PO Accounting Flow

Accounting Flow
for
Purchase Orders, Receipts and Matched
Invoices in an Encumbrance Environment
An Oracle White Paper
July 2006
This document details the accounting entries that are expected for
purchase orders with Expense or Inventory destinations, receipts and
matched invoices. It also considers the two choices of accrual available
for Expense items in an encumbrance-enabled environment.
Expense items can be accrued at
a) Period-end
b) On Receipt
Inventory Items can ONLY be accrued at
a) Receipt
This document consists of the following case studies/scenarios.
Accrue on receipt: (APO)
Case 1: Expense Destination/Create, Approve, Reserve/Receive/Invoice
Case 2: Expense Destination/Create, Approve, Reserve/Invoice/Receive
at a price greater than PO price
at a quantity greater than PO quantity
Case 5: Inventory Destination/ Create, Approve,
Reserve/Receive/Invoice
Case 6: Inventory Destination/ Create, Approve,
Reserve/Invoice/Receive
Accrue at Period-end: (APE)
Case 1: Create PO /Receive PO /Deliver PO /Invoice/Run the period end
program
Case 2: Create PO /Invoice/Receive PO/Deliver PO/Run the period end
program
Case 3: Create PO/Receive PO/Deliver PO/Run the period end
program/Invoice
Case 4: Create PO/Receive PO/Run the Period end program/Deliver
PO/Run the
period end program/Invoice
Case 5: Create PO /Receive PO /Deliver PO /Invoice at a price greater
than PO
Price/Run the period end program
Case 6: Create PO /Receive PO /Deliver PO /Invoice at a quantity

greater than PO
Quantity/Run the period end Program
The following Pages will explain each case in detail:
LEGEND: AOR= Accrue On Receipt, APE= Accrue at Period-End
AOR-Case 1:
Assumptions:
Accrue on receipt = Y
Destination type = Expense
Item = expense Item
Action
1. PO is reserved
2. Receive the PO
3. Deliver the PO
Accounting entries
Budget a/c DR @ PO price (base + NR
tax)*
Receiving Inventory a/c DR @ PO price
(base + NR tax)++
Sequence of actions:
Create, Approve, Reserve
PO
Receive and Deliver the PO
Invoice Validation after
matching
Create Accounting for
invoice
Table in which records
exist
Flag/nature of entry
GL_BC_PACKETS
Encumbrance
RRSL/GLI/GL_JE_LINES
AP Expense accrual a/c CR @ PO price
(base+ NR tax) ^^
Expense Charge a/c DR @ PO price (base
+ NR tax)
Receiving Inventory a/c CR @ PO price
(base + NR tax)++
for Invoice
Actual
Encumbrance
Budget a/c CR @ PO price (base + NR

tax)*
4. Invoice Validation REC Tax and NR tax DR @ tax amount++
AP Expense accrual a/c DR @ PO price
excluding tax and tax DR @ tax rate
5. Create Accounting separately ^^
Actual
GL_BC_PACKETS
Encumbrance
AP_AE_LINES_ALL
Actual
AP_ENCUMBRANCE_
LINES_ALL
Encumbrance
AP Liability a/c CR @ invoice price

REC Tax and NR tax CR @ tax amount++
Note:
The corresponding offsetting records have the same symbol in
order to more easily identify which debits and credits offset each
other. (^, +, *)
PO base price refers to received quantity * unit price in PO Lines.
NR tax refers to Non Recoverable Tax calculated for the (received
quantity * PO line unit price)
REC tax refers to Recoverable Tax calculated for the (received
RRSL - RCV_RECEIVING_SUB_LEDGER
GLI GL_INTERFACE
AOR-Case 2:
Assumptions:
Item = expense Item
Action

PO
matching
invoice
Receive and Deliver the
PO
Accounting entries
Table in which
records exist
1. PO is reserved
Budget a/c DR @ PO price (base + NR tax) $$
GL_BC_PACKETS
Encumbrance
2. Invoice Validation
REC Tax and NR tax DR @ tax amount *

AP Expense accrual a/c DR @ PO price
excluding tax and tax DR @ tax rate separately
+++
GL_BC_PACKETS
Encumbrance
AP_AE_LINES_ALL
Actual
AP_ENCUMBRANCE
_LINES_ALL
Encumbrance
RRSL/GLI/GL_JE_
LINES
Actual
3. Create Accounting
for invoice
4. Receive the PO

