AP: Exchange Gain/Loss Setup

This is a very basic setup of Forex Gain/Loss calculation and requires User entered Rate. First Let’s see what is Gain/Loss on Exchange Rate.

What is Exchange Gain/Loss?: The idea behind Gain or Loss on exchange rate is simple. It comes in when you are dealing in Multiple Currencies. Let’s take an example, suppose that you are purchasing some goods or services from another country. There must some currency exchange rate, say the base currency is PKR and transaction is carried out in USD and the exchange rate between the two is 80.25 . You ordered a server which was $37,500.00. The liability recorded on the day the shipment was confirmed was in PKR which was 3,009,375.00 (37500*80.25).  It was informed by the vendor that the shipment will take 8 weeks. After 8 weeks or so you received the server and now you have to pay. The exchange rate on the day of payment was 81.86 and you paid Rs.3,069,750.00. The amount you had to pay in PKR was more than the liability recorded at the time of confirmed shipment. The Loss you had to bear due the fluctuation in forex rate was Rs.60,375.00. Similarly had the Dollar rate on the day of payment was 79.20, then you had to pay Rs.2,970,00.00 and the Gain on exchange you enjoyed was Rs.39,375.00

How does it work in Oracle Payables?: Oracle AP calculates this Gain or Loss automatically based on Exchange Rate from Invoicing to Payment.

Here are setup steps or pre-requisites for this functionality:

1. Enable the currency in General Ledger in which you want to do the transaction. USD is enabled by default.
2. Define Exchange Rate, but I have not used the predefined rates, I am using User Entered rates.
3. Define Currency Payables Option. Here you define the account code combination which will be used during the transaction.
4. Define a multi-currency Bank Account from which the payment will be made.

After performing the above steps, the Exchange Gain/Loss functionality is enabled. The exchange rates will be entered by user at the time of Invoice Entry and at the time of Payment, which will calculate the gain or loss on the transaction.

There is another need of calculating Unrealized Gain/Loss on the exchange which I have discussed in another Post.

If you have any queries feel free to contact me at atif.syd@gmail.com

That’s All. :)

AP: Document Sequencing for Bank wise Check Payments

There are scenarios or requirement where the payment voucher number should be generated Bank wise like payments made from HBL should have its own sequence and payment made from MCB should have its own. You can also narrow down the sequencing to Check Books.

Following is the levels of the Payment and its Document Categories:

• All Payment (Check Pay: It is a seeded or default category)
• Bank Account (this needs to be defined)
• Check Book (this also needs to be defined)

I am not referring to other types of payment like EFT or Wire Transfer cuz frankly I haven’t seen any organization in Pakistan using these mode of payments, I am not denying that there aren’t but I haven’t seen and in turn haven’t worked on it. Although I worked with modes like Netting Payment and Refunds :D

The process is very simple. You just have to be familiar with Document Sequencing. For bank account wise sequence generation you have to perform following steps

1. Define a separate Document Category using the System Administrator responsibility.
2. Assign the newly created document category to either Bank Account OR Payment Document.
3. Define a new Document Sequence.
4. Assign the newly created Sequence to Category.

There you go, now the document sequence or voucher sequence will be generated against a particular bank account or check book.

You question should be: Where to assign the category and What is difference between assigning category to Bank Account and Check Book?

Well, the difference is very simple and it is of hierarchy that is if you assign the category code to bank account then all the check books created in that account will have the same document category assigned to it. Otherwise you have to select the category code for each check book.

For Step 1 Defining a separate Document Category, do the following:

Navigation: System Administrator>Application>Sequential Numbering>Categories

1. Select Application as Payables.
2. Enter Category Code like CHK_HBL. It is 30 character field.
3. Enter Name like HBL Check Payment.
4. Enter Description. (Optional)
5. Select Table Name as AP_CHECKS_ALL. Don’t select any other table name. The reason to select this table name is because the payment document is created in this table.

Moving on, you have to assign this document category to either the Bank Account or the Check Book. I prefer to assign it at bank account level.

