Author Name: Ahmed Ismail Abdelsalam

Company: Raya International Services

Title: Oracle SCM Consultant

Submission Date: 30/03/2010

Table of Contents

1. Expense Item Procure to Pay Cycle.........................................................................................4

2. Generate Accounting Entries for the Expense P2P Cycle........................................................9

3. Expense item P2P cycle...........................................................................................................9

3.1. Required accounts..........................................................................................................................9

3.2. Expense P2P Cycle Steps.............................................................................................................10

List of Figures

Figure 1-Receiving Option-Receiving Inventory Account..........................................................................5Figure 2-Item Master-Purchasing Tab.........................................................................................................6Figure 3-Item Master-Invoicing Tab...........................................................................................................6Figure 4-Financial Options-Tab Accounting...............................................................................................7Figure 5-Financial Options-Tab Purchasing................................................................................................7Figure 6-Financial Options- Tab Encumbrance...........................................................................................8Figure 7-Purchasing Options.......................................................................................................................8Figure 8-Define Ledger-Ledger Options.....................................................................................................9Figure 9-Creating-Approve Requisition....................................................................................................11Figure 10-Requisition Status.....................................................................................................................13Figure 11-Accounting Events to View the Requisition Accounting Entries..............................................13Figure 12-View the Commitment Encumbrance Entries for the PR..........................................................14Figure 13-Funds Available-Checking the Commitment for the PR...........................................................14Figure 14-Auto create Purchase Requisition to Purchase Order................................................................15Figure 15-Checking Fund-Viewing the budget deduction.........................................................................17Figure 16-Approving Purchase Order........................................................................................................17Figure 17-Reverse PR commitment-create Obligation against PO............................................................19Figure 18-Checking the Available Fund-Obligation increased..................................................................19Figure 19-Receipt-Deliver the Purchase Order..........................................................................................21Figure 20-Receiving and Deliver Transactions..........................................................................................22Figure 21-Viewing Receiving Transaction................................................................................................23Figure 22-Reversing Obligation Encumbrance..........................................................................................24Figure 23-Obligation Encumbrance deduction..........................................................................................25Figure 24-Create Accounting-Draft Mode.................................................................................................26Figure 25-View the Create Accounting Output.........................................................................................27Figure 26-Create Accounting-Final Mode.................................................................................................27Figure 27-Deliver Accounting Entries.......................................................................................................28Figure 28-Actual Field increased by $500.................................................................................................28Figure 29-Posting Journals-Drill Down Accounts.....................................................................................30Figure 30-Entering the invoice..................................................................................................................31Figure 31-Matching the Invoice................................................................................................................32Figure 32-Validating the Invoice...............................................................................................................33Figure 33-Create Accounting for the Invoice............................................................................................35Figure 34-Viewing Accounting Generated against the invoice..................................................................36Figure 35-Viewing generated journal against invoice...............................................................................37

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 Checkedb. 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 Itemi. 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

d. Define Financial Optionsi. Tab Accounting- Liability Account: 01-000-2210-0000-000

ii. Tab Supplier-Encumbrance-Enter the Master Inventory Item

Figure 3-Item Master-Invoicing Tab

iii. PO Encumbrance and Requisition EncumbranceChecked

Figure 4-Financial Options-Tab Accounting

Figure 5-Financial Options-Tab Purchasing

e. Define purchasing optionsi. Enter Expense AP Accrual: 01-000-2225-0000-000

ii. Accrue Expense Items: At Receipt

f. Define Ledgeri. Enable Budget ControlChecked

Figure 6-Financial Options- Tab Encumbrance

Figure 7-Purchasing Options

ii. Require Budget JournalCheckediii. 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 Debit CreditEncumbrance

TypeCreate requisition/Approve

Encumbrance Account Reserve for Encumbrance

Commitment

Autocreate-Approve Purchase Order

Reserve for Encumbrance

Encumbrance Account Commitment

Encumbrance Account Reserve for Encumbrance

Obligation

PO Receipt*

Reserve for Encumbrance

Encumbrance Account Obligation

Receiving Inspection account

AP Expense account

After Create AccountingPO Deliver* Expense charge

accountReceiving Inspection account

Create Invoice-Create accounting

AP Expense 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: 01-000-6999-0000-0003. Receiving-Inspection Account: 01-000-1499-0000-0004. AP Expense Account: 01-000-225-0000-0005. Expense Charge Account: 01-520-5341-0000-0006. 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:01-520-5341-0000-000

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

Figure 9-Creating-Approve Requisition

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

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

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

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 13-Funds Available-Checking the Commitment for the PR

Figure 14-Auto create Purchase Requisition to Purchase Order

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

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

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)

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 17-Reverse PR commitment-create Obligation against PO

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.

Figure 18-Checking the Available Fund-Obligation increased

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.

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

Figure 20-Receiving and Deliver Transactions

Figure 21-Viewing Receiving Transaction

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

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

14. Creating Accounting in a draft mode and transfer the journals to GL, (N)PurchasingToolsRequests(B) Submit New Request(R) Single

Figure 23-Obligation Encumbrance deduction

Request and Press OKEnter the Request Name: Create Accounting-Receiving ,and Enter the parameters as follow:

a. Ledger: Ledger namePost Ledger Nameb. Mode: Draftc. Transfer to GL: Yesd. 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.

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 P2PCycle

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

17. Checking the Accounting Entries for the delivery step,(N)

PurchasingReceivingReceiving Transaction SummaryEnter PO number(B) Find(B) TransactionsClick on DeliverToolsView Accounting

Figure 26-Create Accounting-Final Mode

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.

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

Figure 27-Deliver Accounting Entries

Figure 28-Actual Field increased by $500

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

Figure 30-Entering the invoice

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

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

Figure 32-Validating the Invoice

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”

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

Figure 33-Create Accounting for the Invoice

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.

Figure 35-Viewing generated journal against invoice