REC Tax and NR tax CR @ tax amount *
Receiving Inspection a/c DR @ PO price (base
+ NR tax) ^^^^
AP Expense accrual a/c CR @ PO price (base+
NR tax) +++
5. Deliver the PO
Expense Charge a/c DR @ PO price (base +

NR tax)
Receiving Inspection a/c CR @ PO price (base
+ NR tax) ^^^^
RRSL/GLI/GL_JE_
LINES
Actual
Encumbrance
Budget a/c CR @ PO price (base + NR tax) $$
Note:
Corresponding offsetting accounts have same symbols
PO base price refers to received quantity * unit Price in PO lines
quantity *PO line unit price)
quantity *PO line unit price)
GLI GL_INTERFACE
AOR-Case 3:
Assumptions:
Item = expense Item
Action
1. PO is reserved
2. Receive the PO
3. Deliver the PO
Create, Approve, Reserve PO
Receive and Deliver PO
Create Invoice at higher unit
price than PO
Invoice Validation
Create Accounting
Accounting entries
Budget a/c DR @ PO price (base + NR tax) ^^^^
Receiving Inventory a/c DR @ PO price (base + NR
tax) $$$
AP Expense accrual a/c CR @ PO price (base+ NR
tax) **
Expense Charge a/c DR @ PO price (base + NR
tax)
Receiving Inventory a/c CR @ PO price (base + NR
tax) $$$
Table in which
records exist
Flag/nature of
entry
GL_BC_PACKETS
Encumbrance
RRSL/GLI/GL_JE_
LINES
Actual
RRSL/GLI/GL_JE_
LINES
Encumbrance
Budget a/c CR @ PO price (base + NR tax) ^^^^

4. Invoice Validation at
higher price
REC Tax and NR tax DR @ tax amount #

IPV a/c DB @ difference in price &
Actual
GL_BC_PACKETS
Encumbrance
AP Expense accrual a/c DR @ PO price excluding

tax and tax DR @ tax rate separately **
AP_AE_LINES_ALL
Actual
5. Create Accounting for

Invoice
IPV a/c DR @ difference in price
REC Tax and NR tax CR @ tax amount #
AP_ENCUMBRANCE
Encumbrance
_LINES_ALL
IPV a/c CR @ difference in price &
Note:
PO base price refers to received quantity * unit Price in PO lines
GLI GL_INTERFACE
AOR-Case 4:
Assumptions:
Item = expense Item
Action
1. PO is reserved
2. Receive the PO
3. Deliver the PO
PO
Receive and Deliver PO
Create Invoice at higher
quantity than PO
Invoice Validation
Create Accounting
Accounting entries
Table in which
records exist
GL_BC_PACKETS
Budget a/c DR @ PO price (base + NR tax) &
Receiving Inspection a/c DR @ PO price
(base + NR tax) ##
RRSL/GLI/GL_JE_
LINES
AP Expense accrual a/c CR @ PO price
(base+ NR tax) ^^^
Expense Charge a/c DR @ PO price (base +
NR tax)
Receiving Inspection a/c CR @ PO price
(base + NR tax) ##
Budget a/c CR @ PO price (base+ NR tax) &
RRSL/GLI/GL_JE_
LINES
Encumbrance
Actual
Actual
Encumbrance
for higher quantity
*See additional info
below
for Invoice
GL_BC_PACKETS
REC Tax and NR tax DR @ tax amount ****
AP Expense accrual a/c DR @ invoice price
separately ^^^
AP_AE_LINES_ALL
Encumbrance
Actual

REC Tax and NR tax CR @ tax amount ****
AP_ENCUMBRANCE
_LINES_ALL
Encumbrance
Note:
PO base price refers to received quantity * unit Price in PO line

NR tax refers to Non Recoverable Tax calculated for the (received quantity *
PO line unit price)
REC tax refers to Recoverable Tax calculated for the (received quantity * PO
line unit price)
GLI GL_INTERFACE
No separate accounting entry for Quantity Variation (#4) will be seen
here
AOR-Case 5:
Assumptions:
Destination type = Inventory
Item = Inventory Item
Action
1. PO is reserved
2. Receive the PO

