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Inventory items: Machine parts, Raw Materials, Any Trading Items etc
Expenses Items:
You can Track items Onhand but the items value will not show in your inventory valuation
(Office Stationery) etc.
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.
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.
Organization Expense Account
Definition of subinventory
Oracle Inventory -> Setup -> Organization ->Subinventory
1- Expense subinventory can be defined as an inventory which keeps track of Items delivered into
Inventory, which may NOT be of asset value.
When Defining a new subinventory, the attribute Asset Subinventory remains UNCHECKED, which
means that this Subinventory is NOT an asset subinventory and hence an Expense Subinventory.
Navigation: Oracle Inventory -> Subinventories -> Parameters
In Average Cost Organization You Can Change Expense Account At Subinventory Level
You should uncheck the asset flag for that subinventory. Make sure that the subinventory
accounts are setup correctly.
2- Asset subinventory on the other hand keeps track/record of asset items
received INTO this organization. When Defining a new subinventory, the attribute Asset
Subinventory is CHECKED , which means that this subinventory is an asset subinventory.
Navigation: Oracle Inventory -> Subinventories -> Parameters
The terminology of items is rather confusing from an Purchasing/Inventory
point of view:
For easy understanding these will be referred to as A , B and C,
A - Expense Items
B - Inventory Expense Items
C - Inventory Asset Items
A - These items have attributes checked
a - Purchasable
b - Purchased
Expense item
1) Expense Account
=================
The Expense account is has an GL account type of an EXPENSE and is defined in 3 areas:
a) Subinventory
b) Item
c) Organization
b) Item - This account is REQUIRED if Inventory Asset Value is set to No and Inventory
Item is set to Yes.
This attribute is controlled at the Organization level only.
This is the default inventory account for Inventory Expense items (B).
Oracle Purchasing debits this account when you receive an item into inventory.
only if the item is being expensed and received into the expense subinventory.
If the Purchase Order for an Inventory Expense Item (B) has a destination of Inventory
AND the expense subinventory is entered on the Purchase Order itself, then Oracle
Purchasing uses THIS (Items Expense
account) FIRST; if NOT, Oracle Purchasing uses the expense account you assigned to the
subinventory.
-This account is REQUIRED if Inventory Asset Value is set to No and Inventory Item is set
to NO.
This attribute is controlled at the Organization level only.
This is the default inventory account for Inventory Expense items (A).
If You Receive This Item In any Subinventory PO Charge Account Is Expense Account At
Item Level
Line 3 For Item (C Inventory Asset Items)
a) Subinventory -
This account holds the value of encumbrances against ITEMS in this subinventory. This
account is used for purchase order receipts and returns.
Navigation: Inventory resp > Subinventories > Define Subinventories
b) Item -
This account is REQUIRED if Reverse Encumbrance parameter is set to Yes
This attribute is controlled at the Organization level only.
This is the default encumbrance account Oracle Purchasing uses when an item is
received. If the item encumbrance account on an item does NOT exist, Oracle Purchasing
uses the encumbrance account from the subinventory. You encumber, or reserve against
funds, when the purchase requisition or purchase order is approved.
When you deliver into a subinventory you reverse the encumbrance.
The total receipts plus encumbrances equals your total funds spent.
Navigation: Items > Choose an org > Purchasing Attribute
c) Organization -
This encumbrance account at the organization level account recognizes the reservation of
funds when a purchase order is approved. This account is used if Organization uses
AVERAGE costing.
Navigation: Setup > Organizations > Query the Inventory Org > Organization
classifications > other > Inventory information > Alternate region > Other accounts
8) Material
===========
This is an asset type account that tracks material cost. Under standard costing, these
accounts are defaulted when you define subinventories and can be overridden.
For average costing, this account holds your inventory and intransit values.
Once you perform transactions, you cannot change this account.
Navigation: Setup > Organizations > Query the Inventory Org > Organization
classifications > other > Inventory information > Alternate region > other accounts
CHARGE ACCOUNT
==============
The account generation depends MAINLY on the destination type of the Purchase order.
Therefore:
A) If the destination type is Expense and item is an Expense item, the Charge account
comes from the Organization Items Expense account which is
Navigation : Items > Organization Items > Purchasing attribute > Expense account
B) If the destination type is Inventory and the Item is an Inventory expense item, there
exists an order, in which the system looks for the accounts to be defined.
Subinventory Expense account (Expense subinventory) into which the item is being
received.
If this Expense account is NOT defined then the system looks at Organization Items
Expense account, if this is also NOT available then The Organization parameters of the
Receiving Orgs Expense account will be populated.
Navigation: Setup > Organizations > Query the Inventory Org > Organization
classifications > Organization Parameters > Costing > Expense account
C) If the destination type is Inventory and the item is an Inventory Asset item, the charge
account is defaulted in the following order:
1) Subinventory Material or Expense account of the Subinventory into the RECEIVING
subinventory.
Navigation: Inventory resp > Subinventories > Define Subinventories.
If this account does NOT exist then:
2) Material Account from the Organization Parameters of the Receiving organization is
populated.
Navigation: Setup > Organizations > Query the Inventory Org > Organization
classifications > Organization Parameters > Costing
For onetime or predefined items with no associated expense account, the Account
Generator will be unable to build a charge account.
In this case, you can either manually specify a charge account in your document or you
can design a custom Account Generator function to build Expense destination charge
accounts based on field values like Requester.
BUDGET ACCOUNT
==============
If the destination type is Expense, the Budget account is built off of the Charge account. If
the destination type is Inventory, the Budget account is built based in the following order:
i)Encumbrance account of the subinventory into which the item is being received.
ii)Encumbrance account defined against the item
iii)Encumbrance account from the Organization Parameters of the Receiving Org.
If none of the above are available, then it copies the charge account.
ACCRUAL ACCOUNT
===============
If the destination type is Expense then the Accrual account is populated from the
Purchasing Options Expense AP accrual account.
Navigation: Purchasing Resp > Setup > Organizations > Organizations > Purchasing
Options
If the destination type is Inventory the accrual account is populated from the receiving
Organizations Organization Parameters region.
Navigation: Setup > Organizations > Query the Inventory Org > Organization
Classifications > Organization Parameters > Other accounts > Inventory AP accrual
account
VARIANCE ACCOUNT
================
If the destination type is Expense then the Variance account is copied from the Charge
account.
If the destination type is Inventory, then this value is populated from the Organization
Parameters of the receiving Organization.
Navigation: Setup > Organizations > Query the Inventory Org > Organization
Classifications > Organization Parameters > Other accounts > Inventory Price Variance
account
Stock able
transact able
Costing flag
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;
Ste Transaction Point Debit Credit
p
1 Po Creation
2 Create Receipt Inventory Receiving Accrual Account
Account
3 Inspection
4 Delivery Of Items Asset Clearing Account Inventory Receiving
Account
5 Matching AP Invoice With Accrual Account Liability Account
Receipt
6 Payment Made To Vendor Liability Account Bank Clearing Account
7 When Clearing Payment Bank Clearing Account Bank Asset Account
Transaction
8 When Asset Addition Done And Asset Account Asset Clearing Account
Capitalized In FA Module