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Procure to Pay (P2P) – Accounting Entries

Posted on March 21st, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

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In response of my last post ,yet another reader asked for "Asset ,Purchasing & Inventory Purchasing and there corresponding accounting entry within P2P cycle. Therefore this post highlights some of key accounting entry in each steps with respect to th

As you know "procure to pay" Business Flow start Purchasing requisition till paying to vendors and most important, in all the case the purchase is made for basic element called Items.

As you know there are three types of items:

  • Inventory Expense Item
  • Inventory Asset Item
  • Expense item

Definition of above Items used in Purchasing can be best understood as:

ITEMS

Asset flag means means it is an asset and the items value will show in your inventory valuation.

1Inventory Item

inventory item

2Expense Item

These are one which is used for consumable items purchase for your organization. More importantly , for creating an expense item you have to perform following setup doing in the Master Item form.Go to same path in oracle inventory

Oracle Inventory -> Items -> Master Items

When master items form open Go to Inventory Menu you need to tick followings

  1. Inventory item
  2. Stock able
  3. Transactble
  4. Resolvable

And you can also setup in Costing and purchasing menu account code as per your requirement.

expenseitem

3Asset Item

As discussed above , the following attributes need to be enabled for such an item.

  • Inventory item
  • Stock able
  • transact able
  • Costing flag
  • Inventory asset value

For entering on purchase orders
It should have purchased and purchasable flags enabled and you have to make sure you are assigning this item to the Purchasing org which you have defined at

Oracle Purchasing > Setup > Organizations >
Financial Options > 'Supplier-Purchasing' alternate region 'Inventory Organization' field.

The accounting can be best described for such kind of items is;

asset Item

Is there any effect on Step 5 in all three cases, that mean do matching have different accounting entry?

The answer is no; as per my understanding purpose of setting the PO to a 2way, 3 way or 4 way match is to ensure that the corresponding hold is generated on the invoice.

The holds are basically designed for control purposes, they do not have any accounting effects.

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Posted in Oracle Payable | 15 Comments »Email This Post Email This Post | Print This Post Print This Post

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15 Responses
  1. Milind Deodhar Says:

    Dear Sanjit,

    Good these entries flow will help to beginner. But always in my case I have excellent accounting knowledge but at the time of interview Oracle accounting entries explaintion get trouble for me.
    Thks for entries to start fresh studies bcoz I’m not in touch with Apps.

    Thks

  2. Bill Lam Says:

    I think there maybe some big mistakes about the inventory assets item. If the inventory_item_flag is Y and COSTING FLAG enabled for inventory assets item, how could u make step 4 to debit the Asset clearing a/c happen when doing the receiving transaction for po

  3. Sridevi Says:

    We are on Oracle Applications Release 12. In Account Payables, we need to setup reversal of accruals when invoice is matched to 3WAY POs. I did set up the accounting rules for invoices, but not sure how oracle recognizes that these setup is for reversal of accruals and will post the correct received amount against the ccounts.

    Currently, oracle is recording the invoiced amount as reversal of accruals which is incorrect. I am not sure how & where to setup reversal of accrual accounts in Accounst payable. This is highly critical setup change for us. Please can anyone clarify how to accomplish this in Oracle AP R12.

  4. Ibrahim Says:

    Greetings,
    My entries goes like this currently.
    Fixed Asset Items (421)
    Receipt into receiving for Inspection
    1. DR Receiving Inspection ZAXDARX2001X0000X121007X0000X0000X0000 USD 111.00
    2. CR Accrual ZAXDARX2001X0000X113003X0000X0000X0000 USD 111.00
    The accrual account here is the one that is picked if Invoice is matched to the PO. i do understand that this account is picked from Inventory Org>otheraccount> Inventory AP accruals. if i set this account to the asset clearing account, all the item will go to this account, how can i choose this account only for Asset items?

  5. Joe Says:

    Thanks. This was a really helpful post. Answered a lot of questions I had.

  6. Joe Says:

    The site was very helpful. I appreciate the brake down of the steps! It is helpful for people that are trying to learn and gain more knowledge like myself! I didn’t know that the holds have no effect on accounting!! Thanks for the information!

  7. Faraz Says:

    thats fine for begginers that great effort.

    Fraz Akhter

  8. suresh raj Says:

    hi,
    i appreciate your help,it would be better if we have accounting entries for order to cash cycle too…

  9. Khalid Mehmood Says:

    Thanks sanjit, its really a good for beginners. I got help from it. please arrange this type of document for sales order.

  10. Satya Says:

    A very good article

    Thanks a lot for sharing it

  11. Islam Says:

    Thank you, it was helpful

  12. Sandhya Says:

    This information is very good for the beginners like myself. could also give the navigation from where these accounts get picked up

  13. elshayeb Says:

    Thank you, it was helpful

  14. pooja Says:

    amazing presentation of accounting entries

  15. Sandeep Says:

    Got an idea what are those A/Cs. but when it comes to oracle apps. no idea to understand these a/cs entries or there location in the apps. if someone can explain that would be better.
    Thx

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