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*Receiving:*
*Delivery:*
*Invoice:*
*Depreciation :*
Expense Item:
Inventory Item:
Those Item that needs to maintain stock and tracking are inventory Items. Creating
unique Item coding for each SKU's
Non-Stock able Items that is direct IN & OUT, are expense items. For such items no
need to create Item code for all. Only few codes can be created and in PR & PO
description can be change
For example
Inventory items: Machine parts, Raw Materials, Any Trading Items etc
You cannot define an item as expense and inventoried at the same time. But you
can define the item as inventory item.
You should uncheck the asset flag for that subinventory. Make sure that the
subinventory accounts are setup correctly.
a - Purchasable
b - Purchased
b - stockable
c - transactable
e - Costing Enabled = No
b - stockable.
c - transactable
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.
THE BASICS
Whats the difference between the two? The key difference is that
inventory is the materials, work-in-progress goods and finished products a
company intends to sell to earn revenue. It is the companys product, or it is
a component used to create the companys product. In order to stay in
business, the company must sell inventory, send it into the distribution
channel, or use it in production. Fixed assets, on the other hand, may be
used in production of the companys products, such as equipment or
machinery, but they are not part of the companys normal revenue stream or
product line. They are rarely sold under a years time, unless the company is
upgrading equipment or selling a facility or, in a worst case scenario, closing.
Wasp Inventory Control Tour
Why is keeping track of inventory important? Inventory is considered a
current asset by the companys accounting team, which means that the
company plans to sell the asset in the short term.
Over time, some inventory may become obsolete, or there may be too much
on hand to sell within a reasonable period. An inventory system must include
the ability to identify excess and obsolete inventory so that the company can
adjust for this slow moving or non-moving inventory. Conversely, if your onhand inventory is too low, you may lose sales due to inability to meet
demand. This is where knowledge of your inventory turnover ratio comes in
handy.
Why is keeping track of fixed assets important? Fixed assets, also
known as hard assets, are considered long-term assets on the balance sheet.
This means that the company expects to profit from use of the asset for a
long time often referred to as its useful life. However, fixed assets do have a
finite useful life, and accountants must record the decline in usefulness (the
assets value) by recording periodic depreciation. Over time, each assets
value is reduced, but financial statements will continue to use the original
cost of the asset rather than its current market value. To know how much
value your assets are worth at any given time, youll need a tracking system.
TRACKING SYSTEMS
What do inventory tracking systems account for? There are several
reasons to track inventory. One important function is to monitor sales.
Inventory tracking systems can follow your products as they move in and out
of stock or production, as well as when they sell it in order to calculate the
cost of goods sold. You can also ensure the safety of your inventory (via
surveillance or alarms) and maintain your inventory turnover ratio by
ensuring the accuracy of your databases and eliminating excess stock. Unlike
fixed asset management systems, inventory systems normally do not include
the ability to plan and schedule maintenance on items in stock, even if such
items would normally require periodic maintenance while they are in service.
For example, companies that sell machinery and equipment dont perform
maintenance on the equipment in inventory, despite recommending that
customers who use the equipment maintain it regularly. Equipment in
inventory is not in use for its intended purpose, so it does not require
maintenance until it is sold and the customer begins using it.
What do fixed asset systems need to track? A fixed asset system must
have the ability to calculate and record each assets depreciation. The best
fixed asset systems have multiple depreciation methods they can use to
calculate periodic depreciation. The most common depreciation method is
known as straight-line depreciation, which is the initial cost of an asset
divided by its useful life. Other methods include double declining balance
and sum of the years digits. To combat depreciation, fixed asset
management systems should have the ability to track required and
Scope
This procedure covers requesting and approving the purchase of a fixed asset from a supplier.
This procedure does not cover fixed assets transferred from the fixed assets pool or from another unit.
Policy
A fixed asset
may consist of either a single item or components purchased as separate items but intended to
function together as a unit (e.g., personal computer components)
has both a total cost greater than $500 (including freight) and a useful life of at least 3 years.
An asset tag
is permanently affixed (whenever practical) to each fixed asset after it has been placed in service
is not affixed to a fixed asset when doing so either is physically impossible or would impair the
use of the fixed asset
is removed when the fixed asset is disposed of
A Purchase Requisition
based on the total cost of the fixed asset and whether the purchase conforms to the capital
budget (that is, whether the fixed asset is in the budget and within the budgeted amount)
Responsibility
The Budget Officer is responsible for
approving and forwarding the purchase requisition to the Chief Financial Officer
ensuring that the correct fixed asset account has been used and other details as specified in the
procedure
verifying the completeness of all requests for the purchase of a fixed asset
deciding when approval by the Executive Staff is required for fixed asset purchases that do not
conform to the capital budget (that is, are not in the capital budget or have a total cost greater than
the budgeted amount)
confirming that the Chief Financial Officers approval is also recorded on the requisition Approval
History
ensuring that all criteria for fixed asset purchases are met on the purchase order
approving and forwarding the purchase order to the Computing Services Manager if computer
equipment is being purchased
approving and forwarding the purchase order for the asset to the supplier and subsequent follow
up
reviewing all computer equipment purchase orders forwarded from the Materials Management &
Logistics Manager.
approving or rejecting such purchase orders depending whether they conform to computing
service purchasing policy
Distribution
Budget Officer*
Buyer
Ownership
The Chief Financial Officer is responsible for ensuring that this document is necessary, reflects actual
practice and supports IITA policy.
