1. Using Supply Chain Cost Management
  2. Receipt Accrual, Reconciliation, and Clearing

Receipt Accrual, Reconciliation, and Clearing

When goods are interfaced from Oracle Receiving to Oracle 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 hasn't 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 hasn't 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.

You can manually clear receipt accrual balances from the Adjust Receipt Accrual Balances page for purchases without receipts but with invoices matched to the order:

  • You’ve matched an invoice incorrectly to a wrong PO distribution for which receipt didn't get created in the period.
  • You’ve open invoices for a receipt that was corrected or returned and the PO is closed.

This helps you to reconcile and clear out old accrual accounts in accounts payable for orders that are closed or no further activity is expected in the period.

Note:
  • You can clear out old accruals in accounts payables without any receipts for orders that are matched to order only.
  • Use Accrual Clearing Reason as the accounting source to derive the relevant account for the Receiving Inspection account.
  • If the accrual balance is cleared assuming no further receipts, and subsequently if receipts are recorded, you must manually reverse the accrual clearing for the accrual account to reconcile.

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 doesn't always know if that's 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.