You have to get to Bank Account page, it’s up to your rights and responsibilities that you choose Payables or Cash Management to get to Bank Account Setup page. Here are the navigation and steps

Step 2 Assigning Document Category to the Bank Account

Navigation: Bank Accounts> Search Bank Account> Update the particular Bank Account>

1. Click on Account Access Tab on the left.
2. Click on Options.
3. Enter the newly created category on the Payment Document Category field. Like in this example it is CHK_HBL.

You can also see another region Payment Document Categories by Payment Method. It is self-explanatory that if you are using multiple payment methods  with the particular bank account and want to have separate number generated for each method then you can define and assign separate document categories to each method.

For step 3 and 4 you have to refer to Document Sequencing

I hope this suffice your requirement. If you have any queries, feel free to contact me at atif.syd@gmail.com

That’s All :)

AP: Invoice Aging Report

Let’s see what the term Invoice Aging means? Why is it called Aging report? Where is the Aging report used? How does the Aging report work?

Why called Aging Report?: Aging comes from the word Age. “Age” is the chronological representation of any phenomenon. Be it a person, an organization. Invoice Aging is the calculation of Unpaid or Outstanding Invoice’s Age. In Oracle Payables this calculation is done using the Invoice Aging standard report.The calculation is represented in Days.

Where is the Aging report used?: It is used to calculate the Due and Overdue days of any outstanding supplier’s or invoice’s payment. Using this aging information the cash outflow is determined. And many other decision can be taken.

How does the Aging report works?: Oracle Payables uses the Invoice Date, Payment Terms and Term Date attached to it for calculating the invoice’s age. GL Date has no effect on the aging.

Following are the setup steps required to implement Invoice Aging report:

1. Define Aging Period
   • Aging Period is a user defined slabs of days. User can define one to many aging calendars.
2. Run the Standard Request using the defined aging period.

Let’s take a scenario to define the Aging Period. Suppose I want to know the payments Overdue by 30 days and payments Due in 30 days i.e. if Today is 1-April then this aging period will display the payments due from 2-March to 1-May. So here is how to define such periods.

Step 1:

Navigation: AP>Setup>Calendar>Aging Period

1. Enter the Name, let’s suppose “Monthly Aging Period”.
2. Enter the Description(optional), like “30 days due and overdue aging period”.
3. The Column Order will be by default 1, let it be.
4. Enter 16 in Days From and 30 in Days To. (Yes, number of days in positive will pick the past due payments)
5. Give the First Column Heading as 30 – 16 and Overdue in Second Column Heading, though it is optional. These column headings will appear on the aging report.
6. Go to next row, the column order will be automatically generated.
7. Enter 0 in Days From and 15 in Days To.
8. Give the First Column Heading as 15-0 and Overdue in Second Column Heading.
9. Go to next row.
10. Enter -15 in the Days From and 1 in Days To.
11. Give the First Column Heading as Due In and give 1-15 Days in Second Column Heading.
12. Go to next row i.e 4th or the last row, as the aging report has only four columns.
13. Enter -16 and -30 respectively in both columns.
14. Give the First Column Heading as Due In and give 16-30 Days in Second Column Heading.
15. Save the period.

Step 2: Now you have run the standard request name Invoice Aging Report. Give the following parameters

• Sort Invoice By:
  • Trading Partner: All invoices will be sorted and grouped by Supplier’s Name
  • Invoice Type: All the invoices will be sorted by the Invoice Type, like Standard, Prepayments, Credit Memos etc.
• Include Invoice Detail:
  • Yes: The invoice information will be displayed in detail like Invoice Number, Due Date, Unpaid%, Amount Remaining.
  • No: A summarized view of the
• Include Site Details:
  • Yes: The invoices will be categorized supplier site wise.
  • No: There will be no site information.
• Minimum Amount Due: There is no need to define this parameter. I think the name says it all :)
• Maximum Amount Due: There is no need to define this parameter. I think the name says it all :)
• Invoice Type: There is no need to define this parameter. I think the name says it all :)
• Trading Partner: Due to this parameter I also call this report as Supplier Aging Report.
• Aging Period Name: Give the name of the period of which you want to have the due calculate.

So with this you can have either Invoice wise or Supplier wise Aging analysis of your payables dues.

If you have any query regarding the Aging Report or anything else then e-mail me at atif.syd@gmail.com

That’s All. :)

AP: Supplier Balance Owed

One of the many good features of Oracle Apps. This option lets you see the total liability of a supplier on just one click. Though it may not be true as it displays the balance including the unvalidated invoices as well. But still it is a good feature.

