Receipt Accounting

1. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

Introduction:
This white paper was made to solve the confusion of “Receipt Accounting” and give a
better understanding of each ESS Job “Scheduled Process” and what it exactly does. If you have
anything you want to add to that paper, please don’t hesitate to E-mail me. Special thanks to
Oracle development team whom have helped us partners to understand it.

Receipt Accounting
There are two kinds of accruals:
1-Accrue on receipt.
2-Accrue on period end.
For all inventory items, it'll be always on receipt but for expense you can choose between these
two kinds.
We are going to be talking about inventory items so we'll talk about "Accrue on receipt".



So this represents the different events that happens in the P2P cycle, so you start with a
"Requisition" and that can be converted to a "PO" either manually or automatically and then the
"PO" is going to be sent to a supplier and the supplier is going to send you the goods so you
receive the goods and once you receive it you can optionally do "Inspection" and then "Put
Away" into the inventory and then the supplier will give you an "Invoice" that you'll record into
payables and then you'll be matching with either with the "PO" or "Receipt" then you'll be

2. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

making a "Payment" this invoice can be either manually or automatically created, the pay on
receipt functionality is still available in Fusion. So these are all the P2P events.

Let's take a look at how things going to be accounted.

So, for example when you raise a "Requisition" you can encumber the amount (Optionally) so
when an encumbrance ledger will be created (by the financial consultant). The encumbrance type
will be commitment so you are kind of committing to a “Commitment” so you are reserving the
funds in the ledger so that is why there would be an encumbrance made into the ledger.

Subsequently you are going to raise a PO based on the PR at point of time the encumbrance is
going to be reserved and it is going to be converted into an "Obligation", so you are pretty much
going to pay this supplier now. So, you want to encumber this amount.

Once you receive the goods, now you are sure you want to pay the supplier and at that point you
are going to relief the encumbrance and knock off the entry, and you are going to book the
accrual so you are pretty much paying the supplier. And the receiving is going to be debited.

3. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

So why do you do this? Because you want to show this payment or (liability) to the supplier and
relief all the encumbrance and turn it into an actual entry as demonstrated.

Now next thing, you may want to inspect the goods (Optionally) so that is the entry you'll see.
(Receipt Routing)


Now after inspecting it and you found that it is pretty good, so you want to deliver it to
inventory, that is when this transaction happens:



And then when you account the invoice, it’ll have that accrual on it so that is why accrual is
going to be knocked off and liability will be booked.


And now when you make the "Payment" the "Liability" is knocked off and then cash or bank is
booked.

4. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]





So what we are going to get exposed to in this paper is shown in that segment:

So the "Receipt Accounting" deals with these two events only. And the “Put Away” transaction
is dealt with "Cost Accounting"

And we have these two (Receipt Accounting & Cost Accounting) as separate individual products
and are made independently. "Cost Accounting" is not only for the (Put Away) but it's for any
transaction done in the inventory, so whenever there is an impact into the inventory, that
particular event is going to be impacted by the "Cost Accounting", whatever is dealt with the
(Receipt) kind of activity is going "Receipt Accounting".
These two put together is called "Cost Management":

5. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]





Receipt accounting integrates with a lot of products within the HUB

Let us talk about (Accrue on Receipt):
As we said "Cost Management" has two pieces into it, one is "Receipt Accounting" and the other
is "Cost Accounting" all the other products within the cloud interface with it by populating the
interface tables and from the interface, distributions are going to be created and from
distributions accounts are going to be created. So, that is briefly the architecture.
Also, we have two more products, it's the "SLA" and "TAB".
When you create a "PO" a lot of accounts are going to be populated on it like "Charge Account"
"Accrual Account" "Variance Account" and all these accounts are going to be automatically
populated, how? In EBIZ we used to have "Account generator workflow" in Fusion we no longer
have it and we have "TAB".
Now you are going to receive the goods, once you save the receipt you have accounted it and in
this case, you'll have to run a program called

6. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

"Transfer Transactions from Receiving to Costing": this program (ESS Job), will pick the
"Receipt" transactions and send it to the "Costing" interface.
BUT they'll have to be transferred into distributions, so you'll run a program called
"Create Receipt Accounting Distributions”: it'll look at the interface tables and create
distributions and these distributions are nothing but the account combinations.
So, if you are receiving there has to be two lines like in the previous demonstration. Then the
third program is "Create Accounting" is nothing but SLA accounting which is going to be
invoked and it'll consider the distributions and then generates the journals. All these programs
are going to be referenced as "Concurrent Programs" which is an old naming in EBIZ but in
Fusion they’re called "ESS jobs" and it can be accessed through the navigator by clicking on
"Scheduled Processes", you don't have to worry as all these three jobs can be scheduled.



