2Receipt Accounting

This chapter contains the following:

Oracle Fusion Receipt Accounting is used to create, manage, review, and audit purchase accruals. It includes the following features:

  • Create Receipt Accounting Distributions. Create accounting distributions for receipts of accrue at receipt purchase orders.

  • Review Receipt Accounting Distributions. Review the accrual accounting distributions created by receipt accounting for purchase order transactions, such as receipts, returns, corrections, and matches of uninvoiced receipts to purchase orders. You can also review the accounting distributions created by receipt accounting for deliveries that are expensed rather than stored as inventory.

  • Manage Accrual Clearing Rules. Define business rules for the automatic clearing of balances in the purchase order accrual accounts, set the conditions for each rule, and set the order in which rules must be applied.

  • Match Receipt Accruals. Match purchase order receipt accruals with invoices from the payables application.

  • Clear Receipt Accrual Balances. Automatic clearing of accrual balances based on predefined rules.

  • Review Receipt Accrual Clearing Balances. Review the General Ledger accounted accrual balances on a periodic basis.

  • Adjust Accrual Clearing Balances. Review uncleared accrual balances and perform adjustments. Manually adjust or clear accrual balances to inventory valuation for accounts not covered by automatic clearing rules, or reverse such clearing adjustments.

  • Run reports and analytics for Receipt Accounting. The reports available include the following:

    • Accrual Clearing

    • Accrual Reconciliation

    • Uninvoiced Receipt Accrual

    • Receipt Accounting Period Close

    • Landed Costs

Note: You can run the Create Receipt Accounting Distributions, Match Receipt Accruals, and Match Receipt Accruals process jobs for either all your business units or for a selected business unit.

If you want to trigger these jobs using the ERP integration service, ESS web service, or job sets then use the following job definitions:

Job Name ESS Job Definition

Create Receipt Accounting Distributions

ReceiptAccrualProcessMasterEssJobDef

Match Receipt Accrual

MatchReceiptAccrualMasterEssJobDef

Clear Receipt Accruals

AccrualClearRulesMasterEssJobDef

Considerations for Accrual Settings

The key policy decision that you need to make for receipt accounting is whether or not you want to accrue at receipt. The following table outlines the points to consider for each accrual option.

Accrual Setting Points to Consider

Accrue at Receipt

  • Purchases are accrued at receipt. An accrued liability account is credited when the goods are received.

  • Optional for expense destination purchases, and mandatory for inventory purchases.

  • More accounting and more reconciliation than when accruing at period end. The receipt accounting application provides tools to help reconcile the accrued liability clearing account.

  • Accounting is more timely than when accruing at period end.

Accrue at Period End

  • The accounts payable account is credited when the supplier invoice is processed in accounts payable. Receipt accounting has a function to accrue uninvoiced receipts at period end.

  • Less accounting and less reconciliation than when accruing at receipt.

  • Accounting may be less timely than when accrued at receipt, but will be accrued by period end.

The accrual options are configured in the Procurement offering. For more information on configuring the accrual options, see the related topics section.

Use Receipt Accounting to:

  • Create accruals for purchase order receipts that are expensed or shipped to inventory.

  • Create accruals for intercompany trade flows.

  • Create receipt inspection accounting for purchase order and interorganization receipt flows.

  • Support budgetary control and encumbrance accounting

Receipt Accounting also has tools to help you reconcile the accrual clearing accounts as the accruals are offset by the accounts payable accounting when invoices are processed.

Receipt Accounting Tasks and Accounting Events

The following table describes the Receipt Accounting tasks and processes to support receipt, inventory, and manufacturing accounting, and the sequence in which the tasks should be executed.

Task Navigation Resulting Events

Transfer receipt transactions and tax determinants from Receiving to Receipt Accounting.

Scheduled Processes work area > Schedule New Process > Transfer Transactions from Receiving to Costing

  • All receiving transactions are transferred from the Receiving application to the Receipt Accounting application, along with the tax determinants and related information that is present on receipts.

  • Receipt transactions are then ready in the Receipt Accounting application for further processing.

Transfer accounts payable transactions from Payables to Receipt Accounting.

Scheduled Processes work area > Schedule New Process > Transfer Costs to Cost Management

  • All payable invoices that are accounted are transferred from the Accounts Payable application to the Receipt Accounting application.

  • Payable Invoices are then ready in the Receipt Accounting application for further processing.

Create accounting distributions for receipts of accrue at receipt purchase orders.

Receipt Accounting Work Area > Create Receipt Accounting Distributions

  • Accruals for all types of purchases

  • Accrual accounting distributions at the time of receipt or return of goods and services

  • Trade accrual distributions for global procurement, interorganization transfers, and cross-business unit shipments to customers

  • Accounting distributions for expense destination deliveries of purchases marked for accrual at receipt. These purchases are typically for services procurement, one-time item purchases, and expense usage purchases.

  • Accounting distributions for invoice variances for IPV, ERV, TRV, TERV, and TIPV

  • Staging of variances into receiving inspection for subsequent wash by the inventory and expense revaluation processes

  • Accounting distributions for inventory and expense revaluations

  • Tax amounts are recalculated for all receipt transactions. Taxes are calculated by calling the Tax application programming interface.

  • Tax accounting distributions

  • Budgetary control and encumbrance accounting. You can enable and perform budgetary control, encumbrance accounting, or both. Budgetary control and encumbrance accounting are optional tasks, and are enabled in Financials.

Create period end uninvoiced receipt accruals.

Receipt Accounting work area > Create Uninvoiced Receipt Accruals

  • Provisional expense accruals for purchases not marked for accrual at receipt

Create subledger accounting.

Receipt Accounting work area > Create Accounting

  • Journal entries for receipt accounting distributions

Review accrual distributions and tax calculations.

Receipt Accounting work area > Review Receipt Accounting Distributions

  • Review accrual distributions and tax calculations.

Clear receipt accruals.

Receipt Accounting work area > Clear Receipt Accrual Balances

  • Automatic clearing of accrual balances based on predefined rules

  • Staging of information for revaluation of inventory and expenses by cost accounting and receipt accounting processes

Generate and view reconciliation reports.

Scheduled Processes work area > Schedule New Process > Accrual Reconciliation report

Scheduled Processes work area > Scheduled Processes > Accrual Clearing report

  • Accrual Reconciliation report

  • Accrual Clearing report

Create receipt accounting distributions.

Receipt Accounting work area > Create Receipt Accounting Distributions

  • Accounting distributions for cleared accrual balances

  • Revaluation and expense adjustment entries for invoice variances or accrual clearing events that modify acquisition costs for purchases

Review uncleared accrual balances and perform adjustments.

Receipt Accounting work area > Adjust Receipt Accrual Balances

  • Staging for manual intervention for exceptions of high material value

  • Manual accrual clearing

  • Manual adjustments and reversals of prior accrual clearing adjustments

  • Automatic creation of accounting distributions for these adjustments

Match purchase order receipt accruals with invoices from payables.

Receipt Accounting work area > Match Receipt Accruals

  • Manual reconciliation of accrual balances

  • Review and audit accrual balances that were final accounted.

Review accrual clearing balances.

Receipt Accounting work area > Audit Receipt Accrual Clearing Balances

  • Audit the General Ledger accounted accrual balances on a periodic basis.

When goods are interfaced from Receiving to Oracle Fusion Receipt Accounting, Receipt Accounting recognizes the liability to the supplier, and creates accruals for receipts destined for inventory or expense. For consigned purchases, the supplier accrual is booked upon change of ownership.

Receipt Accounting then reconciles these accrual balances against the corresponding invoices from accounts payable and clears them to inventory valuation.

The following discusses receipt accruals, their reconciliation, and clearing.

Receipt Accrual Creation

When goods are received and delivered to inventory or expense destinations, the receipt accounting application creates accrued liability balances for the estimated cost of purchase order receipts. The application creates accruals for:

  • Inventory destination receipts, which are always accrued on receipt

  • Expense destination receipts, which are accrued on receipt, or at period end if the supplier invoice has not yet been processed

When it processes the supplier invoice, Accounts Payable creates the actual supplier liability and offsets the accrual balances. The accrued liability account typically has high volumes of entries going through it, and may have remaining balances that must be justified if the account payable invoice has not yet been processed; or if the Account Payable invoice has been processed, any remaining balance must be resolved and cleared. Receipt Accounting provides tools to help with this reconciliation.

Receipt Accrual Reconciliation and Clearing

Some of the remaining balance in the accrued liability account can be automatically cleared by Receipt Accounting and Cost Accounting to the appropriate purchase expense or asset account, based on your predefined clearing rules. However, some of this balance will represent uninvoiced quantities, or other discrepancies which you will want to resolve and clear manually.

Example 1: Assume that the purchase order receipt is for 100 units at $5 each; the application creates a credit to the accrued liability account in the amount of $500. When the corresponding invoice arrives from the supplier, it reflects 100 units at $6 each; the application debits the accrued liability account in the amount of $600. The difference of $100 automatically clears and flows to inventory valuation.

Example 2: Assume that the quantity received is 99.4, and the quantity on the supplier invoice is 100. The processor does not always know if that is the final invoice or if more invoices are pending for the uninvoiced quantity. If small variations are normal, you can set up rules to automatically clear small variations, while large variations are verified manually. If there is a predefined rule for the treatment of such a discrepancy, the application automatically clears the difference to inventory valuation. However if no such rule exists, then you must clear it manually.

Audit Receipt Accrual Clearing Balances

After accrual balances are cleared to the appropriate expense or asset account, you can review and audit the final accounting distributions generated by Receipt Accounting.

Define accrual clearing rules to clear accrual balances automatically. Accrual balances are often of unknown origin and unpredictable. With accrual clearing rules you can specify when accrual balances should be cleared and written off. The Clear Receipt Accrual process scans for applicable rules on the transactions, and clears the balances when rule criteria are met.

The following discusses the creation of accrual clearing rules using predefined attributes, and illustrates the results with an example.

Predefined Attributes

The following table describes the attributes that are available in the Accrual Line tree in the Conditions browser:

Attribute Name Description

Purchase Order Distribution Identifier

Purchase order structure is based on the hierarchy of purchase order header > purchase order line > purchase order schedule > purchase order distribution. The accounting for purchase order transaction is at the lowest level of purchase order distribution. The accrual and charge account codes are defined at this level. Invoices are matched and accrual is offset at the PO distribution level.

This attribute represents the PO distribution ID on the PO document.

Percentage Over-Invoiced

At each purchase order distribution level, receipt accounting tracks the original ordered quantity, total received quantity, and total invoiced quantity.

Percentage Over-Invoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) < 0 then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty

Percentage Uninvoiced

At each purchase order distribution level, receipt accounting tracks the original ordered quantity, total received quantity, and total invoiced quantity.