Here is the navigation for Calculating the Balance Owed:

1. Go Invoices form.
2. Click Find (Torch).
3. Enter the Trading Partner Name.
4. Enter the Site (If you want to calculate the liability on a specific site, otherwise the whole supplier liability will be calculated for that particular Operating Unit)
5. Click on Calculate Balance Owed button.
6. Enter the Operating Unit for which you want to calculate the liability.
7. Click Calculate.
8. If you want to see the invoices then click on the Invoice button.

NOTE: The balance calculated also includes the UNVALIDATED invoices, even the invoices with Header amount that are entered but not validated, even if the invoice line amount is greater than header.

I don’t think it needs any further explanation. If you have any queries, please send it to Atif.Sydi@gmail.com

That’s All :)

AP: Entering DR and CR Memos

Before getting into the transactions, lets see what are Debit Memos and Credit Memos.

In Oracle Payables both of them are used to reduce the invoice amount. This reduction can be of any reason and from either side i.e. the organization using Oracle Payables (Payer) or the Supplier (Payee) it is going to pay.

There is a concept that if an invoice amount needs to be increased then a CR memo is entered and if it needs to be decreased then DR memo is entered. However this concept doesn’t apply in Oracle Payables. Here in Payables the difference between CR and DR memo is of initiation i.e. a Credit Memo is given by the supplier if it finds any discrepancy the amount invoiced and debit memo is given by the customer if they identify any discrepancy.

Debit Memo: A negative change in invoiced amount identified by customer and sent to supplier.

Credit Memo: A negative change in invoiced amount identified by supplier and sent to customer

Moving on,

There are two possible scenarios in Payables for entering a CR or DR memo

1. The invoice is paid
2. The invoice is not paid

In first scenario where invoice was overcharged and has been paid to the supplier; a CR/DR memo will create a Refund i.e. receiving amount in the bank.

In second scenario where the invoice is overcharged but open or not paid; a CR/DR memo will reduce the payment amount.

Here are the steps for entering the invoice for Scenario 1

1. Create an invoice if you want to test this scenario, let’s say invoice number INV-001 with amount 15000/-
2. Create CR/DR memo for same supplier in INV-001
3. Give it a number say INV-001DR1 with amount -3000/-
4. Scroll the invoice header section to the Match Action column and select “Invoice” from the drop down.
5. Don’t give the Invoice Line or Distribution amount.
6. Click on Corrections button.
7. Enter invoice number to be corrected i.e. INV-001 and click Find.
8. Click on Select and enter the amount to be corrected say -2000 or the total amount -3000.
9. Click Correct.
10. With this, the Invoice Line and Distributions will be copied to CR/DR memo with the respective correction in Distribution lines.
11. Now perform the validation.
12. Create Accounting is optional.
13. Now pay the CR/DR memo; you can use the “Pay in Full” option or the Payment window.
14. Select the bank account in which you are receiving the refund from supplier.
15. Enter the check number, which is used by supplier to pay the refund amount.
16. Save the Transaction.
17. The accounting in this case will debit your bank account and Credit the Liability.

Accounting Entry for Refund:

CR/DR Memo

Liability           DR

Expense                CR

CR/DR Memo payment

Bank                   DR

Liability                CR

Here are the steps for entering the transaction in Scenario 2

1. The Invoice for this scenario will also be created already.
2. Enter the CR/DR memo with the reduction amount.
3. Go to payment window.
4. Select the Supplier and every other detail.
5. Select the bank account and document number you are paying from.
6. Click Enter/Adjust Invoice and select the Standard Invoice for which the amount should be reduced in the first line and the CD/DR memo in the next line. You will that the Total will be reduced which will your payment amount.
7. Save the transaction.

That’s All. :)

Your queries are welcome at Atif.Syd@gmail.com

AP: Recurring Invoices

The concept and use of Recurring Invoice is the same as the  Recurring Journal Voucher in Oracle General Ledger. The only difference in Payables is that you have to define a Calendar according to which the recurring invoices will be generated. And this is the part which is a bit tricky until you exactly know how it works.

