Author Name: Ahmed Ismail Abdelsalam Company: Raya International Services Title: Oracle SCM Consultant Submission Date:

30/03/2010

Table of Contents
1. 2. 3. Expense Item Procure to Pay Cycle ........................................................................................ 5 Generate Accounting Entries for the Expense P2P Cycle ..................................................... 10 Expense item P2P cycle ......................................................................................................... 10
3.1. 3.2. Required accounts ....................................................................................................................... 10 Expense P2P Cycle Steps............................................................................................................ 11

List of Figures
Figure 1-Receiving Option-Receiving Inventory Account ........................................................................... 5 Figure 2-Item Master-Purchasing Tab .......................................................................................................... 6 Figure 3-Item Master-Invoicing Tab............................................................................................................. 6 Figure 4-Financial Options-Tab Accounting ................................................................................................ 7 Figure 5-Financial Options-Tab Purchasing ................................................................................................. 7 Figure 6-Financial Options- Tab Encumbrance ............................................................................................ 8 Figure 7-Purchasing Options ........................................................................................................................ 8 Figure 8-Define Ledger-Ledger Options ...................................................................................................... 9 Figure 9-Creating-Approve Requisition ..................................................................................................... 11 Figure 10-Requisition Status....................................................................................................................... 13 Figure 11-Accounting Events to View the Requisition Accounting Entries .............................................. 13 Figure 12-View the Commitment Encumbrance Entries for the PR........................................................... 14 Figure 13-Funds Available-Checking the Commitment for the PR............................................................ 14 Figure 14-Auto create Purchase Requisition to Purchase Order ................................................................. 15 Figure 15-Checking Fund-Viewing the budget deduction .......................................................................... 17 Figure 16-Approving Purchase Order ......................................................................................................... 17 Figure 17-Reverse PR commitment-create Obligation against PO............................................................. 19 Figure 18-Checking the Available Fund-Obligation increased .................................................................. 19 Figure 19-Receipt-Deliver the Purchase Order ........................................................................................... 21 Figure 20-Receiving and Deliver Transactions .......................................................................................... 22 Figure 21-Viewing Receiving Transaction ................................................................................................. 23 Figure 22-Reversing Obligation Encumbrance........................................................................................... 24 Figure 23-Obligation Encumbrance deduction ........................................................................................... 25 Figure 24-Create Accounting-Draft Mode .................................................................................................. 26 Figure 25-View the Create Accounting Output .......................................................................................... 27 Figure 26-Create Accounting-Final Mode .................................................................................................. 27 Figure 27-Deliver Accounting Entries ........................................................................................................ 28 Figure 28-Actual Field increased by $500 .................................................................................................. 28 Figure 29-Posting Journals-Drill Down Accounts ...................................................................................... 30 Figure 30-Entering the invoice ................................................................................................................... 31 Figure 31-Matching the Invoice.................................................................................................................. 32 Figure 32-Validating the Invoice ................................................................................................................ 33 Figure 33-Create Accounting for the Invoice ............................................................................................. 33 Figure 34-Viewing Accounting Generated against the invoice .................................................................. 33 Figure 35-Viewing generated journal against invoice ................................................................................ 33

Accounting Flow and P2P Expense Cycle Snapshots for Purchase Orders, Receipts and Matched Invoices in an Encumbrance Environment
This document will be divided into 2 parts, the first part will presents the required setup for the P2P Expense cycle and the accounting entries that will be generated during this cycle, and the second part will be presenting the P2P Expense Cycle in details with snapshots for the whole cycle

This document has been created using Oracle application R 12.0.4 , some Recommended batches will be presented at the end of this document stating the problems and the purposed solutions.

1. Expense Item Procure to Pay Cycle

Expense Item P2P cycle required setup steps: 1. Define Inventory Organization a. Inventory Information i. Reverse Encumbrance Checked b. Receiving Information i. Enter Inventory Receiving Account (01-000-1499-0000-000) ii. Receipt Routing in our case will beDirect Delivery*

Figure 1-Receiving Option-Receiving Inventory Account

c. Define Expense Item i. Purchased, PurchasableChecked ii. Enter Expense and Encumbrance Account(01-520-5341-0000-000) iii. Invoice able item and Invoice Enable

Figure 2-Item Master-Purchasing Tab

Figure 3-Item Master-Invoicing Tab

d. Define Financial Options i. Tab Accounting- Liability Account: 01-000-2210-0000-000 ii. Tab Supplier-Encumbrance-Enter the Master Inventory Item iii. PO Encumbrance and Requisition EncumbranceChecked