Now the next step is to "Put Away" the goods from receiving to inventory, and again you have to
run another program which is "Transfer Transactions from inventory to costing" and then you'll
have to run "Create cost accounting distributions" and that is when the distributions are going to
be created and then the actual journals are going to be created.

7. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]



Now you are going to create an invoice, and when you create it and match it against a PO or a
Receipt, and when you do it you run "Create Accounting" and then you run "Transfer Costs to
Cost Management" that brings the data from payables into costing and you do it because you
need these accounts for reconciliations and again run "Create Receipt Accounting Distributions"
because they'll come from the interface first.

8. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]



Now you are going to run another program which is called "Match Receipt Accruals" and it'll
match accruals which is booked in the receipt accounting with ones coming from the payables,
so you need to make sure your accruals are knocked off correctly.


And then you can run "Accrual Reconciliation Report" which will book these two values and
show it to you.

9. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

And from this report you can see "Accrual" in one-time CR and the other DR and both knocked
off each other and the net balance in this case will be 0.
Demo:
Steps:
1-Create a PO and in our case, it’ll be “Direct”.

10. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


2-Receive the PO.

3- So now according to the previous slides we have to send these info across to the costing, so
this receipt transaction should be made available for the costing to do the accounting so we have
to run these programs.

And of course, not the put away as our receipt was direct.
So now you'll go and run an ESS job. Which are?
1-Transfer Transactions from Receiving to costing.
2-Transfer Transactions from inventory to costing.

11. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]





So now they'll go into interface, so we have to run the second one. Why? Cause we have done
the put away as well.
And now let us run "Create Receipt Accounting Distributions" and that will pick from interface
to distributions. So how do you run it?
Go to the main menu—Costing. You will see "Cost accounting" and "Receipt Accounting"
which are two different activities "Receipt Accounting" will take care of receiving activity and
"Cost Accounting" is going to take care of "Put Away" activity.


So click on "Receipt Accounting" in which you will find this screen.

12. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]



So click on "Create Receipt Accounting Distributions" cause your transactions are sitting in the
interface, you need to pick them from the interface and turn them into distributions

Now distributions are getting created, go ahead and query the status.

13. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

Once you have distributions, you need to run "Create Accounting" and then you'll have the
journals.




So what will SLA do, it's going to look at distribution and create journals, so you'll be able to see
the journals.

And then you'll match with the invoice. So go to ESS and make sure it's done.

14. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


Go to "Review Receipt Accounting Distributions" and give your PO number.



Don't mind the encumbrance one, click on the second one, and at the bottom you can see two
lines.

15. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


Now let us go and create an invoice and we then match them.so navigate to payables---invoices
and then click on "Create Invoice" and query with PO# and you'll pick up most of the info and
give a proper number

So you have the invoice created.

16. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


But it's not validated, so go on "Invoice Actions" and "Validate" it then again "Invoice Actions"
and click on "Post to Ledger", so the SLA is now running the accounting. You'll get a
confirmation message..

When you click on "View Accounting" you will see that the accrual got knocked off and the
liability got booked

Which is the same as we demonstrated, and these have to go to GL. So let us go and check our
ESS. So we'll run "Transfer Costs to Cost Management" and that program will pick all the
accruals and send it across to interface table.

17. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]



So it'll ask for BU and Cut-off date.

Now you have again to create a distribution out of it and take it from the interface. So we go
again on "Create Receipt Accounting Distribution" from "Costing"—"Receipt Accounting"

So what we are basically trying to do is

18. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


We are trying to get the "Accrual info" to interface and from interface to distribution so we can
do the matching and make sure they match.
Now we have all the info with us

And now we have to make sure they match and they knock off each other, so go on

19. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

And this program will do all the matching then we run a report that will tell us how good the
match is.