The literal meaning of word “Recur” is  “to come again”, I think it is short for the word Re Occur, anyways.

Recurring Invoice means any liability that occurs with a specific span to time. I have used recurring invoice in following scenarios, you can come up with more :)

Recurring Invoice Scenarios:

1. Utility bills
2. Amortization of prepayments

Implementing Recurring Invoices:

Let’s first take a real life scenario and see how to create a recurring calendar on this scenario

Recurring Invoice Calendar

Create recurring calendar according to your need.

Navigation: AP>Setup>Calendar>Special Calendar

1. On the right side of the form there are radio box options select Recurring Invoice
2. Enter the Name of the calendar. Example TestRecurring08
3. Enter the Description of the recurring calendar. (Optional)
4. Enter the Number of Period for recurring invoice calendar
   • If you want Monthly recurrence then enter 12 (Every month for the whole year)
   • If you want Half Yearly recurrence then enter 2 (Twice a year)
   • If you want Half Monthly recurrence then enter 24 (Twice a month for the whole year)

Now enter the calendar. Lets take the example of 24 periods recurring.

1. Enter the Period Name like Jan1 (for the first 15 days)
2. Enter the current Fiscal Year
3. The period Sequence will be  automatically populated when you press TAB button on the keyboard
4. The From Date will also be automatically generated on pressing the TAB button
5. Enter the To Date as 15-Jan-2008 (The year 2008 is for this scenario)
6. Due Date will be blank, System Name will be automatically generated
7. Enter the Period Name for second period as Jan2
8. To Date will be automatically generated
9. Repeat the steps for the whole calendar

Recurring Invoice

Navigation: AP>Invoices>Entry>Recurring Invoices

1. On the form, Enter Supplier Name for whom the recurring invoices needs to generated.
2. Supplier Number will populate automatically,
3. Select the Site for which the invoices needs to be generated
4. Select the Recurring Calendar you created for recurrence
5. Enter the Number of Periods, should be same as defined in recurring calendar
6. Select the First Period of the calendar

Invoice Definition:

1. Enter the Invoice Number (Alphanumeric)
2. Select WHT if applicable
3. Enter Invoice Description
4. Select the Liability Account Code Combination
5. Leave the GL Date blank because if you enter the date say for example 01-JUL-2008, then all the invoices created will have the same GL date but if you keep the field blank then the invoices will have the “From Date” of the calendar for each period.

Line Definition:

1. Either select Distribution Set or PO (Either is mandatory)
2. Give Item Description, Manufacturer and Model Number if applicable

Amount:

1. Enter the First Amount invoice should have, for example, Rs.100
2. Enter Change in Percentage (if required). If you enter 1 then the system will calculate the 1% of First Amount and Adds it to the first amount. Following is the sample table

First Amount = 100
Change = 1%
100
101
102.01
103.0301
104.060401
105.101005
106.1520151
107.2135352
108.2856706
109.3685273
110.4622125
111.5668347
TOTAL=1268.250301

After all is done you can Generate the invoices.

Number of Invoice is the quantity of invoices you want to generate, for example you have created the recurring calendar with 24 periods and you give the Number of Period in the recurring form as 24, and you give 12 as the Number of Invoices.

Take the following example of the above scenario

Scenario 1

Recurring Calendar Period: 24 (Jan-08 to Dec-08)

Period given in Recurring Invoice Form: 24

Starting Period: Jan1-08

Number of Invoices: 24

24 Invoices will generate from Jul-08 to Jun-09

Scenario 2

Recurring Calendar Period: 24 (Jan-08 to Dec-08)

Period given in Recurring Invoice Form: 24

Starting Period: May2-08

Number of Invoices: 8

8 Invoices will generate from May2-08 to Sep1-08

Click on Create Recurring Invoices to generated the invoices in Invoice Workbench

The Next on the form means that next invoice will be generated from Sep2-08 till Dec2-08

When you click Create Recurring Invoices a form will open showing the invoice number with the period name and the GL date as given in the recurring invoice form

Your queries are welcome at Atif.Syd@gmail.com

That’s All :)

AP: Petty Cash

Petty cash is one of the process that used in Pakistan and even in other countries but Oracle Application does not have a Standard Feature to cater to this process.

When I say “does not” it means that there is no standard functionality of petty cash. Obviously Oracle has suggested its workaround.