Figure 4-Financial Options-Tab Accounting

Figure 5-Financial Options-Tab Purchasing

Figure 6-Financial Options- Tab Encumbrance

e. Define purchasing options i. Enter Expense AP Accrual: 01-000-2225-0000-000 ii. Accrue Expense Items: At Receipt

Figure 7-Purchasing Options

f. Define Ledger i. Enable Budget ControlChecked ii. Require Budget JournalChecked iii. Enter Reserve for Encumbrance Account: 01-000-6999-0000-000

Figure 8-Define Ledger-Ledger Options

2. Generate Accounting Entries for the Expense P2P Cycle

Action
Create requisition/Approve Autocreate-Approve Purchase Order

Debit
Encumbrance Account Reserve for Encumbrance Encumbrance Account Reserve for Encumbrance Receiving Inspection account Expense charge account AP Expense account

Credit
Reserve for Encumbrance Encumbrance Account Reserve for Encumbrance Encumbrance Account AP Expense account

Encumbrance Type
Commitment Commitment Obligation Obligation

PO Receipt*

After Create Accounting

PO Deliver* Create Invoice-Create accounting Receiving Inspection account Liability account

Table 1-Accounting entries for P2P Cycle

(*) Accounting entries and behavior related to R12.0.4

3. Expense item P2P cycle

3.1.Required accounts 1. Encumbrance Account: 01-520-5341-0000-000 2. Reserve for Encumbrance: 01-000-6999-0000-000 3. Receiving-Inspection Account: 01-000-1499-0000-000 4. AP Expense Account: 01-000-225-0000-000 5. Expense Charge Account: 01-520-5341-0000-000 6. Liability Account: 01-000-2210-0000-000

P.S. Budget Account=Encumbrance Account=PO Charge Account= Expense Charge Account Budget should be created and fund should be assigned to the budget account which is:01-5205341-0000-000

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3.2. Expense P2P Cycle Steps 1. Go to Purchasing Responsibility and Create/Approve Requisition

Figure 9-Creating-Approve Requisition

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2. Go to Requisition Summary screen and check the Purchase Requisition Status (N)Purchasing ResponsibilityRequisitionsRequisition Summary ,Enter the Requisition Number and Click (B) find

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Figure 10-Requisition Status

3. View Accounting for the Requisition,(N)Purchasing ResponsibilityAccountingSLA: User Main MenuAccounting Events, Enter the Transaction Date and the Transaction Number (PR number) and Click (B)Go, Then click on the View Journal Entries Button to view the transaction

Figure 11-Accounting Events to View the Requisition Accounting Entries

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Figure 12-View the Commitment Encumbrance Entries for the PR

4. Go to the General Ledger to check on the Funds Available, commitment and obligation monetary values. (N)General Ledger responsibilityInquiryFund, Choose your Budget Organization and the Budget account. Notice that there is a monetary value of $500 in the commitment field which is the value of the create PR

Figure 13-Funds Available-Checking the Commitment for the PR

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5. Auto Create ( To Convert the Requisition to Purchase Order),(N)Purchasing ResponsibilityAuto Create, Enter your purchase requisition number, Select your purchase requisition and Click on (B)Automatic and then click on (B)Create

Figure 14-Auto create Purchase Requisition to Purchase Order

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6. Check Funds on the Level of the Purchase Order, Purchase Order window will appear ,Navigate to ToolsCheck Funds(B) View Results

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Figure 15-Checking Fund-Viewing the budget deduction

7. Approve the Purchase Order, Click on (B)Approve and then click on (OK)

Figure 16-Approving Purchase Order

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8. View Accounting generated for the Purchase Order.(N)Purchasing ResponsibilityAccountingSLA: User Main MenuAccounting Events, Enter the Transaction Date and the Transaction Number (PO number) and Click (B)Go, Then click on the View Journal Entries Button to view the transaction, the commitment transaction for the purchase requisition will be reversed and the obligation transaction will be create against the monetary value of the purchase order($500)

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Figure 17-Reverse PR commitment-create Obligation against PO

9. Go to the General Ledger to check on the Funds Available, commitment and obligation monetary values. (N)General Ledger responsibilityInquiryFund, Choose your Budget Organization and the Budget account. Notice that there is an increase in the obligation field by $500 which is the value of the create PO and the Commitment field updated to $ Zero. Last value for the obligation was $2,751

Figure 18-Checking the Available Fund-Obligation increased

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10. Receipt-Deliver the Purchase Order,(N)Purchasing ResponsibilityReceivingReceipt, Enter the Purchase Order number and click (B)Find, Select the Purchase Order line you want to receive in and enter the location where you want to receive the Expense item and save.