Percentage Uninvoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) > 0 then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty

PO Status

Status of the purchase order document. If the PO status is Finally closed, then it's treated as Closed. You can define the accrual clearing rules based on the PO Status.

PO Match Option

Invoice match option defined on the purchase order schedule. It can be PO or Receipt.

Invoice Age

Days or time since the latest invoice was recorded for a purchase order distribution.

Receipt Age

Days or time since the latest receipt was recorded for a purchase order distribution.

Over-Invoiced Quantity

When the invoiced quantity is greater than the ordered quantity, it represents the difference between the two: IF (Net Rct qty - Invoice Qty) < 0 then Over Invoiced Quantity = ABS(InvoiceQty - NetRecptQty)

Under-Invoiced Quantity

When the invoiced quantity is less than the ordered quantity, it represents the difference between the two: IF (Net Rct qty - Invoice Qty) > 0 then Under Invoiced Quantity = ABS(NetRecptQty - InvoiceQty)

Percentage PO Accrual Amount

The balance in the accrual account for a PO distribution divided by the accrual value for the ordered quantity: Sum(accruals in CMR and AP)/PO amount

PO amount = Net Order Qty * PO Price

Accrual Clear Amount

Value of balance in an accrual account for a PO distribution. Net of accrual amount credited in Receipt Accounting and that debited in Accounts Payable. To clear debit balance enter a positive number and for credit balance enter a negative number.

Total Invoice Accrual Amount

Absolute value of balance (net of invoices and debit memos) in an accrual account in Payables Subledger for a PO distribution.

Total Receipt Accrual Amount

Absolute value of balance (net of receipts, corrections and returns) in an accrual account in Receipt Accounting Subledger for a PO distribution.

PO Distribution Number

This attribute represents the PO distribution number on the PO document, such as 1, 2, and so on, and is different from the Purchase Order Distribution Identifier.

Supplier

Supplier name on the purchase order document.

Supplier Site

Supplier site code on the purchase order document.

Item

Item on the purchase order line.

Item Category

Item category on the purchase order line.

Accrual Amount Difference

Difference in accrual amount credited in Receipt Accounting and that debited in Accounts Payable.

Purchase Order Schedule Identifier

The identifier of the PO Schedule that uniquely identifies a PO Schedule number of PO.

Invoice Accrual Amount

Accrual amount debited on invoice in Accounts Payable for the item price.

Invoice Nonrecoverable Tax Amount

Accrual amount debited on invoice in Accounts Payable for the nonrecoverable tax.

PO Line Number

Line number on the Purchase Order Line.

Nonrecoverable Tax Amount Difference

Difference in the nonrecoverable tax amounts booked in Receipt Accounting and Accounts Payable for a PO Distribution.

Inventory Organization Code

Code that uniquely identifies a Inventory Organization.

PO Total Amount

Total amount on the Purchase Order.

PO Number

Unique identifier for the Purchase Order.

PO Quantity

Quantity ordered from the Purchase Order.

Purchase Basis

The basis on which the purchase is done.

Received Accrual Amount

Amount received for PO distribution.

Received Nonrecoverable Tax Amount

Nonrecoverable tax in the amount received for PO distribution.

PO Shipment Number

Schedule in purchase order indicating place of delivery.

Invoice Quantity

Quantity invoiced for PO Distribution.

Invoice Recoverable Tax Amount

Recoverable tax amount on the invoice for a PO distribution.

Received Quantity

Quantity received for a PO distribution.

Received Recoverable Tax Amount

Recoverable tax amount on the receipt for a PO distribution.

Procurement Business Unit

Business unit performing procurement business function.

Purchase Order - Deliver to Location

Delivery location on the purchase order schedule indicating place of delivery.

Profit Center Business Unit

Indicates the business unit which serves as the profit center.

PO Destination Type

Destination type on the PO which can be inventory, expense, manufacturing or drop ship.

Item Description

Description of the item on the purchase order line.

Example

This example illustrates the distributions for a purchase order with associated receipts and invoices.

The following table describes the purchase order details:

PO Header Supplier Supplier Site Status

PO#1234

Advanced Network Devices

New York

Open/Close/Final Close

The following table describes the purchase order lines:

Item Item Category PO Price Ordered Quantity

AS54888

Raw Materials

100 USD

100 EA

The following table describes the purchase order schedules:

Schedule Order Quantity Match Option Status

1

100 EA

Order or Receipt

Open

The following table describes the receipts and invoices:

Receipts Ordered Quantity Received Quantity Invoiced Quantity Accrual Account Status

Receipt 1

60

58

55

01-2210

Open

Receipt 2

40

40

45

01-2220

Open

The following table describes the purchase order distributions and accrual balances:

PO Distribution CMR Accrual Amount (A) AP Accrual Account (B) Accrual Clear Amount (C) = (A-B) Under-Invoiced Quantity Over-Invoiced Quantity Percentage Under-Invoiced Percentage Over-Invoiced Percentage PO Accrual Amount (C)/Ordered Quantity*PO Price

Distribution 1

58*100 USD = 5800 USD

55*100 USD = 5500 USD

300 USD

60 - 55 = 5

Not Applicable

5/58*100 = 8.62%

Not Applicable

300 USD/60*100 = 5%

Distribution 2

40*100 USD = 4000 USD

45*100 USD = 4500 USD

(500) USD

Not Applicable

45-40 = 5

Not Applicable

5/40*100 = 12.50 %

500 USD/40*100 = 12.50 %

The following table describes the Rule 1:

Attribute Operator Value Conditions

PO Status

=

OPEN

And

Percentage Under-Invoiced

Less Than

10%

Not Applicable

Results: The PO Status and the Percentage Under-Invoiced values meet the criteria of Rule 1; therefore the accrual balance of 300 USD is automatically cleared.

The following table describes the Accrual Amounts Cleared Based on Rule 1:

PO Distribution CMR Accrual Amount (A) AP Accrual Account (B) Accrual Clear Amount (C) = (A-B) Under-Invoiced Quantity Over-Invoiced Quantity Percentage Under-Invoiced Percentage Over-Invoiced Percentage PO Accrual Amount (C)/Ordered Quantity*PO Price

Distribution 1

58*100 USD = 5800 USD

55*100 USD = 5500 USD

300 USD

60 - 55 = 5

Not Applicable

5/58*100 = 8.62%

Not Applicable

300 USD/60*100 = 5%

The following table describes the Rule 2:

Attribute Operator Value Conditions

PO Status

=

OPEN

And

Accrual Clear Amount

Less Than

Absolute (1000) USD

Or

Percentage Under-Invoiced

Less Than

10%

Or

Percentage Over-Invoiced

Less Than

10%

Not Applicable

Results: The PO Status, Percentage Under-Invoiced, and Accrual Clear Amount Absolute values meet the criteria of Rule 2; therefore the accrual balances of 300 USD and (500) USD are automatically cleared.

The following table describes the Accrual Amounts Cleared Based on Rule 2:

PO Distribution CMR Accrual Amount (A) AP Accrual Account (B) Accrual Clear Amount (C) = (A-B) Under-Invoiced Quantity Over-Invoiced Quantity Percentage Under-Invoiced Percentage Over-Invoiced Percentage PO Accrual Amount (C)/Ordered Quantity*PO Price

Distribution 1

58*100 USD = 5800 USD

55*100 USD = 5500 USD

300 USD

60 - 55 = 5

Not Applicable

5/58*100 = 8.62%

Not Applicable

300 USD/60*100 = 5%

Distribution 2

40*100 USD = 4000 USD

45*100 USD = 4500 USD

(500) USD

Not Applicable

45-40 = 5

Not Applicable

5/40*100 = 12.50 %

500 USD/40*100 = 12.50 %

The accrual cutoff date enables you to control when backdated receipts are accounted.

The following describes how Receipt Accounting uses offset days to determine the accrual cutoff date for processing backdated receipts.

Using Offset Days

Offset days define the grace period for processing backdated transactions in the prior GL period. You can indicate the number of offset days for a business unit in the Receipt Accounting work area, on the Manage Accrual Clearing Rules page, Manage Accrual Cutoff Rules tab. Receipt Accounting uses the offset days to calculate the accrual cutoff date.

For example, assume the number of offset days is 3, then the accrual cutoff date for processing receipts in the October GL period is November 3:

  • A receipt that is backdated to October 31 but is processed on November 3 is accounted in October

  • A receipt that is backdated to October 31 but is processed on November 4 is accounted in the November GL period

If the offset days are not defined, then the backdated receipts are processed in the prior GL period until the period is closed.

Overview of Accrual Reversal

Use the Create Accrual Reversal Accounting process in the Scheduled Processes work area to reverse accrual journal entries. You can schedule this process to run automatically at predefined intervals, or run it on demand. You can define how and when accrual reversals are automatically performed by:

  • Indicating that an accounting event is eligible for accrual reversal.

  • Determining when the accrual is reversed.

  • Scheduling the Create Accrual Reversal Accounting process to generate the reversal entries.

For more information on accrual reversal, prerequisites, and step-by-step instructions, see the links in the Related Topics section.

Close a Receipt Accounting Period

Watch video

Watch: This video tutorial shows you how to process receipt accruals in preparation for the closing of a receipt accounting period. It also shows you how to schedule receipt accounting processes to run automatically. The content of this video is also covered in text topics.

This procedure shows you how to process receipt accruals in preparation for the closing of a receipt accounting period. You can schedule Receipt Accounting to automatically process receipts that are set to be accrued on receipt. If receipts aren't marked for automatic accrual on receipt, you can run the Create Uninvoiced Receipt Accruals process. This will accrue all receipts that aren't yet invoiced in Accounts Payable.

You can access the following Receipt Accounting processes in the Scheduled Processes work area:

  • Transfer Costs to Cost Management

  • Transfer Transactions from Receiving to Costing

  • Accrual Clearing Report

  • Accrual Reconciliation Report

  • Create Accrual Reversal Accounting

You can access the following Receipt Accounting processes in the Receipt Accounting work area:

  • Create Receipt Accounting Distributions

  • Clear Receipt Accrual Balances

  • Create Uninvoiced Receipt Accruals

  • Create Entries for Receipt Accounting

  • Match Receipt Accruals

You can schedule the processes, or you can run them on demand.

This procedure covers the following tasks:

  • Transferring Cost Data to Receipt Accounting

  • Creating Receipt Accounting Distributions

  • Creating Uninvoiced Receipt Accruals

Transferring Cost Data to Receipt Accounting

This task covers processes that should be run in the Scheduled Processes work area before closing a receipt accounting period.

To transfer cost data to Receipt Accounting, complete the following steps.

