Inventory Org Account Details

By: Syed Mustafa Arshad

Oracle Functional Consultant
PwC Pakistan
Email: syedmustafaarshad@gmail.com

Average Costing:

For average costing, only the Material, Average Cost Variance, Inventory A/P Accrual, Invoice Price Variance, Expense,
Sales and Cost of Goods Sold accounts are required. The other accounts are used as defaults or are not required.

Standard Costing:

For standard costing, only the Purchase Price Variance, Inventory A/P Accrual, Invoice Price Variance, Expense, Sales and
Cost of Goods Sold accounts are required. The other accounts are used as defaults to speed your set up.

Area

Costing
Information

Account Heads

Status

Nature

Material

Mandatory

Asset

Mandatory
Mandatory

Asset
Asset

Mandatory

Asset

Mandatory

Asset

Mandatory

Expense

- Outside Processing
- Material Overhead
Overhead
- Resource
-

Inter- Org
Information

Expense

Transfer Credit

Optional

Detail
An asset account that tracks material cost. For average
costing, this account holds your inventory and intransit
values. Once you perform transactions, you cannot
change this account
An asset account that tracks outside processing cost.
An asset account that tracks material overhead cost.
An asset account that tracks resource and outside
processing overheads.
An asset account that tracks resource cost.
The expense account used when tracking a non-asset
item.
Used to Record Increased Inter Org Charge made to
other Org. The default general ledger account used to
collect transfer charges when this organization is the
shipping organization. This is usually an expense
account. The default value is the value you defined in
the Organization Parameters window for the shipping
organization.

Purchase Price
Variance

Optional

Receiveable

Optional

Payable

Optional

Intransit Inventory

Optional

The variance account used to record differences

between purchase order price and standard cost. This
account is not used with the average cost method.
Enter the general ledger account used to collect the
purchase price variance for interorganization receipts
into standard cost organizations. You must enter an
account if your receiving organization is using standard
costing. This is usually an expense account.
The default general ledger account used as an interorganization clearing account when this organization is
the shipping organization. This is usually an asset
account.
The default general ledger account used as an interorganization clearing account when this organization is
the receiving organization. This is usually a liability
account.
The default general ledger account used to hold
intransit inventory value. This is usually an asset
account. For average cost organizations, this account is
the default material account.

The variance account used to record differences

between purchase order price and invoice price. This
account is used by Accounts Payable to record invoice
price variance. Enter a general ledger account to
accumulate invoice price variance for this organization.
This is usually an expense account.

Invoice Price Variance

Mandatory

Expense

Inventory AP Accrual

Mandatory

Liability

Sales

Mandatory

COGS

Mandatory

Other Accounts
-

Deffered COGS
- Account

Purchase Price
Variance

Invoice price variance is the difference between the

purchase order price for an inventory item and the
actual invoice price multiplied by the quantity invoiced.
Purchasing uses this account on the PO distribution
when the requisition or purchase order is created.
When Payables matches and approves the invoice,
Payables uses the invoice price variance account from
the purchase order to record invoice price variance
entries. In addition, if you have exchange rate
variances, Payables also records invoice price variance
for exchange rate gains and losses.
The liability account that represents all inventory
purchase order receipts not matched in Accounts
Payable, such as the uninvoiced receipts account.
The profit and loss (income statement) account that
tracks the default revenue account.
The profit and loss (income statement) account that
tracks the default cost of goods sold account.

Mandatory
Optional

The variance account used to record differences

between purchase order price and standard cost. This
account is not used with the average cost method.

Cost Variance Account

- Encumbrance
Project Clearance
- Account
LCM Cost Variance
- Account

LCM Absorption
Account

Receiving Options

Expense

The average cost variance is an expense account and

need not be relieved. Variances in average costing
occur only in a few circumstances, such as when a job
has been charged with requirements and not fully
completed or when inventory has been driven negative
and is being replenished or if the inventory is being
consumed at a cost much higher than the current
average cost (Example: Misc Issue Cost Different then
Average Cost). In all these cases, the average cost
variance account is used to absorb the unaccommodated costs. This account is not representative
of any value that will be consumed at any time in the
future, therefore its balances are not required to be
monitored. (Doc ID 1210663.1, Doc ID 467715.1, Doc ID
604398.1).

Expense

Used to Expense out variance between Estimated and

Actual Cost in case of Inventory Consumed already

Mandatory

Liability

This account would be used at time of Receiving

Inspection and to Pass Cost Update to Inventory
Valuation. This account will be null after procure to pay
process end only if Absorption Account, LCM Invoice
Price Variance Account and Default Charge Account are
same.

Mandatory

Liability

For LCM Enabled Org Invoice Price Variance will be

transferred to this account Doc ID 1310019.1

Mandatory

Liability

Mandatory

Liability

For LCM Enabled Org Exchange Rate Variance will be

transferred to this account Doc ID 1310019.1
For LCM Enabled Org Tax Variance will be transferred to

Mandatory

Optional
Optional
Mandatory (If LCM
Enabled)

LCM Invoice Price

- Variance Account
LCM Exchange Rate
Variance Account

- LCM Tax Variance

Account
LCM Default Charge

- Account
-

Receiving Inventory
Account

Mandatory

Liability

Mandatory

Asset

Retroactive Price

- Adjustment Account
- Clearing Account

Purchasing
Options

Expense AP Accrual
Account

Optional
Mandatory

Mandatory

Liability

this account Doc ID 1310019.1

This account is used when create accounting is done for
Cost Factor Invoice.
Enter the general ledger account to record the current
balance of material in receiving and inspection.
Retroactive Price Adjustment cannot be used in case of
LCM.

Enter a general ledger account to accumulate the

expense accounts payable accrual for your purchasing
installation. This is the account used by Purchasing to
accrue your accounts payable liability for expense items
at time of receipt when your Expense Accrual Option is
On Receipt, or at period-end (Control OptionsPurchasing Options) when your Expense Accrual Option
is Period End. This account represents your uninvoiced
receipts and is usually part of your accounts payable
liabilities in the balance sheet.
Enter general ledger accounts to accumulate exchange
rate gains or losses for this organization. These are
usually expense accounts.

Financial Options

Exchange Rate Gain

and Loss Account

Mandatory

Expense

Exchange rate gain or loss accounts are used to record

the difference between the exchange rate used for the
purchase order and the exchange rate used for the
invoice.
Use the Accounting region of the Financials Options
window to set up these accounts