PO
matching
invoice
Accounting entries
Budget a/c DR @ PO price (base + NR tax) #
(base + NR tax) **
AP Inventory accrual a/c CR @ PO price
(base+ NR tax) %%%

exist
GL_BC_PACKETS
Encumbrance
Actual
Material Valuation a/c DR @ std cost

(base + NR tax) **
3. Deliver the PO
PPV a/c CR/DR @ difference in price
Budget a/c CR @ PO price (base+ NR tax) #
4. Invoice Validation REC Tax and NR tax DR @ tax amount $$$$
AP Inventory accrual a/c DR @ PO price
for Invoice
separately %%%
Actual (Account line

type-1)
type-5)
MTL_TRANSACTION_
ACCOUNTS
type-6)
Encumbrance
(Account line type15)
GL_BC_PACKETS
Encumbrance
AP_AE_LINES_ALL
Actual
AP_ENCUMBRANCE_
LINES_ALL
Encumbrance

REC Tax and NR tax CR @ tax amount $$$$
Note:
GLI GL_INTERFACE
AOR-Case 6:
Assumptions:
Destination type = Inventory
Item = Inventory Item
Action
1. PO is reserved
Accounting entries

PO
matching
invoice
exist
GL_BC_PACKETS
Encumbrance
tax) ####
2. Invoice Validation REC Tax and NR tax DR @ tax amount*
AP Inventory accrual a/c DR @ PO price
3. Create Accounting separately @@@
for invoice
4. Receive the PO
REC Tax and NR tax CR @ tax amount*

(base + NR tax) ^^^^
AP Inventory accrual a/c CR @ PO price
(base+ NR tax) @@@
GL_BC_PACKETS
Encumbrance
AP_AE_LINES_ALL
Actual
AP_ENCUMBRANCE_
LINES_ALL
Encumbrance
RRSL/GLI/GL_JE_
LINES
Actual

type-1)
Receiving Inspection a/c CR @ PO price
type-5)
MTL_TRANSACTION_
(base + NR tax) ^^^^
ACCOUNTS
PPV a/c CR/DR @ difference in price
type-6)
Encumbrance (Account
tax) ####
line type- 15)
Material Valuation a/c DR @ std cost
5. Deliver the PO
Note:
GLI GL_INTERFACE
AccrueatPeriodEnd
APE-Case 1:
Assumptions:
Accrue on receipt = N
Item = expense Item
Purchase Encumbrance type and
Invoice Validation after matching
Invoice Encumbrance type are
Create Accounting for invoice
different
Run the Period End Program
Action
1. PO is reserved
Accounting entries
Budget a/c DR @ PO price (base + NR tax)

exist
GL_BC_PACKETS
Encumbrance
*
2. Receive the PO
3. Deliver the PO
for invoice
6. Run the Period end

program
7. Manual Reversal of
journal entry
No Accounting Transactions
Budget a/c CR @ PO price (base + NR tax)
*
REC Tax and NR tax DR @ tax amount ^^
Budget a/c DR @ invoice price excluding
NR tax-INV Enc &&&
Expense charge a/c DR @ invoice price
separately
including NR tax
REC Tax and NR tax CR @ tax amount ^^
Budget a/c CR @ invoice price excluding
NR tax &&&
Not Required since there are no accrual
entries
N/A
N/A
N/A
N/A
GL_BC_PACKETS
Encumbrance
AP_AE_LINES_ALL
Actual
AP_ENCUMBRANCE_
LINES_ALL
Encumbrance
N/A
N/A
N/A
N/A
Note:
quantity * po line unit price)
APE-Case 2:
Assumptions:
Item = expense Item
different
Action
1.PO is reserved
Run the Period end Program
Accounting entries

exist
GL_BC_PACKETS
Encumbrance
2.Invoice Validation
3.Create Accounting for

invoice
4.Receive the PO
5. Deliver the PO
6.Run the Period end
program
journal entry
tax) ####
tax) ####
REC Tax and NR tax DR @ tax
amount***
Budget a/c DR @ invoice price
excluding NR tax- INV Enc %%
GL_BC_PACKETS
Encumbrance
AP_AE_LINES_ALL
Actual
AP_ENCUMBRANCE_
LINES_ALL
Encumbrance
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Expense charge a/c DR @ invoice

price excluding tax and tax DR @ tax
rate separately
including NR tax
Budget a/c CR @ invoice price
excluding NR tax %%
REC Tax and NR tax CR @ tax
amount***
entries
Note:
Corresponding offsetting accounts have same symbols.
APE-Case 3:
Assumptions:
Item = expense Item
different
Action
1.PO is reserved
2.Receive the PO
Accounting entries
Budget a/c DR @ PO price (base + NR tax) $
Table in which
records exist
GL_BC_
PACKETS
N/A
Encumbrance
N/A
3.Deliver the PO

program
Expense Charge a/c DR @ PO Price (base + NR tax) #

AP Expense accrual a/c CR @ PO Price (base + NR
tax) &
5.Manual Reversal of
journal entry (Both
actual and
encumbrance)
N/A
RRSL/GLI
Budget a/c CR @ PO price (base + NR tax) $