  1. From the Navigator menu, select Scheduled Processes.

  2. Select the processes that you want to run or schedule. The following receipt accounting processes should be completed before closing a receipt accounting period:

    • Transfer Costs to Cost Management. This process transfers invoice information to Receipt Accounting.

    • Transfer Transactions from Receiving to Costing. This process transfers receipt information to Receipt Accounting.

  3. Review the Status column to confirm that the processes have completed successfully.

Creating Receipt Accounting Distributions

This task creates receipt accounting distributions in preparation for the closing of a receipt accounting period. You can schedule this process, or run it on demand.

To create receipt accounting distributions, complete the following steps.

  1. Navigate to the Receipt Accounting work area, and select the Create Receipt Accounting Distributions task.

  2. To run the receipt accounting processes for all the business units that you have access to, leave the Bill-to Business Unit empty. However, if you want to run them only for a particular business unit, select it from the Bill-to Business Unit drop-down list.

    Note: When you run this process, the application creates one master job and a child job for each of the profit center BU that's associated with the Bill to Business Unit.
  3. Click on the Schedule tab, and select the option Run Using a Schedule.

  4. Complete the Frequency, Start Date, and End Date fields, and click Submit.

  5. From the tasks menu, select the Review Receipt Accounting Distributions task to view the receipt accounting distributions that were created.

  6. On the Review Receipt Accounting Distributions page, search for transactions that have a Transaction Status of Final Accounted and a Transaction Type of Receipt into Receiving Inspection.

  7. Click on the Distributions tab, and click the Detach button to view the details on a new page.

  8. Click on the Journal Entries tab to view the journal entries for the accounting distributions. Click the Detach button to view the details on a new page.

Creating Uninvoiced Receipt Accruals

If receipts aren't marked for automatic accrual on receipt, you can run the Create Uninvoiced Receipt Accruals process. This will accrue all receipts that aren't yet invoiced in Accounts Payable. You can run this job more than once during the period close process. At a minimum it should be run after the Accounts Payable period is closed and all the Accounts Payable invoices are interfaced to Cost Management, and before the General Ledger period is closed. For period end accrual, the accounted date always falls on the last date of the period selected.

You can specify a cutoff date within the accounting period for accounting purposes. Then, period end accrual for uninvoiced receipts is created on the cutoff date. This enables you to ensure that when you have multiple ledgers with different calendar period end dates, the period end accrual is booked in the same period that they're accrued.

When you have a primary general ledger and multiple secondary ledgers with different calendar periods, do the following:

  • If there are two ledgers running on different calendar period end dates, choose the lesser period end date as the cutoff date. For example, if the secondary ledger ends on the 27th day of the month and the fiscal ledger ends on the 30th day, choose the 27th day as the cutoff date.

  • If you're specifying a cutoff date, ensure that it's set to a date that's before the period end date. Else, you will get errors.

  • If you have configured the application to automatically reverse and post in general ledgers, the reversal accounting entries are automatically posted to the journals. However, if you haven't opted for automatic reversal, you must manually reverse the period-end accrual that was already booked and post it in the next period. For more information about configuring automatic reversal in general ledgers, see the Oracle Financials Cloud Using General Ledger guide on the Oracle Help Center.

  • Once the accounting period is closed, in all ledgers, move the cutoff date to a date that's in the next period.

To create uninvoiced receipt accruals, complete the following steps.

  1. Navigate to the Receipt Accounting work area, and select the Create Uninvoiced Receipt Accruals task.

  2. On the Create Uninvoiced Receipt Accruals page, complete the Bill-to Business Unit and Accounting Period fields.

  3. Select a Period End Accrual Cutoff and Accounting Date. If you don't select any date, the last date of the accounting period is taken as the cutoff and accounting date.

  4. Click Submit.

  5. On the Review Receipt Accounting Distributions page, search for transactions with a Transaction Type of Period End Accrual.

  6. Scroll down and select the Distributions and Journal Entries tabs to view the accounting details.

Cost Management for Internal Material Transfers

Cost Management supports receipt accounting and cost accounting for requisition based internal transfers for items going to either an expense or an inventory destination, with or without a receipt at the destination.

Self-Service Procurement, Supply Chain Financial Orchestration, and Cost Management have been integrated to provide an estimated transfer price based on the internal cost of the items on the requisition. A transfer price is required on the internal material transfer requisition line for approval, budgetary control, and encumbrance accounting.

Cost Management supports requisition-sourced transfer orders going to expense destinations with multiple distributions and different expense accounts. Based on the account defined at the distribution level, Cost Management will book the expense for the appropriate account. In the case of transfers to expense destinations where a receipt is not required, new logical receipt and delivery transactions are created in Cost Management, similar to the physical events created with receipt expense destination transfers when a receipt is required. Budgetary control and encumbrance accounting are supported for expense destination internal transfer orders.

Budgetary Control

You can ensure that budget funds are available before a requisition for an internal transfer is submitted for approval. Depending on your budgetary control configuration, the funds will be reserved either at the time the requisition is submitted for approval, or when the requisition is approved. Insufficient funds override rules and approvers can be configured as part of budgetary control setup. Cost Management liquidates the commitment and books an expenditure at the time of delivery when a receipt is required, or at the time of shipment by creating a virtual receipt when the receipt is not required. The Requisition for Internal Material Transfer transaction subtype has been added to enable budgetary control of requisitions for internal material transfers.

Encumbrance Accounting

Encumbrance accounting entries are created for transactions subject to budgetary control and encumbrance accounting when the Create Accounting process is run. Cost Management liquidates the reserve for the encumbrance account and creates journal entries for the actual expense value.

Receipt Accounting for Outside Processing

Receipt Accounting supports manufacturing outside processing, where one or more work order operations are outsourced to a supplier who provides specialized manufacturing services. Outside processing transactions are accounted in Receipt Accounting under the Destination Type of Manufacturing.

Accounting Distributions Created for Outside Processing

Cost Accounting supports the Purchase Order Receipt into Manufacturing transaction type for the costing of outside processing items delivered to Manufacturing. The transaction processing depends on the cost method, as follows.

  • Actual or Average cost method. The purchase price multiplied by the number of items received is added to the work in process valuation.

  • Standard cost method. The standard cost multiplied by the number of items received is added to the work in process valuation. The difference between the purchase price and the purchase order is accounted as a purchase price variance.

Receipt Accounting for Manual Procurement of Items for Work Orders

Receipt Accounting supports creating accruals and processing of purchase order receipts for items directly procured from a maintenance or manufacturing work order and are received against the Work Order destination type.

Accounting Distributions for Manual Procurement of Items for Work Orders

For all purchase orders with the Work Order destination type, these accounting entries are created for the Receipt transaction.

Accounting Line Type Transaction Type

Receiving Inspection

Debit

Accruals

Credit

Global drop shipment is an order fulfillment strategy where the seller does not keep products in the inventory. The seller relies on suppliers or contract manufacturers to build, store, and ship orders to the customers. When a customer places an order for a drop shipped product, the seller issues a purchase order for the item. The seller also provides instructions to the suppliers to ship directly to the customer. The supply chain financial orchestration process routes the orchestration flow of drop shipments through one or more business units within the corporation. These business units can belong to the same legal entity or may occur across legal entities.

The financial flow starts when the supplier sends the advanced shipment notice, or when the supplier matches the invoice with the purchase order for the drop shipment. The flow creates cost accounting distributions and intercompany invoices for the ownership transfers that occur between parties, including supplier, one or more organizations, and the customer. Supply Chain Financial Orchestration sends a request to the receiving system to create a drop ship receipt on the supplier invoice that references the purchase order. Receiving creates a logical receipt, and then notifies Order Management to start customer billing. This automation helps to reduce billing cycle time.

Receipt Accounting Distributions for Drop Shipments

You can review the receipt accounting distributions for drop shipments on the Review Receipt Accounting Distributions page. The following accounting line types are created for drop shipment events.

Event Application Source Accounting Line Type Transaction Type

Drop Ship Receipt

Receiving

Receiving Inspection

Debit

Drop Ship Receipt

Receiving

Accrual

Credit

Global Procurement

Overview of Global Procurement Trade Accounting

Companies often design their legal structure for financial efficiency as well as efficiency in the physical flow of goods through the supply chain. Typically, the most optimal financial movement of goods is different from the most optimal physical movement of goods. For example, the purchase requisitions from a group of subsidiary companies could be routed through a single international purchasing company who deals with the suppliers. As a result, the legal owners of the purchasing organizations will be different from the legal owners of the receiving organizations. This form of purchasing is known as global procurement.

The following discusses:

  • Global procurement trade flows

  • Trade agreements and accounting rule sets

  • Agreements converted to purchase orders

  • Commonly used terms

Global Procurement Trade Flows

This figure illustrates a typical global procurement trade flow, in this case between a US corporation and its China supplier. The US corporation has a central procurement business unit which creates trade agreements and purchase orders on behalf of its subsidiaries.

Global procurement overview

The China supplier drop ships the goods directly to the US receiving inventory organization M1. However for legal and accounting purposes, the trade flows from the China supplier through the China sold-to legal entity (China Ltd), to the US receiving legal entity (US Inc). For management and profit tracking purposes, the trade flows from the China sold-to profit center business unit CN BU to the US receiving profit center business unit US West.

Financial Trade Agreements and Accounting Rule Sets

A trade agreement defines the parties in the trade relationship. In this example the trade agreement is between the US corporation and the China supplier, and it defines the buying, selling, sold-to, and receiving legal entities, profit center business units, inventory organizations, and trade organizations.

The accounting rule sets define source documents and accounting that is required in the legal and financial flow, also known as the ownership change event flow. A rule set is associated with a financial route, and financial routes can have different accounting rule sets.

The following illustrates a trade agreement setup for the US corporation:

  • Agreement #: GP001

  • Type: Procurement

  • Supplier Ownership Change: ASN (Advance Shipment Notice)

  • Primary Trade Relationship #: PTR1

  • Sold-to Legal Entity: China Ltd.

  • Sold-to Business Unit: CN BU

  • Deliver-to Legal Entity: US Inc.

  • Deliver-to Business Unit: US West

  • Financial Trade Relationship #: FTR1

  • From Legal Entity: China Ltd.

  • From Business Unit: CN BU

  • From Organization: CN INV ORG

  • To Legal Entity: US Inc.

  • To Business Unit: US West

  • To Organization: M1

  • Profit Tracking: Yes

  • Invoicing: Yes

  • Obligation Currency: CNY

  • Rate Type: Corporate

  • Transfer Pricing: Purchase Order - 10%

  • Purchase Order/Sales Order: No

Trade Agreement Converted to Purchase Orders

The trade agreement is used to create purchase orders. The following illustrates a purchase order created under the US Corporation trade agreement # GP001:

  • Document Type: Purchase Order

  • Document #: PO-GP001

  • Document Line #: 1

  • Document Line Detail: 1.1

  • Document Line Distribution #: 1.1.1

  • Item: SFO-CST_ASSET

  • Quantity: 100

  • UOM: Each

  • Currency: CNY

  • Price: 650

  • Sold-to Legal Entity: China Ltd.

