Example of Accounting of Interorganization Transfers Across Business Units
This example illustrates:
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Transactions that are captured in Oracle Supply Chain Financial Orchestration and interfaced to Oracle Receipt Accounting and Oracle Cost Accounting.
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Accounting entries that Receipt Accounting and Cost Accounting generate for the transfer of goods across profit center business units.
Scenario
China Ltd. ships the goods to US Inc. The organizations are in two different profit center business units.
Transactions from 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:
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China Ltd. acquires goods locally at the cost of USD 50, plus USD 10 overhead on the receipt of goods.
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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 No.
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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.
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China Ltd. books a profit of USD 40 (USD 100 transfer price - USD 50 acquisition cost - USD 10 overhead).
Analysis
Receipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.
Accounting Entries
The following figure illustrates accounting entries for the shipment from legal entity China Ltd. to legal entity US Inc.
Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.
The following table describes the distributions:
|
Subledger |
Event Type |
Accounting Line Type |
Amount in Functional Currency +Dr/-Cr |
Functional Currency |
Cost Element |
Basis of Amount |
|---|---|---|---|---|---|---|
|
Cost Accounting |
In-Transit Shipment |
Trade In-Transit |
50 |
USD |
Material |
Current Cost |
|
Cost Accounting |
In-Transit Shipment |
Trade In-Transit |
10 |
USD |
Overhead |
Current Cost |
|
Cost Accounting |
In-Transit Shipment |
Inventory |
-50 |
USD |
Material |
Current Cost |
|
Cost Accounting |
In-Transit Shipment |
Inventory |
-10 |
USD |
Overhead |
Current Cost |
|
Cost Accounting |
Trade In-Transit Issue |
Interorganization Receivable |
100 |
USD |
Material, Overhead |
Transfer Price |
|
Cost Accounting |
Trade In-Transit Issue |
Trade In-Transit |
-50 |
USD |
Material |
Current Cost |
|
Cost Accounting |
Trade In-Transit Issue |
Trade In-Transit |
-10 |
USD |
Not applicable |
Internal Markup (Transfer Price minus Current Cost) |
|
Cost Accounting |
Trade In-Transit Issue |
Interorganization Gain/Loss |
-40 |
USD |
Not applicable |
Internal Markup |
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 distributions.
|
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 |
Interorganization Payable |
-100 |
USD |
Not applicable |
Transfer Price |
|
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
50 |
USD |
Material |
Sending Organization Cost |
|
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
10 |
USD |
Overhead |
Sending Organization Cost |
|
Cost Accounting |
Trade In-Transit Receipt |
Trade In-Transit |
40 |
USD |
Profit in Inventory |
Internal Markup |
|
Cost Accounting |
Trade In-Transit Receipt |
Trade Clearing |
-100 |
USD |
Material, Overhead, and Profit in Inventory |
Transfer Price |
|
Receipt Accounting |
Interorganization Receipt |
Receiving Inspection |
100 |
USD |
Not applicable |
Transfer Price |
|
Receipt Accounting |
Interorganization Receipt |
Trade In-Transit |
-100 |
USD |
Not applicable |
Transfer Price |
|
Cost Accounting |
Interorganization Delivery |
Inventory |
50 |
USD |
Material |
Sending Organization Cost |
|
Cost Accounting |
Interorganization Delivery |
Inventory |
10 |
USD |
Overhead |
Sending Organization Cost |
|
Cost Accounting |
Interorganization Delivery |
Inventory |
40 |
USD |
Profit in Inventory |
Internal Markup |
|
Cost Accounting |
Interorganization Delivery |
Receiving Inspection |
-100 |
USD |
Material, Overhead, and Profit in Inventory |
Transfer Price |