Expense Charge a/c CR @ PO Price (base + NR tax) #
AP Expense accrual a/c DR @ PO Price (base + NR
GL_JE_LINES
tax) &
Budget a/c DR @ PO price (base + NR tax) ++
Budget a/c CR @ PO price (base + NR tax) ++
Budget a/c DR @ invoice price excluding NR tax GL_BC_
INV Enc **
PACKETS
REC Tax and NR tax DR @ tax amount ^^
Expense charge a/c DR @ invoice price excluding

tax and tax DR @ tax rate separately
7.Create Accounting for AP Liability a/c CR @ invoice price including NR
tax
invoice
REC Tax and NR tax CR @ tax amount ^^
Budget a/c CR @ invoice price excluding NR tax **
N/A
Actual
Encumbrance
Actual
Encumbrance
AP_AE_LINES_
ALL
Actual
AP_ENCUMBR
ANCE_LINES_
ALL
Encumbrance
Note:
RRSL RCV_RECEIVING_SUB_LEDGER
GLI GL_INTERFACE
APE-Case 4:
Assumptions:
different

PO/Receive the PO and Run the
Period End Program
Deliver the PO and Run the
Period End Program
Invoice Validation and Create
Accounting
Sequence of Actions:
Action
Accounting entries

exist
Flag/nature of
entry
1.PO is reserved
2.Receive the PO
Budget a/c DR @ PO price (base + NR tax) ^

Expense Charge a/c DR @ PO Price (base + NR
tax) +
AP Expense accrual a/c CR @ PO Price (base +
program
NR tax) &
Budget a/c CR @ PO price (base + NR tax) ^
Expense Charge a/c CR @ PO Price (base + NR
tax) +
journal entry (Both actual AP Expense accrual a/c DR @ PO Price (base +
NR tax) &
and encumbrance)
Budget a/c DR @ PO price (base + NR tax) *
5. Deliver the PO
GL_BC_PACKETS
N/A
RRSL/GLI
Actual
Encumbrance
GL_JE_LINES
Actual
N/A
N/A
Expense Charge a/c DR @ PO Price (base + NR

tax) +
RRSL/GLI
AP Expense accrual a/c CR @ PO Price (base +
program
NR tax) &
Budget a/c CR @ PO price (base + NR tax) *
Expense Charge a/c CR @ PO Price (base + NR
tax) +
journal entry (Both actual AP Expense accrual a/c DR @ PO Price (base +
GL_JE_LINES
NR tax) &
and encumbrance)
Budget a/c DR @ PO price (base + NR tax) #
Budget a/c CR @ PO price (base + NR tax) #
Budget a/c DR @ invoice price excluding NR
GL_BC_PACKETS
tax- INV Enc /////
REC Tax and NR tax DR @ tax amount \\\\
separately
AP_AE_LINES_ALL
9.Create Accounting for AP Liability a/c CR @ invoice price including
NR tax
invoice
REC Tax and NR tax CR @ tax amount \\\\
AP_ENCUMBRANCE_
Budget a/c CR @ invoice price excluding NR
LINES_ALL
tax /////
APE-Case 5:
Assumptions:
Item = expense Item
different
Encumbrance
N/A
Actual
Encumbrance
Actual
Encumbrance
Actual
Encumbrance
Create Invoice at higher price
than PO
Action
1. PO is reserved
Accounting entries
$$
Table in which records exist
Flag/nature of
entry
GL_BC_PACKETS
Encumbrance
2. Receive the PO
N/A
N/A
3. Deliver the PO
N/A
N/A
$$
Budget a/c DR @ PO price excluding NR
4. Invoice Validation at tax ***
GL_BC_PACKETS
Encumbrance
higher price
Budget a/c DR @ difference in invoice
price ***
REC Tax and NR tax DR @ tax amount &
separately
AP_AE_LINES_ALL
Actual
5. Create Accounting AP Liability a/c CR @ invoice price
including NR tax
for invoice
REC Tax and NR tax CR @ tax amount &
AP_ENCUMBRANCE_LINES
Encumbrance
Budget a/c CR @ invoice price excluding
_ALL
NR tax
N/A
N/A
program
7. Manual Reversal of Not Required since there are no accrual
N/A
N/A
journal entry
entries
Note:
APE-Case 6:
Assumptions:
Item = expense Item

different

Create Invoice at higher quantity
than PO
Action
1. PO is reserved
2. Receive the PO
3. Deliver the PO