  • Trade Organization: CN INV ORG

  • Deliver-to Organization: M1

  • Primary Trade Relationship #: PTR1

Global Procurement Common Terms

The following table describes the terms commonly used in global procurement trading:

Terms Definitions and Rules

buy-sell relationship

Relationship between two business units where one acts as a buyer and the other as a seller of goods or services. The seller records the revenue, cost of sale, and receivables. The buyer records the payables and inventory or expense. A buy-sell trade between internal business units is settled through the transfer price.

asset item

Inventory item where the cost of acquisition is valued as an asset on the balance sheet. The inventory cost is expensed when it is consumed or sold.

expense item

Inventory item whose cost of acquisition is booked as an expense.

transfer price

The unit price that one business unit charges another for goods or services traded within the enterprise. The transfer price is typically based on the price list, cost plus or minus, or purchase price plus or minus.

financial route

Designates how financial transactions are settled, can be different from the physical route, and may involve one or more intermediary nodes. The intermediary nodes are internal business units that are not part of the physical supply chain transaction but are part of the financial route.

Incoterms

A series of sales terms in international trade, used to define the rights and obligations of the trade partners with respect to the delivery of goods sold. Incoterms are used to divide transaction costs and responsibilities between buyer and seller, and to reflect transportation practices.

intercompany profit and loss

The internal profit or loss arising out of trade among business units in the enterprise. These internal profits and losses are used for internal management but are typically eliminated when producing the enterprise consolidated financial statements for external stakeholders.

intercompany trade

The trade of goods and services between organizations belonging to different legal entities within a conglomerate.

intracompany trade

The trade of goods or services between two internal organizations within a legal entity.

ownership change event

The transfer of title of goods and services from one party to another. This results in accounting and the creation of financial documents such as Accounts Receivable and Accounts Payable invoices.

price list

Contains the basic list information and pricing attributes for items or product groups.

pricing option

A method to compute the transfer price based on cost, source document price, or price list.

profit center

A business unit that operates with its own income statement and reports to the legal entity.

purchasing trade organization

The inventory organization reporting to the sold-to legal entity identified in the purchase order. This organization is used for cost accounting the transactions in the sold-to legal entity.

qualifiers

Business attributes of a supply chain document or transaction that determine the applicability of the trade agreement.

supply chain financial orchestration agreement

An agreement between the legal entities, business units, and trade organizations of a corporate group. The agreement defines the parties in the trade relationship and the financial settlement process.

trade distributions

Subledger entries created by Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting for Oracle Fusion Supply Chain Financial Orchestration trade transactions.

procurement business unit

Has central responsibility for the creation of trade agreements and purchase orders on behalf of legal entities and business units under the holding company.

Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting create accounting distributions for trade transactions in the supply chain. These accounting distributions are associated with two kinds of business units: profit center business units and bill-to business units.

The following explains the different business units associated with trade transactions and the assumptions used to derive them.

Profit Center Business Unit

A profit center business unit reports to a single legal entity and is responsible for measuring the profitability of inventory organizations under that legal entity. All trade transactions are associated with a profit center business unit which, in turn, is derived from the inventory organization that owns the trade transaction. Cost Accounting uses the profit center business unit to process all inventory transactions.

Bill-to Business Unit

A bill-to business unit is used to process receipt accruals in a trade transaction, and is the same business unit that processes the invoice in Accounts Payable. For supplier accruals, the bill-to business unit is derived from the purchase order. For intercompany accruals, the bill-to business unit is derived from the profit center business unit.

Receipt Accounting and Cost Accounting process and create accounting distributions for trade transactions in the supply chain.

The following explains how to review the results of global procurement trade transactions processed by Receipt Accounting and Cost Accounting.

Receipt Accounting Results

In the Receipt Accounting work area, access the Review Receipt Accounting Distributions page. On this page you can view accounting details by Source Document Number and Source Document Line Number. Source documents are purchase order schedules, transfer orders, and sales orders.

Cost Accounting Results

In the Cost Accounting work area:

  • Access the Review Item Costs page. On this page you can view a breakdown of the cost of items, cost comparisons of items across organizations, and cost trends over time.

  • Access the Review Cost Accounting Distributions page. On this page you can view accounting details of trade transactions by Reference Document Number.

Receipt Accounting Examples

Example of Consigned Inventory Accounting in a Simple Purchase Order

When an organization receives a shipment of goods under a consignment purchase order, the ownership of the goods remains with the supplier even after they are in the custody of the buyer. Ownership passes from the supplier to the buyer when the inventory is consumed.

When the inventory is consumed, two events occur: First there is a transfer of ownership to the buyer and the consigned goods become owned inventory for a brief period of time, then the owned inventory is depleted.

The following example illustrates:

  • The physical and financial flow of consigned inventory under a consigned purchase order (PO).

  • The transaction that flows from Oracle Fusion Inventory Management into Oracle Fusion Cost Accounting and Oracle Fusion Receipt Accounting.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

Scenario

Supplier Advanced Network Devices (AND-Fresno) ships the goods under a consigned purchase order to inventory organization M1-Seattle.

The following diagram illustrates the flow of consigned inventory:

The diagram describes the consigned inventory flow
for a simple purchase order. The process flow is fully described in
the surrounding text.

Transaction from Oracle Fusion Inventory Management

Cost Accounting and Receipt Accounting receive the following transaction from Inventory:

  • Supplier Advanced Network Devices (AND-Fresno).

  • Consignment Purchase Order #1000.

  • Purchase Order price USD 100.

  • Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed.

  • Receipt and put away transactions performed in M1-Seattle inventory organization in consigned status.

  • When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M1-Seattle.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following diagram illustrates the accounting entries for the forward flow from supplier AND-Fresno to inventory organization M1-Seattle.

Forward flow accounting entries

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seattle for the receipt of goods.

The following table describes those accounting entries:

Subledger Event Type Accounting Line Type Transaction Type Amount in Functional Currency Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

Debit

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

Credit

100

USD

PO Price

Cost Accounting

PO Delivery

Consigned Inventory

Debit

100

USD

PO Price

Cost Accounting

PO Delivery

Consigned Clearing

Credit

100

USD

PO Price

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle.

The following table describes those accounting entries:

Subledger Event Type Accounting Line Type Transaction Type Amount in Functional Currency Functional Currency Cost Element Basis of Amount

Cost Accounting

Transfer to Owned Issue

Consigned Inventory Offset

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned Issue

Consigned Inventory

Credit

100

USD

Material

PO Price

Receipt Accounting

Consigned Receipt Consumption

Consigned Accrual

Debit

100

USD

Not applicable

PO Price

Receipt Accounting

Consigned Receipt Consumption

Consigned Clearing

Credit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

Debit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt Accrual

Accrual

Credit

100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

Debit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

Credit

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Inventory Valuation

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Trade In-Transit

Credit

100

USD

Material

PO Price

Organization M1-Seattle returns goods to supplier AND-Fresno.

This figure illustrates the accounting entries for the return flow from M1-Seattle to AND-Fresno.

Accounting entries for the return flow of consigned
inventory

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seattle for the change of ownership from M1-Seattle to supplier AND-Fresno.

The following table describes the accounting entries for the change in ownership.

Subledger Event Type Accounting Line Type Transaction Type Amount in Functional Currency Functional Currency Cost Element Basis of Amount

Cost Accounting

Transfer to Consigned (Receipt)

Consigned Inventory

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to Consigned (Receipt)

Consigned Inventory Offset

Credit

100

USD

Material

PO Price

Receipt Accounting

Consigned Receipt Consumption

Consigned Clearing

Debit

100

USD

Not applicable

PO Price

Receipt Accounting

Consigned Receipt Consumption

Consigned Accrual

Credit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Return Accrual

Accrual

Debit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Return Accrual

Trade Clearing

Credit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade In-Transit Return

Trade Clearing

Debit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade In-Transit Return

Trade In-Transit

Credit

100

USD

Not applicable

PO Price

Cost Accounting

Transfer to Consigned Issue

Trade In-Transit

Debit

100

USD

Material

PO Price

Cost Accounting

Transfer to Consigned Issue

Cost Variance*

Debit

5

USD

Not applicable

Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance.

Cost Accounting

Transfer to Consigned Issue

Inventory Valuation

Credit

105

USD

Material

Current Cost

* Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance.

Receipt Accounting generates accounting entries under inventory organization M1-Seattle for the return of consigned goods from M1-Seattle to AND-Fresno.

The following table describes those accounting entries:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Receipt Accounting

PO Return to Supplier

Consigned Accrual

100

USD

PO Price

Receipt Accounting

PO Return to Supplier

Consigned Clearing

-100

USD

PO Price

Receipt Accounting

PO Return to Receiving

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Return to Receiving

Consigned Inventory

-100

USD

PO Price

Example of Consigned Inventory Accounting of an Interorganization Transfer Across Business Units

An interorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain. The following is an example of accounting performed by Oracle Fusion Cost Accounting and Oracle Fusion Receipt Accounting in a simple purchase order with an interorganization transfer of goods across profit center business units. The goods remain in consigned status until ownership changes in the receiving organization.

This example illustrates:

  • Transactions captured in Oracle Fusion Inventory and interfaced to Cost Accounting and Receipt Accounting.

  • Transactions captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Cost Accounting and Receipt Accounting.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

Scenario

Supplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M1-Seattle, who in turn transfers the consigned goods to inventory organization M2-LA. Inventory organizations, M1-Seattle and M2-LA, are in different business units.

Image of consigned inventory interorganization
transfer across business units

Interfaced Transactions

Oracle Fusion Inventory sends the following transactions to Receipt Accounting and Cost Accounting:

  • Supplier Advanced Network Devices (AND-Fresno).

  • Consignment Purchase Order #1000.

  • Purchase Order price USD 100.

  • Ship-to organization is M1-Seattle which is the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed.

  • Receipt and put away transactions performed in M1-Seattle inventory organization in consigned status.

  • Goods transferred in consigned status from inventory organization M1-Seattle to M2-LA.

  • When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M2-LA through M1-Seattle.

Oracle Fusion Supply Chain Financial Orchestration sets up the trade agreement, accounting rule sets, and associated purchase orders, and the information flows into Receipt Accounting and Cost Accounting. The transfer from M1-Seattle to M2-LA is based on trade agreement SFO #123 which has the following terms:

  • Intercompany transfer price is USD 120.

  • Intercompany invoicing is set to Yes.

