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Encumbrance Accounting process flow in Oracle’s GENERAL LEDGER application

Posted on May 30th, 2009 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

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Here is figure (Adopted from Chapter 3 of the Oracle General Ledger Users Guide shows the encumbrance accounting process with the budgetary control flag enabled:

The following flow chart explains the process followed during the encumbrance cycle. The encumbrances can be created in GL as well as from Payables and Purchasing.

Encumbrance Flow

  1. You need to enter encumbrances manually, if necessary. When you post encumbrance transactions, General Ledger automatically posts offset amounts to this account.
  2. Use MassAllocations to allocate encumbrances across cost centers, departments, and divisions. You need to enable Budgetary Control for your ledger to automatically create encumbrance entries from Oracle Purchasing and Oracle Payables
  3. Import encumbrances using Journal Import.
    • Open encumbrance years to enter and post encumbrance entries to future periods.Your initial encumbrance year is opened automatically when you open the first
      period for your ledger.
    • Remember , GL uses the last period of your latest open encumbrance year to determine how far to calculate your project-to-date encumbrance balances
  4. Enter encumbrances via Purchasing and Payables
    • Purchasing automatically creates unposted encumbrance entries for General Ledger when you approve a requisition or purchase order.
    • Payables automatically creates unposted encumbrance entries for General Ledger to encumber funds for purchase order variances and unmatched invoices. See: Encumbrance Entries in Payables, Oracle Payables User's Guide.
    • General Ledger immediately updates your funds available when you reserve funds for your transactions in Purchasing and Payables. However, you must post your encumbrance entries to review funds available in Financial Statement Generator reports.
  5. Reserve funds for encumbrance entries to allow posting of encumbrances. To do so, do one of the following:
    • Reserve funds online in the Enter Encumbrances window. See: Entering Encumbrances, in the Oracle General Ledger Users Guide.
    • Reserve funds in batch mode by running the Mass Funds Check/Reservation program. See: Running the Mass Funds Check/Reservation Program, in the Oracle General Ledger Users Guide.
  6. You need to review unposted encumbrance journal entries online.
  7. Post encumbrances.
  8. Relieve encumbrances.
  9. Review funds available.
  10. Define and submit encumbrance reports using the FSG. or standard reports to review your encumbrance balances and activity. Such Reports limited to following:
    • Encumbrance Trial Balance Report
    • General Ledger Report
    • Account Analysis Report
  11. Perform year-end encumbrance processing.
  12. Carry forward year-end encumbrances.

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