
Nonrecoverable Tax |
Tax B Invoice-Based Nonrecoverable |
Cost Accounting |
Transfer to Owned Issue |
Consigned Inventory |
-1,200 |
USD |
Not applicable |
PO Price |
Receipt Accounting |
Trade Receipt Accrual |
Trade Clearing |
1,000 |
USD |
Not applicable |
PO Price |
Receipt Accounting |
Trade Receipt Accrual |
Trade Clearing |
75 |
USD |
Not applicable |
Tax A Delivery-Based Nonrecoverable |
Receipt Accounting |
Trade Receipt Accrual |
Trade Clearing |
125 |
USD |
Not applicable |
Tax B Invoice-Based Nonrecoverable |
Receipt Accounting |
Trade Receipt Accrual |
Tax Recoverable* |
75 |
USD |
Not applicable |
Tax A Delivery-Based Recoverable |
Receipt Accounting |
Trade Receipt Accrual |
Supplier Accrual |
-1,275 |
USD |
Not applicable |
Not applicable |
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
1,000 |
USD |
Not applicable |
PO Price |
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
75 |
USD |
Not applicable |
Tax A Delivery-Based Nonrecoverable |
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
125 |
USD |
Not applicable |
Tax B Invoice-Based Nonrecoverable |
Cost Accounting |
Trade In-Transit Receipt |
Trade Clearing |
-1,200 |
USD |
Not applicable |
Not applicable |
Cost Accounting |
Transfer to Owned (Receipt) |
Inventory Valuation |
1,000 |
USD |
Material |
PO Price |
Cost Accounting |
Transfer to Owned (Receipt) |
Inventory Valuation |
75 |
USD |
Nonrecoverable Tax |
Tax A Delivery-Based Nonrecoverable |
Cost Accounting |
Transfer to Owned (Receipt) |
Inventory Valuation |
125 |
USD |
Nonrecoverable Tax |
Tax B Invoice-Based Nonrecoverable |
Cost Accounting |
Transfer to Owned (Receipt) |
Trade In-Transit |
-1,200 |
USD |
Not applicable |
Not applicable |
*Delivery-based recoverable tax A is calculated on consigned receipt but will be accounted after ownership change event.
Accounts Payable generates the following accounting entries when the invoice is created:
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
Basis of Amount |
---|---|---|---|---|---|
Accounts Payable |
Invoice |
Supplier Accrual |
1,275 |
USD |
Not applicable |
Accounts Payable |
Invoice |
Tax B Recovery |
150 |
USD |
Tax B Invoice-Based Recoverable |
Accounts Payable |
Invoice |
Tax B Rate Variance* |
25 |
USD |
Not applicable |
Accounts payable |
Invoice |
Supplier Liability |
-1,450 |
USD |
Not applicable |
*Tax variance due to the difference between tax rates at time of delivery versus invoice.
Receipt Accounting and Cost Accounting generate the following accounting entries when invoice is accounted:
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
---|---|---|---|---|
Receipt Accounting |
Invoice Price Adjustment |
Trade Clearing |
25 |
USD |
Receipt Accounting |
Invoice Price Adjustment |
Tax B Rate Variance* |
-25 |
USD |
Cost Accounting |
Acquisition Cost Adjustment |
Inventory Valuation** |
25 |
USD |
Cost Accounting |
Acquisition Cost Adjustment |
Trade Clearing |
-25 |
USD |
*Tax variance due to the difference between tax rates at time of delivery versus invoice.
**Inventory acquisition cost adjustment for nonrecoverable tax B.