  • Profit tracking is set to Yes.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

Diagram of accounting entries for the forward flow
of consigned inventory in interorganization transfer across business
units

Receipt Accounting generates distributions under inventory organization M1-Seattle for the shipment from supplier AND-Fresno to M1-Seattle.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Inventory

100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Clearing

-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M1-Seattle for the interorganization transfer from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Cost Accounting

In-Transit Shipment

Consigned In-Transit

100

USD

PO Price

Cost Accounting

In-Transit Shipment

Consigned Inventory

-100

USD

PO Price

Cost Accounting

Consigned Trade In-Transit Issue

Consigned Receivable

100

USD

PO Price

Cost Accounting

Consigned Trade In-Transit Issue

Consigned In-Transit

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the interorganization transfer from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Receipt Accounting

Consigned Trade Receipt Accrual

Trade Clearing

100

USD

PO Price

Receipt Accounting

Consigned Trade Receipt Accrual

Consigned In-Transit

-100

USD

PO Price

Receipt Accounting

Consigned Trade In-Transit Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

Consigned Receipt Consumption

Trade Clearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned Inspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned In-Transit

-100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inspection

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle.

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

PO Price

Receipt Accounting

Trade Receipt Accrual

Accrual

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Intercompany Cost of Goods Sold

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change of ownership from M1-Seattle to M2-LA.

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

PO Price

Receipt Accounting

Trade Receipt Accrual

Accrual

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Intercompany Cost of Goods Sold

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Cost Accounting

Transfer to Owned Issue

Consigned Inventory Offset

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned Issue

Consigned Inventory

-100

USD

Material

PO Price

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

120

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Receipt Accrual

Intercompany Accrual

-120

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

-120

USD

Material

Transfer Price

Cost Accounting

Transfer to Owned (Receipt)

Inventory Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Inventory Valuation

20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to Owned (Receipt)

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Inventory organization M2-LA returns the goods to supplier AND-Fresno. The return of the consignment is executed in two parts:

  • An interorganization transfer from M2-LA to M1-Seattle. The accounting is the same as simple purchase order return transactions.

  • A consignment return from M1-Seattle to the supplier. The accounting is the same as regular return to supplier transactions.

Example of Consigned Inventory Accounting of an Interorganization Transfer Within the Same Business Unit

An intraorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain. The following is an example of accounting performed by Oracle Fusion Cost Accounting and Oracle Fusion Receipt Accounting for an interorganization transfer of goods within the same profit center business unit.

This example illustrates:

  • Transactions captured in Oracle Fusion Inventory and interfaced to Cost Accounting and Receipt Accounting.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

Scenario

Supplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M3-NY, who in turn transfers the goods to inventory organization M4-NJ. Inventory organizations, M3-NY and M4-NJ, are within the same business unit.

Diagram of interorganization transfer of goods
within the same business unit

Interfaced Transactions

Cost Accounting and Receipt Accounting receive the following transaction from Oracle Fusion Inventory:

  • Consignment Purchase Order (PO) #1000.

  • Purchase Order price USD 100.

  • Ship-to organization is M3-NY which is also the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed.

  • Receipt and put away transactions are performed in M3-NY in consigned status.

  • Goods are transferred in consigned status from M3-NY to M4-NJ.

  • Ownership changes from supplier to M4-NJ through M3-NY when the goods are consumed.

Cost Accounting generates transactions for:

  • Ownership changes from supplier AND-Fresno to inventory organization M3-NY and from M3-NY to M4-NJ.

  • Transfer of goods from M3-NY to M4-NJ. The transfer is at cost because the organizations are within the same profit center business unit.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

The following diagram lists the accounting entries for the forward flow.

Diagram of accounting entries for forward flow
interorganization transfer within same business unit

The following table lists the distributions that Receipt Accounting generates under inventory organization M3-NY for the shipment from supplier AND-Fresno to M3-NY.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Inventory

100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Clearing

-100

USD

PO Price

The following table lists the distributions generated by Cost Accounting under inventory organization M3-NY for the interorganization transfer from M3-NY to organization M4-NJ.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Cost Accounting

In-Transit Shipment

Consigned In-Transit

100

USD

PO Price

Cost Accounting

In-Transit Shipment

Consigned Inventory

-100

USD

PO Price

Cost Accounting

Consigned Trade In-Transit Issue

Consigned Receivable

100

USD

PO Price

Cost Accounting

Consigned Trade In-Transit Issue

Consigned In-Transit

-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M4-NJ for the interorganization transfer from M3-NY to M4-NJ.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Cost Accounting

Consigned Trade Receipt Accrual

Consigned Clearing

100

USD

PO Price

Cost Accounting

Consigned Trade Receipt Accrual

Consigned Payable

-100

USD

PO Price

Cost Accounting

Consigned Trade In-Transit Receipt

Consigned In-Transit

100

USD

PO Price

Cost Accounting

Consigned Trade In-Transit Receipt

Consigned Clearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned Inspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt

Consigned In-Transit

-100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

Consigned Inspection

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M3-NY for the change of ownership from supplier AND-Fresno to M3-NY.

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

PO Price

Receipt Accounting

Trade Receipt Accrual

Accrual

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Interorganization Receivable

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M4-NJ for the change of ownership from M3-NY to M4-NJ.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Cost Accounting

Transfer to Owned Issue

Consigned Inventory Offset

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned Issue

Consigned Inventory

-100

USD

Material

PO Price

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

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

-100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Inventory Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Trade In-Transit

-100

USD

Material

PO Price

Inventory organization M4-NJ returns goods to supplier AND-Fresno. The return of the consignment is executed in two parts:

  • An interorganization transfer from M4-NJ to M3-NY. The accounting is the same as simple purchase order return transactions.

  • A consignment return from M3-NY to the supplier. The accounting is the same as regular return to supplier transactions.

Example of Consigned Inventory Accounting in a Global Purchase Order

Most large enterprises use a global procurement approach to their purchasing needs, where a central buying organization buys goods from suppliers on behalf of the internal organizations. This includes trade transactions involving consigned inventory executed under a global purchase order. Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting process these consigned inventory transactions and generate subledger journal entries.

The following example illustrates:

  • The physical and financial flow of consigned inventory in a global purchase order.

  • Transactions that flow from Oracle Fusion Inventory into Cost Accounting and Receipt Accounting.

  • Transactions that flow from Oracle Fusion Supply Chain Financial Orchestration into Cost Accounting and Receipt Accounting.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the forward flow.

  • Accounting entries that Cost Accounting and Receipt Accounting generate for the return flow.

Scenario

The supplier AND-Fresno ships the goods in consigned status to inventory organization M2-LA, through the purchasing trade organization M1-Seattle.

Diagram of consigned inventory flow in a global
purchase order

Interfaced Transactions

Cost Accounting and Receipt Accounting receive the following transaction from Oracle Fusion Inventory:

  • Consignment Purchase Order (PO) #1000.

  • Purchase Order price USD 100.

  • Sold-to Legal Entity is LE1.

  • Ship-to organization is M2-LA which is also the contingent owner. Contingent owner assumes ownership from the supplier when inventory is consumed.

  • Receipt and put away transactions performed in M2-LA in consigned status.

  • Ownership changes from supplier AND-Fresno to M2-LA through M1-Seattle when the goods are consumed.

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. The shipment from supplier to inventory organization M2-LA is based on trade agreement GP #123 which has the following terms:

  • Intercompany transfer price is USD 120.

  • Intercompany invoicing is set to Yes.

  • Profit tracking is set to Yes.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following are accounting entries for the forward flow.

Diagram of accounting entries for the forward flow
in a consigned global purchase order

Receipt Accounting generates distributions under inventory organization M2-LA for the consigned shipment from supplier AND-Fresno to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Receipt Accounting

PO Receipt

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Inventory

100

USD

PO Price

Receipt Accounting

PO Delivery

Consigned Clearing

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seattle for the change of ownership from supplier AND-Fresno to M1-Seattle.

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

PO Price

Receipt Accounting

Trade Receipt Accrual

Accrual

-100

USD

Not applicable

PO Price

Receipt Accounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Not applicable

PO Price

Receipt Accounting

Trade In-Transit Receipt

Trade clearing

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit Issue

Intercompany Cost of Goods Sold

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Issue

Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of ownership from M1-Seattle to M2-LA.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Cost Accounting

Transfer to Owned Issue

Consigned Inventory Offset

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned Issue

Consigned Inventory

-100

USD

Material

PO Price

Receipt Accounting

Consigned Receipt Consumption

Consigned Accrual

100

USD

Not applicable

PO Price

Receipt Accounting

Consigned Receipt Consumption

Consigned Clearing

-100

USD

Not applicable

PO Price

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

120

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Receipt Accrual

Intercompany Accrual

-120

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Receipt

Trade In-Transit

20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade In-Transit Receipt

Trade Clearing

-120

USD

Material

Transfer Price

Cost Accounting

Transfer to Owned (Receipt)

Inventory Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Inventory Valuation

20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to Owned (Receipt)

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Transfer to Owned (Receipt)

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Organization M2-LA returns goods to supplier AND-Fresno. The following are accounting entries for the return flow.

Diagram of accounting entries for return flow in
consigned global purchase order

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change of ownership from M2-LA to M1-Seattle:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Cost Accounting

Transfer to Consigned Receipt

Consigned Inventory

100

USD

Material

PO Price

Cost Accounting

Transfer to Consigned Receipt

Consigned Inventory Offset

-100

USD

Material

PO Price

Receipt Accounting

Trade Return Accrual

Intercompany Accrual

120

USD

Not applicable

Transfer Price

Receipt Accounting

Trade Return Accrual

Trade Clearing

-120

USD

Not applicable

Transfer Price

Cost Accounting

Trade In-Transit Return

Trade Clearing

120

USD

Material

Transfer Price

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Consigned Receipt Consumption

Consigned Clearing

100

USD

Material

PO Price

Cost Accounting

Consigned Receipt Consumption

Consigned Accrual

-100

USD

Material

PO Price

Cost Accounting

Transfer to Consigned Issue

Inventory Valuation

100

USD

Material

PO Price

Cost Accounting

Transfer to Consigned Issue

Inventory Valuation

20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to Consigned Issue

Inventory Valuation

10

USD

Overhead

Not applicable

Cost Accounting

Transfer to Consigned Issue

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Transfer to Consigned Issue

Trade In-Transit

-20

USD

Profit in Inventory

Internal Markup

Cost Accounting

Transfer to Consigned Issue

Cost Variance*

-10

USD

Material

Not applicable

*Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance.