So we have it


So let us go and take a look at the accrual reconciliation which we have to do through the ESS.

20. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


Wait for it to finish and review the output. And it'll look like this:

So both are knocked off as you can see.

Now the example we have seen was the ideal case in which they match but in sometimes they
might not match for various reason

21. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


So for example you received 49 out of 50 so you might not receive a bill from the supplier for
the remaining item so you need to knock it off..so accruals in receipts can be different than
accruals in the payables side, so there might be some remaining amount.

So when you account this invoice, it'll be different.

22. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


So you can go and do it manually or you can do a "Clear Accrual Balances & Match Receipt
Accruals" so you just run the program and knock off the slight differences and when you do it
it'll knock off, so it is essentially decreasing the accrual from receipt. But you have to make sure
your inventory is valued correctly, so everything could be in sync

Now let us go and do the example again on the application:
It is going to be a replication of what we have done earlier on. So we'll create a PO and receive
it.

23. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

The PO amount will be 50 as it was before,

And just go and create a receipt under the appropriate inv
And then we go and run the same ESS jobs..
1-From Receiving to costing. (ESS Job)
2-Create Receipt Accounting Distributions. (ESS Job)
3-Create Accounting. From the tab on the side
So the matching will happen only if these accounts has been gone to GL that is why we are
running the "Create Accounting"
So let us go now into payables—invoices and follow the same steps but this time will invoice
less quantity.

Then validate it then post to ledger then let us look into the accounting now.

24. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


It shows 4,900.00 now while the one booked in purchasing was 5,000.00,click save and close.
Then after that we run "Transfer Costs to cost management"


That will be picking all the invoices that has been accounted and posted in GL and send them
across to costing.

25. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

So now you have to make the distributions again from the costing---Receipt accounting.

Click on "Create Receipt Accounting Distributions"
Once it's done you'll do the matching and find the difference.

26. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

And then we'll run the "Accrual Reconcialtion Report" and the difference shall be shown.


Wait for it to complete then open the output.

27. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


This is the one for the PO and as you can see here there is a balance for 100 and you want to
clear it off, there is 2 ways:
1-Manually.
Navigate to receipt accounting then




Click on "Adjust Receipt Accrual Balances"

28. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


Click search

You will see the difference, then you will decide to change it by clicking on "Adjust Accrual
Balances" so after that click on "Actions" and then "Adjust Balances"

29. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


When you click on it, it'll create an adjustment entry for 100, nevertheless you can do it
automatically just navigate to

"Manage Accrual Clearing Rules" and in here you can write the rules, like if for example the
difference between the accruals is 2% of the actual amount then go ahead and clear it.
You query the rule first and edit it if desired, and use "Clear Receipt Accrual Balances" page to
clear it.

30. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


This is just an OBR so for instance in our example we have missed one piece out of 50 which is
almost 2% and in our condition we have 5% so we leave it and we also leave "ClearAccruals" as
it is, the conditions comes from the imp guide..

The one we have used is the marked one..

Then you go to the other task which is "Clear Receipt Accrual Balances"

31. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]



So that program is going to evaluate all the rules and then identify all the PO that'll fall into this
criteria and then goes and creates that amount.
So now after it's done

32. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


Click on "Audit Receipt Accrual Clearing Balance"
So now let us go and see, just search using the PO and BU.

As you can see here the 100 has been accounted. Now let us go ahead and send that entry that we
have seen for 100, so we send it to the interface then distribution and look at how entries will
show up on the screen..
Click on "Create Accounting"

33. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]




Once you do it, you shall not see any balance now..
Go and check it on ESS..

Now after it's done, I have to match the receipt accruals and then run the report. Go to "Cost
Accounting" then

34. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


Click on "Match Receipt Accruals"

After it's complete, we need to run the "Accrual Reconciliation Report" from ESS.

35. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]






Now it should show no balance..

Now you can see that an accrual clearing has happened.

36. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]


By saying "Offset Days" you can limit the number of days beyond which you can post it to the
previous period, in other words look at the slide.

Basically it'll happen to expense items as we talked about previously, and it'll create the
following two lines..

37. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]

38. Moustafa Abdulrahman
Oracle Fusion SCM Consultant
[email protected]