I am writing or explaining my workaround for handling petty expense and payments made from petty cash.

According to my knowledge, I know two ways or workarounds to handle petty cash in Oracle Payables:

Workaround 1:

1. Create bank account named Petty Cash
2. Create a Supplier named Petty Cash Supplier.

Use the Cash Management Module to Reimburse your Petty Cash Bank Account from your actual bank account.

Use the Petty Cash Supplier for entering the invoice with expense accounts. You can use the multiple Supplier Sites if you have petty cash administration at different sites.

You can also use the petty cash bank account for Payments made using Cash method.

Workaround 2:

1. Create employee as a Petty Cash Supplier, give advance to that employee, and apply petty cash standard invoices.

In this case you cannot actually pay your Expense Report or Reimburse your Employee Expenses.

I use both of the above methods. But I personally suggest the first method. Though it may be a lengthy one but still it keeps details of every transaction and payment made using petty cash bank account.

There can be other workarounds as well which I haven’t came across with.

I don’t think there is any need for details in this regard? If you have any queries then email me

Your queries are welcome at Atif.Syd@gmail.com

Take Care.

That’s All :)

AP: Suppliers

First let’s see what is the literal meaning of the term supplier?

A person(s) or an organization(s) that “supplies”, “sells” or provides something, it can be goods or services or both, tangible items or intangible items. For Example:

1. A florist supplies flowers, bouquets and plants, and a gardener supplies its services of taking care of the garden.
2. Oracle Corporation supplies both products as well as services, Oracle EBS is a product and My Oracle Support(formerly Metalink) is a service.

Are we clear on what is the meaning of Supplier?

Now, here is what a Supplier is in Oracle Application:

• Theoretically, An entity to which your organization is Liable To, i.e. your organization has booked some liability against that party. Also the Supplier Setup form only shows natural account which has Liability as its nature. The reason for only one nature of account to display there is that Suppliers are you Creditors.
• In Oracle Apps a supplier can be:
  • General Supplier, Hardware Vendor, Raw Material Manufacturer, Stationary, Book Store, Insurance Companies, Leasing Companies, Workshops, etc.
  • Government Organizations
  • Tax Collecting Authorities. In case of Pakistan it would be Federal Board of Revenue(FBR), State Bank of Pakistan(SBP) and National Bank of Pakistan(NBP)
  • Utility Suppliers like Electricity Department, Cell Phone and Land Line Service Providers. In case of Pakistan PTCL, KESC, WAPDA, etc.
  • Organization’s Employees: Yes, your employee is also your supplier. Not logically but technically in case of Oracle Apps. You have to open your employee as a supplier when you to Reimburse the Expense claims of your employee.
  • Petty Cash Administrator: Another Employee opened as a supplier to pay Petty Cash Advances and maintain petty cash through Oracle Payables.
  • Petty Cash Supplier: We open this supplier (particularly in Pakistan’s scenario) to pay off all the petty expenses.
• Technically, a shared entity across all Oracle Applications
• In R12, Suppliers are owned by Oracle Purchasing module

We see suppliers mainly in Oracle Purchasing and Oracle Payables Module. Since Oracle Apps is designed to cater the variety of industries globally, so there is a supplier’s hierarchy to cater the global need of recording the liability as well.

Here is how Oracle Apps defines a Supplier’s Shared Entity. It divides the Supplier in to two portion:

1. Supplier Master or Header Level – Part of Trading Community Architecture and is visible across the instance.
2. Supplier Site Level – Visible only to the Operating Unit.
   

Both levels are required to define a supplier in the system. The transaction is performed at Site Level i.e. Invoice is booked against the supplier’s site.

Let’s take an example of a supplier to understand the Master and Site level concept. Suppose there is a Hardware vendor which has its branches in different cities and/or different countries. This hardware vendor has its Head Office in Karachi and sales offices in Lahore and Islamabad. This hardware vendor has its policy that all the purchase will be dealt from sales offices but the receiving of cash will done from Head Office as its finance department resides there. Now your organization purchase its hardware from Lahore but has to pay for it to the Head Office in Karachi. There are two types of document generated in this scenario.