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-LA for the change of ownership from M1-LA to supplier AND-Fresno:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Receipt Accounting

Trade Return Accrual

Accrual

100

USD

Not applicable

PO Price

Receipt Accounting

Trade Return Accrual

Trade Clearing

-100

USD

Not applicable

PO Price

Cost Accounting

Trade In-Transit Return

Trade Clearing

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Return Receipt

Trade In-Transit

100

USD

Material

PO Price

Cost Accounting

Trade In-Transit Return Receipt

Intercompany Cost of Goods Sold

-100

USD

Material

PO Price

Receipt Accounting generates distributions under inventory organization M2-LA for the return shipment from M2-LA to supplier AND-Fresno:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Receipt Accounting

PO Return to Supplier

Consigned Accrual

100

USD

PO Price

Receipt Accounting

PO Return to Supplier

Consigned Clearing

-100

USD

PO Price

Receipt Accounting

PO Return to Receiving

Consigned Clearing

100

USD

PO Price

Receipt Accounting

PO Return to Receiving

Consigned Inventory

-100

USD

PO Price

Example of Accounting of Global Procurement Trade Transactions into Inventory

Most large enterprises use a global procurement approach to their purchasing needs, wherein a central buying organization buys goods from suppliers on behalf of the internal organizations. Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting process transactions for these global procurement trade events and generate subledger journal entries.

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a global procurement flow into inventory. It illustrates:

  • Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Receipt Accounting and Cost Accounting.

  • Accounting entries that Receipt Accounting and Cost Accounting generate for the forward flow of a shipment from the supplier, through the intermediary distributor, to the final receiving organization.

  • 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. through the intermediary distributor, China Ltd.

Transactions from Oracle Fusion 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:

  • Purchase Order (PO) price from China Supplier to China Ltd. is USD 50.

  • Intercompany transfer price from China Ltd. to US Inc. is USD 100.

  • Intercompany invoicing is set to Yes.

  • Profit tracking is set to Yes.

  • Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in Cost Organization CO1.

  • China Ltd books a profit of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).

Analysis

Receipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries

The following figure illustrates accounting entries for the forward flow from legal entity China Ltd. to legal entity US Inc.

Accounting entries for the forward flow of global
procurement inventory

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 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

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

Expense

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

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 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

Intercompany Accrual

-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

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

Cost Accounting

PO Delivery

Inventory Valuation

50

USD

Material

Sending Organization Cost

Cost Accounting

PO Delivery

Inventory Valuation

10

USD

Overhead

Sending Organization Cost

Cost Accounting

PO Delivery

Inventory Valuation

40

USD

Profit in Inventory

Internal Markup

Cost Accounting

PO Delivery

Receiving Inspection

-100

USD

Not Applicable

Transfer Price

US Inc returns goods directly to China Supplier.

The following figure illustrates accounting entries for the return flow from legal entity US Inc to legal entity China Ltd.

Accounting entries of global procurement return
flow

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 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

-50

USD

Material

Sending Organization Cost

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-10

USD

Overhead

Sending Organization Cost

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-40

USD

Profit in Inventory

Internal Markup

Cost Accounting

Return to Receiving

Receiving Inspection

100

USD

Material, Overhead, and Profit in Inventory

Transfer Price

Cost Accounting

Return to Receiving

Inventory Valuation

-50

USD

Material

Sending Organization Cost

Cost Accounting

Return to Receiving

Inventory Valuation

-10

USD

Overhead

Sending Organization Cost

Cost Accounting

Return to Receiving

Inventory Valuation

-40

USD

Profit in Inventory

Internal Markup

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

Receipt Accounting

Intercompany AP Invoice

Intercompany Liability

100

USD

Not Applicable

Transfer Price

Receipt Accounting

Intercompany AP 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 distributions.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Receipt Accounting

Trade Return Accrual

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

Not Applicable

Inventory is depleted at the current cost, and the difference between transfer price and cost is booked as cost variance

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-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 COGS

-50

USD

Material

PO Price

Cost Accounting

Trade In-Transit Return Receipt

Intercompany COGS

-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 Receivable

-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.

Example of Accounting of Interorganization Transfers Across Business Units

This example illustrates:

  • Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Receipt Accounting and Cost Accounting.

  • 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 Oracle Fusion 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:

  • China Ltd. acquires goods locally at the cost of USD 50, plus USD 10 overhead on the receipt of goods.

  • Intercompany transfer price from China Ltd. to US Inc. is USD 100.

  • Intercompany invoicing is set to No.

  • Profit tracking is set to Yes.

  • Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in Cost Organization CO1.

  • 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.

Accounting entries for interorganization transfer
across business units

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

Example of Accounting of Trade Transactions in Internal Drop Shipments

An internal drop shipment is a trade transaction involving the movement of goods from an inventory organization directly to a customer, yet the business unit that sells the goods to the customer is different from the business unit to which the inventory organization belongs. From the financial standpoint, the business unit to which the inventory organization belongs sells the goods to the other business unit who, in turn, sells the goods to the customer.

The following is an example of accounting performed by Oracle Fusion Cost Accounting and Oracle Fusion Receipt Accounting for an internal drop shipment. It illustrates:

  • Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Receipt Accounting and Cost Accounting.

  • Accounting entries that Receipt Accounting and Cost Accounting generate for the drop shipment flow from the selling organization to the customer of the buying organization.

  • Accounting entries that Receipt Accounting and Cost Accounting generate for the return flow from the customer to the seller.

Scenario

China Ltd. drop ships the goods to the customer of US Inc.

Transactions from Oracle Fusion Supply Chain Financial Orchestration

The trade agreement, accounting rule sets, and associated purchase orders are set up in Oracle Fusion Supply Chain Financial Orchestration, and the transactions flow into Receipt Accounting and Cost Accounting based on this setup:

  • China Ltd. acquires goods locally at the cost of USD 50, plus USD 10 overhead on the receipt of goods.

  • Intercompany transfer price from China Ltd. to US Inc. is USD 100.

  • Intercompany invoicing is set to Yes.

  • Overhead rule is configured in Cost Accounting for transaction type Trade in-Transit Receipt in Cost Organization CO1.

  • US Inc. books a profit of USD 40 (USD 100 transfer price - USD 50 PO price - 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.

Accounting entries in internal drop shipment

Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.

The following table describes the cost accounting entries.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Cost Accounting

Sales Order Issue

Trade In-Transit

50

USD

Material

Current Cost

Cost Accounting

Sales Order Issue

Trade In-Transit

10

USD

Overhead

Current Cost

Cost Accounting

Sales Order Issue

Inventory

-50

USD

Material

Current Cost

Cost Accounting

Sales Order Issue

Inventory

-10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit Issue

Intercompany Cost of Goods Sold

50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit Issue

Intercompany Cost of Goods Sold

10

USD

Overhead

Current Cost

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

Overhead

Current Cost

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 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 the 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

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

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

Cost Accounting

Trade Sales Issue

Deferred Cost of Goods Sold

50

USD

Material

Sending Organization Cost

Cost Accounting

Trade Sales Issue

Deferred Cost of Goods Sold

10

USD

Overhead

Sending Organization Cost

Cost Accounting

Trade Sales Issue

Deferred Cost of Goods Sold

40

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade Sales Issue

Trade In-Transit

-50

USD

Material

Sending Organization Cost

Cost Accounting

Trade Sales Issue

Trade In-Transit

-10

USD

Overhead

Sending Organization Cost

Cost Accounting

Trade Sales Issue

Trade In-Transit

-40

USD

Profit in Inventory

Internal Markup

The customer returns goods directly to China Ltd.

The following figure illustrates accounting entries for the return flow from US Inc (Sold-to Legal Entity) to China Ltd (Legal Entity).

Accounting entries for the return flow of internal
drop shipment

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

Split into three lines (Material, Overhead, and Profit in Inventory)

Transfer Price

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-50

USD

Material

Sending Organization Cost

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-10

USD

Overhead

Sending Organization Cost

Cost Accounting

Trade In-Transit Return

Trade In-Transit

-40

USD

Profit in Inventory

Internal Markup

Accounts Payable

Intercompany Accounts Payable Debit Memo

Intercompany Liability

100

USD

Not Applicable

Transfer Price

Accounts Payable

Intercompany Accounts Payable Debit Memo

Intercompany Accrual

-100

USD

Not Applicable

Transfer Price

Cost Accounting

Trade Sales Return Receipt

Trade In-Transit

50

USD

Material

Sending Organization Cost

Cost Accounting

Trade Sales Return Receipt

Trade In-Transit

10

USD

Overhead

Sending Organization Cost

Cost Accounting

Trade Sales Return Receipt

Trade In-Transit

40

USD

Profit in Inventory

Internal Markup

Cost Accounting

Trade Sales Return Receipt

Deferred RMA Gain/Loss

-50

USD

Material

Sending Organization Cost

Cost Accounting

Trade Sales Return Receipt

Deferred RMA Gain/Loss

-10

USD

Overhead

Sending Organization Cost

Cost Accounting

Trade Sales Return Receipt

Deferred RMA Gain/Loss

-40

USD

Profit in Inventory

Internal Markup

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 accounting entries.

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Cost Accounting

RMA Receipt

Inventory*

50

USD

Material

Current Cost

Cost Accounting

RMA Receipt

Inventory

10

USD

Overhead

Current Cost

Cost Accounting

RMA Receipt

Trade In-Transit

-50

USD

Material

Current Cost

Cost Accounting

RMA Receipt

Trade In-Transit

-10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit Return Receipt

Trade In-Transit

50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit Return Receipt

Trade In-Transit

10

USD

Overhead

Current Cost

Cost Accounting

Trade In-Transit Return Receipt

Intercompany Cost of Goods Sold

-50

USD

Material

Current Cost

Cost Accounting

Trade In-Transit Return Receipt

Intercompany Cost of Goods Sold

-10

USD

Overhead

Current Cost

Accounts Receivable

Intercompany Accounts Receivable Credit Memo

Intercompany Revenue

100

USD

Not Applicable

Transfer Price

Accounts Receivable

Intercompany Accounts Receivable Credit Memo

Intercompany Receivable

-100

USD

Not Applicable

Transfer Price

* Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance.

Example of Accounting of Global Procurement Trade Transactions into Expense

Oracle Fusion Receipt Accounting and Oracle Fusion 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:

  • Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Receipt Accounting and Cost Accounting.

  • 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.

  • 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 Oracle Fusion 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:

  • Purchase Order (PO) price from China Supplier to China Ltd is USD 50.

  • Intercompany transfer price from China Ltd to US Inc is USD 100.

  • Intercompany invoicing is set to Yes.

  • Profit tracking is set to Yes.

  • 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).

Accounting entries for the forward flow

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 .

Return flow accounting entries

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.

Example of Accounting of Interorganization Transfers Within the Same Business Unit

An interorganization transfer is a trade transaction involving the movement of goods or services between organizations in the supply chain. When the transfer occurs between organizations within the same profit center business unit, the transfer is always at cost and there is no intercompany invoicing. Oracle Fusion Cost Accounting creates the trade events and they do not flow through Oracle Fusion Supply Chain Financial Orchestration.