Accounting entries
##
##
Budget a/c DR @ PO price excluding NR tax

4. Invoice Validation at $$
higher quantity
for invoice

program
journal entry

exist
GL_BC_PACKETS
Encumbrance
N/A
N/A
N/A
N/A
GL_BC_PACKETS
Encumbrance
Budget a/c DR @ additional invoice price

-INV enc $$
REC Tax and NR tax DR @ tax amount ////
separately
AP_AE_LINES_ALL
including NR tax
REC Tax and NR tax CR @ tax amount ////
Budget a/c CR @ PO price excluding NR tax
AP_ENCUMBRANCE_LI
^^^^
NES_ALL
Budget a/c CR @ additional invoice price
with encumbrance line type as QV ^^^^
entries
Actual
Encumbrance
N/A
N/A
N/A
N/A
Note:
Important Notes:
1.Accrual entries will be generated /created ONLY when the Received

quantity > Billed quantity at the time of running Receipt AccrualsPeriod end program.
2. Under the cases mentioned above under the Period-end Section,
manual reversal of journal entries are not required except for Case 3
and Case 4 since there are NO accrual entries created /generated.
3. For all these cases the account records from receiving will also be
inserted into GL_BC_PACKETS, along with the other subledger tables
mentioned above. These records in GL_BC_PACKETS can be viewed by
querying the max(packet_id), as there are no REFERENCE fields
populated for receiving records.
4. Liability a/c which is recorded at invoice price will also include the
recoverable and non-recoverable tax rates.
Accounting Flow against Purchase Orders, Receipts and Matched Invoices.

JULY 2006
Authors: Manighandan Venkatraman & Asha Ravada
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
oracle.com
Copyright 2006, Oracle. All rights reserved.
This document is provided for information purposes only and the
contents hereof are subject to change without notice.
This document is not warranted to be error-free, nor subject to any
other warranties or conditions, whether expressed orally or implied
in law, including implied warranties and conditions of merchantability
or fitness for a particular purpose. We specifically disclaim any
liability with respect to this document and no contractual obligations
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Oracle, JD Edwards, PeopleSoft, and Siebel are registered trademarks of Oracle
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of their respective owners.

PO Accounting Flow

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Accounting Flow

Case 6: Create PO /Receive PO /Deliver PO /Invoice at a quantity

Budget a/c CR @ PO price (base + NR

AP Liability a/c CR @ invoice price

Create, Approve, Reserve

Budget a/c DR @ PO price (base + NR tax) $$

REC Tax and NR tax DR @ tax amount *

AP Liability a/c CR @ invoice price

Expense Charge a/c DR @ PO price (base +

Budget a/c CR @ PO price (base + NR tax) $$

Budget a/c CR @ PO price (base + NR tax) ^^^^

REC Tax and NR tax DR @ tax amount #

AP Expense accrual a/c DR @ PO price excluding

AP Liability a/c CR @ invoice price

5. Create Accounting for

REC Tax and NR tax CR @ tax amount #

IPV a/c CR @ difference in price &

AP Liability a/c CR @ invoice price

Corresponding offsetting accounts have same symbols

PO base price refers to received quantity * unit Price in PO line

Create, Approve, Reserve

Table in which records

Material Valuation a/c DR @ std cost

Actual (Account line

AP Liability a/c CR @ invoice price

Create, Approve, Reserve

REC Tax and NR tax CR @ tax amount*

Actual (Account line

Table in which records

6. Run the Period end

Table in which records

3.Create Accounting for

Expense charge a/c DR @ invoice

4.Run the Period end

Expense Charge a/c DR @ PO Price (base + NR tax) #

Budget a/c CR @ PO price (base + NR tax) $

Expense charge a/c DR @ invoice price excluding

Create, Approve, Reserve

Table in which records

Budget a/c DR @ PO price (base + NR tax) ^

Expense Charge a/c DR @ PO Price (base + NR

Table in which records exist

Purchase Encumbrance type and

Create, Approve, Reserve PO

Invoice Validation after matching

Budget a/c DR @ PO price excluding NR tax

6. Run the Period end

Table in which records

Budget a/c DR @ additional invoice price

1.Accrual entries will be generated /created ONLY when the Received

Accounting Flow against Purchase Orders, Receipts and Matched Invoices.

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