1. Purchase Order
2. Payment Cheque [or Check as Oracle Apps says it in American English ;) ]

To deal with this, Oracle has concept of Supplier Site. For the above scenario, there will two sites for this vendor

1. Lahore Site, purpose of this site will be Purchasing
2. Karachi Site, purpose of this site will be Payment or Pay Site

In Oracle Purchasing you will only be able to raise the PO against the Lahore site and Karachi site will not be visible in the LOV in Purchasing Module. And in Oracle Payables you will only be able to enter invoice and pay check against Karachi site.

So you see the purpose of Site and Master. There is always one Master Record of supplier and multiple Sites depending on the scenario.

NOTE: Master record doesn’t mean it is Head Office and Site are Branches. Head Office and branches both are sites.

SUPPLIER SETUP

Now here are the setups steps for Suppliers in Oracle Payables. I will not be able to discuss “Each” option but only the ones necessary or is used in Pakistan particularly:

1. Setup an Inventory Organization which is part of Payables setups
2. Configure Payables System Setup
3. Create Supplier Master
4. Create Supplier Site
5. Configure Site options

Payables System Setup

These options are defaulted on supplier form. Most of the fields are optional but it is for ease of entering the supplier data. All the fields are changeable on Supplier form or Invoice workbench. You configure the following in this form

• Supplier Numbering: Auto or Manual. Alphanumeric or Numeric.
• Invoice Match Option: How you want to match the invoice with PO or after receiving items
• Payment:
  • Currency: A default payment currency.
  • Pay Group: This is the Grouping of suppliers in a category. For example, Utility Suppliers, Sundry Creditors, Chemical Supplies etc. But I use it for categorizing the invoices, so I don’t use it here as its an optional field as well. Pay group is defaulted to Supplier form and from supplier form to Invoice Workbench. You can change it on the workbench form.
  • Term Date: The date when system start calculating the payment terms thereby calculating the invoice aging.
  • Pay Date Basis: If your supplier is giving discount then you can setup a payment term with discount and set the pay date basis accordingly
  • Payment Term: A default payment term

This setup is across the instance and is DEFAULTED on every new supplier.

Supplier Master Setup

• Supplier Type: Oracle bifurcates supplier in two types, Standard and Employee. The supplier types I’ve mentioned above are Organization Type like Utility, Manufacturing, Tax Authority. etc.
• Organization Name: It’s the name of the supplier. For example Oracle Corporation
  • NOTE: Naming convention should be strictly followed. Oracle itself emphasizes on setting up a naming convention for suppliers becuase for the application “Oracle Corp.” and “Oracle Corporation” are two different suppliers.
• Country: Do I need to explain this?
• Tax Registration Number: This field is also self explanatory.
• Taxpayer ID: Again a self explanatory field. In Pakistan we use this field as NTN
• Alias: I haven’t used this field yet.
• URL: Self explanatory.

Once done with the master. A detailed web form open with Company Profiles, Banking Details etc.

Here you can configure the option for both Master and Site and to do so you have to create a site.

Supplier Site and Detail Setup

• To create a site you have to create an address. On the Supplier detailed web form there is a link “Address Book” on the left side bar. Go to this link and create an address.
  • Country: I don’t think I need to explain this field
  • Address Line 1: At least one address line is mandatory. You can use the other four lines as well.
    • NOTE: Do not enter city in any of the address line. City field is given separately.
    • NOTE: Do not use the commas at end of the address line because the system automatically puts one after each Address Line.
  • Address Name: This is basically Site Name. This name will appear on the invoice form.
    • NOTE: You can enter a larger text but the invoice form will only displays 15 characters. So be careful while naming the site.
  • Address Purpose: The site you are adding is for what purpose? RFQ, Purchasing or Payment
  • After you are done with address creation then you have to attach this site to and Operating Unit.

Now you are able to setup various options like following

• Tax Details: For enabling Withholding Tax and Sales Taxes
• Accounting Controls: For Liability account, Prepayment account and Distribution Sets
• Payment Terms: Different sites can have different payment terms
• Payment Methods: Define the method of payment medium used for this site. Like Check, EFT or Bank Instruction.

Remember: Some options requires configuring both Master and Site level. Like Payment Methods and WHT.

I will elaborate the Setup of Supplier in this same entry later. If you have any questions email it to me.