The following is an example of accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting for an interorganization transfer of goods between inventory organizations within the same profit center business unit.

Scenario

Inventory organization M1 makes a transfer of goods to inventory organization M2. Both inventory organizations are under the profit center business unit US West, which is under the legal entity US Inc.

Interorganization Transfer

The cost of goods transferred from M1 to M2 is USD 50 plus overhead of USD 10.

Analysis

Receipt Accounting and Cost Accounting create accounting entries for the transfer of goods.

The following figure illustrates those accounting entries.

Accounting entries for the transfer of goods

Accounting Entries

Receipt Accounting generates distributions under business unit US West and inventory organization M1. Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.

The following table describes the cost accounting entries.

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

60

USD

Material + Overhead

Current Cost

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

Overhead

Current Cost

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 the 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

60

USD

Not Applicable

Sending Organization Cost

Receipt Accounting

Trade Receipt Accrual

Interorganization Payable

-60

USD

Not Applicable

Sending Organization Cost

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 Clearing

-60

USD

Material + Overhead

Sending Organization Cost

Receipt Accounting

Interorganization Receipt

Receiving Inspection

60

USD

Not Applicable

Sending Organization Cost

Receipt Accounting

Interorganization Receipt

Trade In-Transit

-60

USD

Not Applicable

Sending Organization Cost

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

Receiving Inspection

-60

USD

Material + Overhead

Sending Organization Cost

To comply with tax regulations, calculate taxes and generate tax distributions for all receipt transactions. You can capture item prices, inclusive and exclusive taxes on your purchases. Receipt costs are adjusted to account inclusive taxes that were included in the item purchase price. Inclusive taxes are booked to a tax liability or recovery account.

You configure the tax point basis and tax point date in Oracle Fusion Financials. Based on this configuration, taxes are calculated either on delivery or invoice generation. For more information about configuring and calculating taxes, see the Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

Prerequisites

Configure the following to automatically calculate and account taxes. You must have the Application Implementation Consultant role to do these tasks.

  • In the Offerings work area, enable the Tax Calculation on Receipt Accounting Distributions feature at the Financials offering level.

  • Enable delivery-based tax calculation for invoices:

    1. In the Setup and Maintenance work area, go to the following:

      • Offering: Financials

      • Functional Area: Transaction Tax

      • Task: Manage Configuration Owner Tax

    2. From the Configuration Owner drop-down list, select the relevant business unit.

    3. From the Application Name drop-down list, select Payables.

    4. From the Event Class drop-down list, select Standard Invoices.

    5. From the Tax Point Basis drop-down list, select Invoice.

    6. From the Tax Point Date drop-down list, select Receipt Date.

      For more information about configuring and calculating taxes, see the Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

  • Configure the application to automatically calculate taxes for trade receipt accrual:

    1. In the Setup and Maintenance work area, go to the following:

      • Offering: Manufacturing and Supply Chain Materials Management

      • Functional Area: Supply Chain Financial Flows

      • Task: Manage Supply Chain Financial Orchestration System Options

    2. Select Calculate tax for trade receipt accrual.

  • Configure the application to automatically calculate and account nonrecoverable taxes on intercompany invoices:

    1. Navigate to the Financial Orchestration work area.

    2. In the Tasks pane, click Manage Documentation and Accounting Rules.

    3. Click the required documentation and accounting rule.

    4. Under Required Tasks, select Intercompany Invoices.

How Taxes are Calculated and Accounted

Here's how taxes are calculated and accounted for different combinations of tax point basis and tax point dates:

Tax Point Basis Tax Point Date Tax Calculation Tax Accounting Variance Calculation and Accounting

Delivery

Receipt Date

Taxes are calculated on goods receipt

Recoverable and nonrecoverable taxes are accounted on goods receipt

Not Applicable

Invoice

Receipt Date

Taxes are calculated on goods receipt

  • Nonrecoverable taxes are accounted on goods receipt

  • Recoverable taxes are accounted on invoice generation

Not Applicable

Invoice

Invoice Date

Taxes are calculated on invoice generation

Recoverable and nonrecoverable taxes are accounted on invoice generation

Tax variance is calculated and accounted for difference in the taxes estimated on purchase order and final tax calculated on invoice

Receipt Accounting receives transactions and related tax determinants from outside sources such as Oracle Fusion Receiving, Inventory, and Accounts Payable. The following discusses:

  • Import of tax determinants into Receipt Accounting

  • Tax distributions created by Receipt Accounting

  • Tax distributions by Cost Accounting

  • Review of tax distributions

Diagram of tax accounting for receipt transactions
process

Import Tax Determinants

Here's how you can import transactions and related tax determinants from outside sources on the Scheduled Processes page in the Scheduled Processes work area.

  • Select the Transfer Transactions from Receiving to Receipt Accounting process to import receipt transactions into Receipt Accounting.

  • Select the Transfer Costs to Cost Management process to import accounts payable transactions into Receipt Accounting and Cost Accounting.

Tax Distributions by Receipt Accounting

The Receipt Accounting Processor calls the Tax Application Programming Interface to calculate transaction taxes based on imported tax determinants. The processor also generates tax distributions for receipt transactions.

Run the Receipt Accounting Processor on the Create Receipt Accounting Distributions page in the Receipt Accounting work area.

Tax Distributions by Cost Accounting

The Cost Accounting Processor uses tax results generated by Receipt Accounting to calculate inventory acquisition costs including nonrecoverable taxes.

Run the Cost Accounting Processor on the Create Cost Accounting Distributions page in the Cost Accounting work area.

Review Tax Distributions

On the Review Receipt Accounting Distributions page in the Receipt Accounting work area view results of the Receipt Accounting Processor:

  • Distributions and journal entries for receipt transactions

  • Tax determinants accessed by clicking the links in the Tax Determinants column

  • Transaction taxes accessed by clicking the Transaction Unit Cost links in the Cost Information tab

On the Review Cost Accounting Distributions page in the Cost Accounting work area view results of the Cost Accounting Processor:

  • Distributions and journal entries for inventory transactions

  • Inventory unit costs including taxes in the Cost Information tab

Example of Tax Accounting for a Simple Procurement Transaction

This example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting for a simple procurement transaction that uses a tax point basis of delivery, that is, taxes are accounted at receipt of the goods.

Scenario

The supplier makes a shipment to the inventory organization based on a purchase order (PO) for USD 1,000, with the following tax details:

  • Tax A delivery basis = 10%. Recoverable and nonrecoverable portions are both 50%

  • Tax B invoice basis = 20%. Recoverable and nonrecoverable portions are both 50%

Tax Details at Receipt and Invoice

Tax details at the time of receipt of goods are:

  • Tax A delivery basis = 15%, which is changed from 10% estimated at the time of purchase order. Recoverable and nonrecoverable portions are both 50%, which is equal to USD 75 (that is, USD 1,000 * 15% * 50%).

  • Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable and nonrecoverable portions are both 50%, which is equal to USD 125 (that is, USD 1,000 * 25% * 50%).

Tax details at the time of invoice are:

  • Tax A delivery basis = 20%, which is changed from 15% reported and accounted on receipt. Recoverable and nonrecoverable portions are both 50%, however taxes are not recalculated because this transaction uses a tax point basis of delivery.

  • Tax B invoice basis = 30%, which is changed from 25% estimated on receipt. Recoverable and nonrecoverable portions are both 50%, which is equal to USD 150.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions when the goods are received and when the invoice is accounted.

Tax Accounting Entries

Receipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Receipt Accounting

PO Receipt

Receiving Inspection

1,000

USD

Material

PO Price

Receipt Accounting

PO Receipt

Receiving Inspection

75

USD

Tax

Tax A Delivery-Based Nonrecoverable: USD 1,000 * 15% * 50%

Receipt Accounting

PO Receipt

Tax Recoverable

75

USD

Tax

Tax A Delivery-Based Recoverable: USD 1,000 * 15% * 50%

Receipt Accounting

PO Receipt

Receiving Inspection

125

USD

Tax

Tax B Invoice-Based Nonrecoverable: USD 1,000 * 25% * 50%

Receipt Accounting

PO Receipt

Supplier Accrual

-1,275

USD

Not applicable

Not applicable

Cost Accounting

PO Delivery

Inventory Valuation

1,200*

USD

Not applicable

Not applicable

Cost Accounting

PO Delivery

Receiving Inspection

-1,200*

USD

Not applicable

Not applicable

*PO price plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the supplier when invoice is created:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

1,275

USD

Not applicable

Not applicable

Accounts Payable

Invoice

Tax Recoverable

150

USD

Tax

Tax B Invoice-Based Recoverable: USD 1,000 * 30% * 50%

Accounts Payable

Invoice

Tax B Rate Variance*

25

USD

Not applicable

Difference between tax estimated at 25% and actual calculated at 30%

Accounts Payable

Invoice

Supplier Liability

-1,450

USD

Not applicable

Not applicable

*Tax variance due to the difference between 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

Receiving Inspection

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

Receiving Inspection

-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.

Example of Tax Accounting for a Consigned Inventory Transaction

This example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion 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:

  • Tax A delivery basis = 10%. Recoverable and nonrecoverable portions are both 50%

  • 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:

  • 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%.

  • 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.

  • 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.

Example of Tax Accounting for a Purchase Order Retroactive Price Change

This example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting for a retroactive price change on a purchase order (PO) receipt that is partially invoiced.

Scenario

The supplier makes a shipment to the inventory organization based on a purchase order for 10 units, at a per unit price of USD 100. After receipt of the goods, a partial invoice is created for 2 units at USD 100 per unit.

The purchase order price changes retroactively from USD 100 to USD 120. The remaining balance of 8 units is invoiced at USD 120 per unit.

Tax Details

This transaction uses a tax point basis of delivery, that is, taxes are accounted at the time of receipt of goods.

Taxes details are the same after the retroactive price change on the PO:

  • Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both 50%.

  • Tax B invoice basis = 30%. Recoverable and nonrecoverable portions are both 50%.

Analysis

Receipt Accounting and Cost Accounting create accounting distributions at the time of receipt of goods, after the retroactive purchase order price change, and for the differential invoice.

