Example of Accounting of Interorganization Transfers with Cost Propagation
This example illustrates:
-
Material moment transactions that are captured in Oracle Inventory Management and interfaced to Oracle Receipt Accounting and Oracle Cost Accounting.
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Supply chain financial 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 transfer of goods across organizations.
Scenario
A transfer order is issued from an asset or expense inventory to an expense destination, where the sending organization and receiving organization are in different profit center business units. A trade agreement is set up in Supply Chain Financial Orchestration to create the financial ownership trade events.
Let's consider the sending organization is M1 and the receiving organization is M2. The quantity of goods transferred is 10 units and the cost per unit is $12.00. The transfer price is $15.00. M1 then makes a cost adjustment of $4.50 per unit.
Accounting Events
For this transfer to expense destination, the corresponding events along with the transaction creating system and subledger are summarized in this table.
|
Event |
Transaction Creating System |
Subledger |
|---|---|---|
|
Miscellaneous |
Inventory |
Cost Accounting |
|
Transfer Order Issue |
Inventory |
Cost Accounting |
|
Trade in Transit Issue |
Financial Orchestration/ Cost Accounting |
Cost Accounting |
|
Trade Receipt Accrual |
Financial Orchestration/ Cost Accounting |
Receipt Accounting |
|
Trade in Transit Receipt |
Financial Orchestration/ Cost Accounting |
Cost Accounting |
|
Transfer Order Receipt |
Receiving |
Receipt Accounting |
|
Transfer Order Deliver to Expense |
Receiving |
Receipt Accounting |
|
Receipt Cost Adjustment |
Cost Accounting |
Cost Accounting |
In the case where the transfer is without a manual receipt at destination, the events Transfer Order Logical Receipt and Transfer Order Logical Deliver to Expense will replace Transfer Order Receipt and Transfer Order Deliver to Expense respectively.
Analysis
Receipt Accounting and Cost Accounting create accounting entries for the transfer of goods.
Accounting Entries
This table describes the receipt and cost accounting entries for the transfer order with manual receipt at expense destination.
|
Subledger |
Event |
Inventory Org/VU |
Accounting Line |
Cost Element |
Amount in USD (+Dr/-Cr) |
Basis of Amount |
|---|---|---|---|---|---|---|
|
Cost Accounting |
Miscellaneous Receipt |
M1 |
Inventory |
Material |
+ 120.00 |
Transaction Cost |
|
Cost Accounting |
Miscellaneous Receipt |
M1 |
Offset |
Material |
- 120.00 |
Transaction Cost |
|
Cost Accounting |
Transfer Order Issue |
M1 |
Trade in Transit |
Material |
+ 120.00 |
Current Item Cost |
|
Cost Accounting |
Transfer Order Issue |
M1 |
Inventory |
Material |
- 120.00 |
Current Item Cost |
|
Cost Accounting |
Trade in Transit Issue |
M1 |
Interorganization Receivable |
Material |
+ 150.00 |
Transfer Price |
|
Cost Accounting |
Trade in Transit Issue |
M1 |
Trade in Transit |
Material |
- 120.00 |
Transfer Order Issue Cost |
|
Cost Accounting |
Trade in Transit Issue |
M1 |
Interorganization Gain/Loss |
Material |
- 30.00 |
Transfer Price - Cost |
|
Receipt Accounting |
Trade Receipt Accrual |
M2 |
Trade Clearing |
+ 150.00 |
Transfer Price |
|
|
Receipt Accounting |
Trade Receipt Accrual |
M2 |
Interorganization Payable |
- 150.00 |
Transfer Price |
|
|
Cost Accounting |
Trade in Transit Receipt |
M2 |
Trade in Transit |
Material |
+ 150.00 |
Transfer Price |
|
Cost Accounting |
Trade in Transit Receipt |
M2 |
Trade in Clearing |
Material |
- 150.00 |
Transfer Price |
|
Receipt Accounting |
Transfer Order Receipt |
M2 |
Receiving Inspection |
+ 150.00 |
Transfer Price |
|
|
Receipt Accounting |
Transfer Order Receipt |
M2 |
Trade in Transit |
- 150.00 |
Transfer Price |
|
|
Receipt Accounting |
Transfer Order Deliver to Expense |
M2 |
Expense |
+ 150.00 |
Transfer Price |
|
|
Receipt Accounting |
Transfer Order Deliver to Expense |
M2 |
Receiving Inspection |
- 150.00 |
Transfer Price |
|
|
Cost Accounting |
Receipt Cost Adjustment |
M1 |
Inventory |
Material |
+ 45.00 |
Cost Adjustment |
|
Cost Accounting |
Receipt Cost Adjustment |
M1 |
Offset |
Material |
- 45.00 |
Cost Adjustment |
|
Cost Accounting |
Transfer Order Issue |
M1 |
Trade in Transit |
Material |
+ 45.00 |
Propagated Cost Adjustment |
|
Cost Accounting |
Transfer Order Issue |
M1 |
Inventory |
Material |
- 45.00 |
Propagated Cost Adjustment |
|
Cost Accounting |
Trade in Transit |
M1 |
Interorganization Receivable |
Material |
+ 45.00 |
Propagated Cost Absorbed to Gain/Loss |
|
Cost Accounting |
Trade in Transit |
M1 |
Trade in Transit |
Material |
- 45.00 |
Propagated Cost Absorbed to Gain/Loss |
|
Cost Accounting |
Trade in Transit |
M1 |
Interorganization Gain/Loss |
Material |
+ 45.00 |
Propagated Cost Absorbed to Gain/Loss |
|
Cost Accounting |
Trade in Transit |
M1 |
Interorganization Receivable |
Material |
- 45.00 |
Propagated Cost Absorbed to Gain/Loss |
Transfer price once established doesn't get updated. Therefore, the propagated cost adjustment gets recorded against the interorganization gain/loss.
|
|
Transfer Price |
Cost of Shipment |
Interorganization Gain/Loss |
|---|---|---|---|
|
Before Cost Propagation |
150.00 |
120.00 |
30.00 |
|
After Cost Propagation |
150.00 |
165.00 (120.00 + 45.00) |
- 15.00 (30.00 - 45.00) |