That’s All :)

AP: Accounting Entries

It is confusing for most of the beginners or new users to understand how an Oracle Application is performing the accounting on various events. Though after going through the application they get use to it. The option of “Create Accounting” and “View Accounting” helps a lot.

Here are some of the events, its explanation and its accounting performed by Oracle Payables, technically, the accounting engine is moved to Oracle Subledger Accounting (SLA). But the accounting is still viewed in Payables.

Anyways,

STANDARD INVOICE:

	DEBIT	CREDIT
Expense / Item Expense / Misc. Expense	100
Supplier / Liability		100
PAYMENT:
Supplier / Liability	100
Bank / Cash / Cash Clearing		100
TOTAL	200	200

How is liability account code combination credited in the above accounting entry?

You see when you define Supplier’s Site, you have to give the liability account code combination on that particular site. Although the liability account is defaulted from Payables’ Financial Setup, but you can change the account code according to your need. You can even change the liability account code combination on the Invoice Workbench by enabling the Column from Folders option.

When you create a standard invoice, you have to give the Supplier Master name and a Site, from this site, the application picks the liability account. For expense account code combination you can either use a distribution set or manually enter it.

Now comes the payment, the liability account is fetched from the supplier whose invoice is being paid, the cash clearing or cash account is fetched from the bank you select during the payment. This account is defined during the Bank Account Setup.

PREPAYMENTS / ADVANCES:

	DEBIT	CREDIT
Prepaid Expense / Advance Paid	70
Supplier / Liability		70
PAYMENT:
Supplier / Liability	70
Bank / Cash / Cash Clearing		70
STANDARD INVOICE:
Expense / Item Expense / Misc. Expense	100
Supplier / Liability		100
PREPAYMENT APPLIED TO STANDARD INVOICE:
Supplier / Liability	70
Prepaid Expense / Advance Paid		70
TOTAL	310	310

The idea of prepayment or advance is that you pay the supplier before receiving its goods or services. Now what if you pay the supplier but due to some reason or dispute you cancel the agreement or contract before receiving the supplies or service from that supplier? The supplier will have to pay back, now if you are receiving the cash it’s more of an asset. So the prepayment’s accounting is doing the same. When you create a prepayment invoice, the application automatically selects the Assets account given on that particular supplier’s site. And when you apply that prepaid invoice on the standard or actual invoice, the application clears the asset account as well as the liability.

In the above scenario of Prepayment, the total liability was PKR. 100, but the prepayment or the advance was paid of PKR. 70. When the Prepayment was applied to the Standard Invoice, the liability on Standard Invoice was decreased by PKR. 70. Still the remaining amount of PKR. 30 has to be paid and it will be a Standard Payment.

INVOICES with “TRACK AS ASSETS”:

	DEBIT	CREDIT
Asset Clearing	100
Supplier / Liability		100
INVOICE TRANSFERRED TO ORACLE ASSETS:
Asset	100
Asset Clearing		100
TOTAL	100	100

“Track as Asset” is a functionality for moving the items from Oracle Payables to Oracle Assets. It is a check box on the Invoice Line TAB and can be enabled on Distribution Line using the Folder View option. When you check this box and run the “Mass Addition Create Report” from Payables, the items on invoice line or distribution line moves to Oracle Assets. You can give the item description on invoice line so that you don’t have to give it when the items are transferred to Oracle Assets.

Now, how does the system identifies that on which account it should move the items to Assets?

It is because the same Asset Clearing account is given in the Assets Setups.

INVOICE with WITHHOLDING TAX (say 6%):

	DEBIT	CREDIT
Expense / Item Expense / Misc. Expense	100
Supplier / Liability		100
Payment with Withholding Tax :
Supplier / Liability	100
Bank / Cash / Cash Clearing		94
Withhodling Tax		6
WITHHOLDING TAX  INVOICE (Usually Auto Generated)
WHT Expense	6
WHT Payables (NBP or SBP)		6
TOTAL	106	106

The above scenario is of an invoice with a withholding (WHT).

In above accounting entry the WHT payables or Liability account is selected from the supplier defined as a Tax Authority. The WHT expense is picked from the WHT setup.

This is some basic accounting entries made by Oracle Payables.

That’s All :)