Activity Preface
This activity is performed whenever a fixed asset is requested.
The approval levels in this procedure are consistent with the approval levels for Purchasing.
The approvals required to purchase a fixed asset are based on two criteria: (1) the total cost of the fixed
asset and (2) whether the purchase conforms to the capital budget (that is, whether the fixed asset is in
the budget and within the budgeted amount).
The total cost of a fixed asset includes all costs required to purchase it, take title to it, and make it ready
for use.
The purchase price of a fixed asset consists of the total of all components intended for use as a unit.
Requestor
1.
The request should be discussed with your Budget Officer before completing the purchase Requisition.
The Chief Financial Officer responsible for Capital Budget should also be consulted.
Complete a Purchase Requisition requesting the item(s) ensuring you adhere to the following rules :
Capital Purchases for IITA should be charged against account 9951-9957. For example,
request for purchase of a motorcycle for cost center 1320 would be written as
01.9954.1320.000000000.0000000, where 9954 is listed as FA Budget Vehicles.
Purchases made for CG-Inter-Centre Projects should be charges against account 75107570. Using the above example with cost center 4011, it would be
01.7540.4011.000000000.0000000
Send for approval to your Budget Officer. Add a note when sending for approval such as Fixed
Asset Purchase Request.
Refer to Purchase Requisitions (RFP) - Initiating and Approving [PRO4003Y] and Valid IITA Purchasing
Accounts [REF4003Y] for further information.
Budget Officer
2.
Ensure that the Requestor has completed the purchase requisition correctly.
Check that the correct fixed asset account has been used as described above. You will need to
view the requisition from Requisitions Summary to view the account distribution.
If you wish to approve, goto task #5. Otherwise, goto task #4.
4.
Reject the requisition as the approval action indicating the reason in the note field.
As a fixed asset purchase you must forward the document to him/her for approval.
7.
If you wish to approve, goto task #9. Otherwise, goto task #8.
8.
You should state a reason on the Note field indicating to the requestor why the request is being rejected.
The requestor will receive notification informing them that it has been rejected.
Buyer
9.
For fixed asset purchases you should check for the following :
The account used should be either 9951-9957 for Capital Assets or 7510-7570 for external assets
normally on CG Inter-Centre projects (cost centers 8XXX).
The Chief Financial Officers name should be seen on the Tools > View Action History as
Approve.
If the details are incorrect, goto task #10. Otherwise, goto task #11.
10. Return the requisition to the requestor.
Enter the reason for return such as Approval for Fixed Asset Purchase must by the Chief Financial
Officer.
Goto task #1.
11. Create the purchase order as usual and send for approval.
Include a note when sending to the Materials Management & Logistics Manager that it is a fixed asset
purchase.
You are checking for the same things as the buyer above.
End of activity.
16. Approve and Forward to the Computing Services Manager.
************************************************************************************
Non-Stock able Items that is direct IN & OUT, are expense items. For such items no need to
create Item code for all. Only few codes can be created and in PR & PO description can be
change
For example
Inventory items: Machine parts, Raw Materials, Any Trading Items etc
You cannot define an item as expense and inventoried at the same time. But you can define
the item as inventory item.
And when you want to use it as expense, move it to an expense subinventory.
You should uncheck the asset flag for that subinventory. Make sure that the subinventory
accounts are setup correctly.
A - Expense Items
B - Inventory Expense Items
C - Inventory Asset Items
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:
Expense item
Asset flag means means it is an asset and the items value will show in your inventory
valuation.
Inventory Item
Expense 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.
Asset Item
As discussed above , the following attributes need to be enabled for such an item.
Inventory item
Stock able
transact able
Costing flag
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.
***********************************************************************
Types of Items
1. Expense Items Stationery (in this example Paper has been used as a stockable item but it
differs from client to client based on business nature)
2. Inventory Expense Items Stockable Items depends on the company
3. Inventory Asset Items To capitalize the item
Inventory Expense
Item
Inventory TAB
Inventory Item
Stockable
Purchasing TAB
Purchased
Purchasable
Transactable
Create an Item
Line
Accountin
g Class
Account
Debit
Accrual
01-000-2410000
200
Receiving 01-000-1400Inspection
000
Credit
200
Line
Accountin
g Class
Account
Inventory 01-000-1410Valuation
000
Receiving 01-000-1400Inspection
000
Debit
Credit
200
200
Line
1
2
Accountin
g Class
Account
Debit
Accrual
01-000-2410000
200
Liability
01-000-2210000
Credit
200
Line
1
2
Accountin
g Class
Account
Debit
Liability
01-000-2210000
200
Cash
01-000-1210000
Credit
200
OR
At the time of making payment in AP (if cash management is being implemented)
Line
1
2
Accountin
g Class
Liability
Account
Debit
01-000-2210000
200
Cash 01-000-1220Clearing
000
Credit
200
Line
1
2
Accountin
g Class
Account
Debit
Liability
01-000-2210000
200
Cash
01-000-1210000
P OS TE D B Y RAGH U S AT 1 3 :2 7 :00
Credit
200