Tax Accounting Entries

Receipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of goods:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Receipt Accounting

PO Receipt

Receiving Inspection

1,000

USD

Material

PO Price

Receipt Accounting

PO Receipt

Receiving Inspection

100

USD

Tax

Tax A Delivery-Based Nonrecoverable: USD 1,000 * 20% * 50%

Receipt Accounting

PO Receipt

Tax Recoverable (Tax A)

100

USD

Tax

Tax A Delivery-Based Recoverable: USD 1,000 * 20% * 50%

Receipt Accounting

PO Receipt

Receiving Inspection

150

USD

Tax

Tax B Invoice-Based Nonrecoverable: USD 1,000 * 30% * 50%

Receipt Accounting

PO Receipt

Supplier Accrual

-1,350

USD

Material

Not applicable

Cost Accounting

PO Delivery

Inventory Valuation

1,250*

USD

Not applicable

Not applicable

Cost Accounting

PO Delivery

Receiving Inspection

-1,250*

USD

Not applicable

Not applicable

*PO price plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the supplier when partial invoice is accounted:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

270*

USD

Not applicable

Item Price plus Nonrecoverable Taxes A and B for 2 units = USD 1,350/10 * 2

Accounts Payable

Invoice

Tax Recoverable

30

USD

Tax

Tax B Invoice-Based Recoverable: USD 200 * 30% * 50%

Accounts Payable

Invoice

Supplier Liability

-300

USD

Not applicable

Not applicable

*Accrual is debited to the extent quantity is invoiced, which is 2 units.

Receipt Accounting and Cost Accounting generate the following accounting entries after the retroactive purchase order price change:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Cost Element Basis of Amount

Receipt Accounting

Retroactive Price Adjustment

Receiving Inspection

160*

USD

Material

USD 120 - USD 100 * uninvoiced quantity of 8 units

Receipt Accounting

Retroactive Price Adjustment

Receiving Inspection

16

USD

Tax

Tax A Delivery-Based Nonrecoverable: USD 160 * 20% * 50%

Receipt Accounting

Retroactive Price Adjustment

Tax Recoverable (Tax A)

16

USD

Tax

Tax A Delivery-Based Recoverable: USD 160 * 20% * 50%

Receipt Accounting

Retroactive Price Adjustment

Receiving Inspection

24

USD

Tax

Tax B Invoice-Based Nonrecoverable: USD 160 * 20% * 50%

Receipt Accounting

Retroactive Price Adjustment

Supplier Accrual

-216

USD

Material

Not applicable

Cost Accounting

Acquisition Cost Adjustment

Inventory Valuation

200**

USD

Not applicable

Not applicable

Cost Accounting

Acquisition Cost Adjustment

Receiving Inspection

-200

USD

Not applicable

Not applicable

*Retroactive price adjustment accounted only for the uninvoiced quantity, that is, 10 units received minus 2 units invoiced = 8 units uninvoiced.

** Retroactive PO price change plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the balance of 8 units:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

960

USD

Item Price USD 120 * 8

Accounts Payable

Invoice

Supplier Accrual

96

USD

Tax A Delivery-Based Nonrecoverable: USD 120 * 8 * 20% * 50%

Accounts Payable

Invoice

Supplier Accrual

96

USD

Tax A Delivery-Based Recoverable: USD 120 * 8 * 20% * 50%

Accounts Payable

Invoice

Supplier Accrual

144

USD

Tax B Invoice-Based Nonrecoverable: USD 120 * 8 * 30% * 50%

Accounts Payable

Invoice

Recoverable Tax B

144

USD

Tax B Invoice-Based Recoverable: USD 120 * 8 * 30% * 50%

Accounts Payable

Invoice

Supplier Liability

-1,440

USD

Not applicable

Accounts Payable generates the following accounting entries for the original invoice quantity of 2 units at the revised PO price:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency Basis of Amount

Accounts Payable

Invoice

Invoice Price Variance

40

USD

Difference in PO Item Price USD 20 * 2

Accounts Payable

Invoice

Tax Invoice Price Variance Tax A

4

USD

Tax A Delivery-Based Nonrecoverable

Accounts Payable

Invoice

Tax Invoice Price Variance Tax B

6

USD

Tax B Invoice-Based Nonrecoverable

Accounts Payable

Invoice

Recoverable Tax A

4

USD

Tax A Delivery-Based Recoverable

Accounts Payable

Invoice

Recoverable Tax B

6

USD

Tax B Invoice-Based Recoverable

Accounts Payable

Invoice

Supplier Liability

-60

USD

Not applicable

Cost Accounting and Receipt Accounting generate the following accounting entries for the differential invoice:

Subledger Event Type Accounting Line Type Amount in Functional Currency +Dr/-Cr Functional Currency

Receipt Accounting

Invoice Price Adjustment

Receiving Inspection

50

USD

Receipt Accounting

Invoice Price Adjustment

Invoice Price Adjustment

-40

USD

Receipt Accounting

Invoice Price Adjustment

Tax Invoice Price Adjustment

-10*

USD

Cost Accounting

Acquisition Cost Adjustment

Inventory Valuation

50**

USD

Cost Accounting

Acquisition Cost Adjustment

Receiving Inspection

-50

USD

*Nonrecoverable taxes A and B on the differential invoice price.

**Difference between invoice price and nonrecoverable taxes A and B.

Example of Tax Accounting for Interorganization Transfers Across Business Units

This example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting for interorganization transfers across business units.

Scenario

Vision Operations ships the goods to Singapore Operations. The organizations are in two different profit center business units.

Transactions from Oracle Fusion 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 acquisition cost).

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

Transfer Order Shipment

Trade In-Transit

Item Cost

12

Cost Accounting

Transfer 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:

Event 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

Receipt Accounting

Transfer Order Receipt

Receiving Inspection

Transfer Price

15

Receipt Accounting

Transfer Order Receipt

Receiving Inspection

Nonrecoverable Tax

0.75

Receipt Accounting

Transfer Order Receipt

Trade In-Transit

Transfer Price

-15

Receipt Accounting

Transfer Order Receipt

Trade In-Transit

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

Transfer Order Receipt

Inventory Valuation

Item Cost

12

Cost Accounting

Transfer Order Receipt

Receiving Inspection

Item Cost

-12

Cost Accounting

Transfer Order Receipt

Inventory Valuation

Nonrecoverable Tax

0.75

Cost Accounting

Transfer Order Receipt

Receiving Inspection

Nonrecoverable Tax

-0.75

Cost Accounting

Transfer Order Receipt

Inventory Valuation

Profit In Inventory

3

Cost Accounting

Transfer Order Receipt

Receiving Inspection

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

Example of Tax Accounting for Internal Drop Shipments

This example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting for internal drop shipment.

Scenario

Vision Operations drop ships the goods to the customer of Singapore Operations.

Transactions from Oracle Fusion 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

Note: Inventory is received at the current cost, and the difference between transfer price and cost is booked as cost variance.

Overview of Reports and Analytics for Receipt Accounting

You can use the Reports and Analytics work area to access predefined reports and analytics that are related to your role, and to modify existing reports and analytics.

The following reports and analytics are available for Receipt Accounting.

  • Accrual Clearing Report

  • Accrual Reconciliation Report

  • Uninvoiced Receipt Accrual Report

  • Receipt Accounting Real Time

  • Receipt Accounting Period Close Real Time

  • Landed Costs Real Time

For more information on accessing and modifying reports and analytics, refer to the guide Creating and Administering Analytics and Reports.

For descriptions of the reports and analyses, and information on accessing them, see the topic Oracle Supply Chain Management Cloud: View Supply Chain Management Reports and Analyses.

FAQs for Receipt Accounting

The recommended sequence for scheduling the receipt accounting processes is:

  1. Incoming transactions:

    • Transfer Transactions from Receiving to Receipt Accounting process. Interfaces receipt transactions.

    • Transfer Costs from Payables to Cost Management process. Interfaces accounts payable transactions.

  2. Receipt accounting:

    • Receipt Accounting Distribution process.

    • Clear Receipt Accrual Balances process. Executes only if you have predefined accrual clearing rules. Marks purchase orders for automatic clearing.

    • Receipt Accounting Distribution process. Creates distributions for cleared accrual balances.

  3. Subledger accounting:

    • Create Accounting process.

  4. Reconciliation and reporting:

    • Match Receipt Accruals process. Matches purchase order receipt accruals with invoices from the payables application. Perform at period close or as needed for internal reporting and reconciliation.

      Note: You can also perform this step before running the subledger accounting process to know the approximate accrual amount for reconciliation.
    • Audit Receipt Accrual Clearing Balances process. Audit the General Ledger accounted accrual balances.

You can perform cost accounting of consigned inventory transactions using zero value or actual cost. Typically, the valuation on the balance sheet for supplier-owned consigned inventory is zero. But you may sometimes want to perform accounting using actual cost. In either case, the inventory valuation reports always display the pro forma value of consigned goods.

Select the accounting distribution basis for consigned inventory on the Manage Cost Profiles page in the Setup and Maintenance work area.

A point in the receipt transaction process where taxes are accounted and reported to the tax authorities. These can be classified into two categories: delivery-based and invoice-based tax points.

Delivery-based taxes are accounted and reported on the receipt transaction. Invoice-based taxes are accounted and reported when the supplier invoice is created, accounted, or paid.

What's a tax point date?

Tax point date is the date on which the tax is calculated. Tax point date can be either the receipt date or invoice date. Tax rate as on the tax point date is considered for tax calculation.

Tax point date is used in conjunction with tax point basis. For more information about configuring and calculating taxes, see the Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

When are nonrecoverable taxes calculated on Intercompany transactions?

When trade receipt accrual occurs in the receiving organization, the receipt accounting distributions are created for:

  • internal material transfers

  • internal drop shipments

  • intercompany returns

When creating receipt accounting distributions, both recoverable and nonrecoverable taxes are calculated and accounted. The item cost includes both transfer price and nonrecoverable exclusive tax accrued in the receiving organization.

For material return transactions, tax is calculated only if the referenced transaction has taxes on it.

Inclusive taxes are included in the assessable value or purchase price. For example:

  • PO amount: USD 100

  • Inclusive tax rate: 10%

  • Tax: 100/1.10 = USD 9.09 (distribution amount divided by (1 + tax rate))

Exclusive taxes are added to the purchase price or assessable value. For example:

  • PO amount: USD 100

  • Exclusive tax rate: 10%

  • Tax: 100*0.10 = USD 10.00 (distribution amount multiplied by tax rate)

Create your subledger account rules on the Manage Account Rules page. It is recommended that you highlight the account rules predefined by Oracle, copy, and modify them as needed.

Create your subledger journal entry rule sets on the Manage Subledger Journal Entry Rule Sets page. It is recommended that you highlight the journal entry rule sets predefined by Oracle, copy, and modify them as needed. For each journal line rule specify the copied account combination rule.

In the Setup and Maintenance work area, you can access both the Manage Account Rules task and the Manage Subledger Journal Entry Rule Sets task in the Manufacturing and Supply Chain Materials Management offering.

Note: You must configure the account rules and journal entry rule sets before proceeding with the setup of subledger accounting rules for receipt accounting.