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Figure 19-Receipt-Deliver the Purchase Order

11. View Receipt/Deliver transactions for the Purchase Order (N) PurchasingReceivingReceiving Transaction Summary, Enter the Purchase Order Number and Click (B) Find, then Click on (B) Transaction.

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Figure 20-Receiving and Deliver Transactions

12. View accounting entries generated against the Receive-Deliver transactions, (N)PurchasingReceivingReceiving Transaction SummaryEnter PO Number(B) Find(B)TransactionClick on the Receipt line to be able to view the accounting entries generated against the receipt Click on ToolsView accounting , Do the same steps to view the Deliver Transaction

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Figure 21-Viewing Receiving Transaction

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Note: In Figure 21, the Receiving account was debited with $500 and the AP Expense account was credited with the same value which is the value of the purchase order.

Figure 22-Reversing Obligation Encumbrance

Note: At the Deliver step, the obligation entry is reversed so the encumbrance will be deducted with the PO value which is $ 500
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13. Check the Available fund screen, (N)General Ledger ResponsibilityInquiryFunds, Enter the Budget name and the Budget account and Click on (B) Find , Notice that the Obligation Encumbrance field has been deducted by $ 500(Check Figure 18) which is the value of the PO and the Actual field has not being update till now

Figure 23-Obligation Encumbrance deduction

14. Creating Accounting in a draft mode and transfer the journals to GL, (N)PurchasingToolsRequests(B) Submit New Request(R) Single Request
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and Press OKEnter the Request Name: Create Accounting-Receiving ,and Enter the parameters as follow: a. Ledger: Ledger namePost Ledger Name b. Mode: Draft c. Transfer to GL: Yes d. Post to GL: No

Figure 24-Create Accounting-Draft Mode

15. Check the Create Accounting output, (N) PurchasingToolsRequests (B) FindClick on Create Accounting Request (B) View Output.

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Figure 25-View the Create Accounting Output

Note: In Figure 25, the receipt and deliver transactions is displayed to understand the accounting entries generated please check the actions of receipt and deliver the Purchase Order in Table 1-Accounting entries for P2P Cycle

16. Create Accounting again, Transfer and Post to GL but this time in a final Mode

Figure 26-Create Accounting-Final Mode

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17. Checking the Accounting Entries for the delivery step,(N) PurchasingReceivingReceiving Transaction SummaryEnter PO number(B) Find(B) TransactionsClick on DeliverToolsView Accounting

Figure 27-Deliver Accounting Entries

Note: Check Table 1-Accounting entries for P2P Cycle to revise the accounting entries generated at the deliver step

18. Check the Funds Available, The Actual field should be increased by $ 500,(N) General LedgerInquiryFundsEnter the Budget NameEnter the Budget Account.

Figure 28-Actual Field increased by $500

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Note: In Figure 18, the Actual field value was $900 before create accounting, but now after create accounting it has been updated to be $ 1,400

19. Review the posted journal ,(N)General LedgerJournalsEnter ,Enter your Batch name and Click (B) FindClick (B) Review Journal

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Figure 29-Posting Journals-Drill Down Accounts

20. Go to the Payable Responsibility and Enter an Invoice using the Purchase Order Number,(N)PayablesEntryInvoices, Enter the Invoice by entering the PO number on the invoice header, Enter the required information and Click (B) Match

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Figure 30-Entering the invoice

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21. Match the invoice against the PO/Receipt, Click (B) Match and Enter the Purchase Order Receipt number and click (B) Find, Select the invoice line(s) that you want to match the PO-Receipt against it and click (B) Find.

Figure 31-Matching the Invoice

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22. Validate the Invoice , Click (B) Actions and check Validate and click OK

Figure 32-Validating the Invoice

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23. Create Accounting for the invoice , notice that the invoice status is Validated, Click on (B) ActionsCreate Accounting and Choose (R) Final Post, notice that after create accounting the Accounted Field will be converted to Yes

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Figure 33-Create Accounting for the Invoice

24. View Accounting generated for the invoice, Go to ReportsView Accounting. Refer to Table 1-Accounting entries for P2P Cycle to view the generated transaction after create accounting for the invoice

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25. View the posted journal, Go to General Ledger ResponsibilityJournalEnter, Enter the batch name and click (B) Find, then click on the (B) Journal Review.

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Figure 35-Viewing generated journal against invoice

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