9 Replies Latest reply on Mar 20, 2012 12:24 PM by Prakash Kumar

    Accounting in Purchasing

    Mahendra
      Hi,

      What are the accounts will be hit..when we receive a item through PO?
      Inventory AP accrual account...this will be debited
      Material valuation account...this will be credited ???

      can someone also share as when and what case invoice and purchase price variance..willl be hit?

      Thanks
      Mahendra
        • 1. Re: Accounting in Purchasing
          Paarthy-Oracle
          IF you have access to MOS. please refer the note : Brief Overview of Receipt Accounting (Doc ID 563100.1)
          This will have the complete information
          • 2. Re: Accounting in Purchasing
            Paarthy-Oracle
            Purchase Price Variance Account:
            ====================
            This is the account used to accumulate purchase price variance for this organization. The purchase price variance account is usually an expense account. This is the variance that you record at the time you receive an item in inventory, and is the difference between the purchase order cost and an item's standard cost. Purchasing calculates purchase price variance as:

            PPV = (PO unit price - standard unit cost) X quantity received

            You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form

            Invoice Price Variance Account:
            =====================
            This is the account used to accumulate invoice price variance for this organization. This is usually an expense account. 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:

            Invoice Quantity x (Invoice Price - PO Price) x Invoice Exchange Rate. Purchasing uses this account on the PO distribution when the requisition or purchase order is created. When Payables creates accounting entries for the invoice, it uses the invoice price variance account from the purchase order to record invoice price variance entries. You define this in the Define Organization (Nav > Setup > Organizations > Organizations) in the Other Accounts tab in the Organization Parameters form.
            • 3. Re: Accounting in Purchasing
              Paarthy-Oracle
              While receiving:
              DR -->Receiving Inspection account @ PO price
              CR -->Inventory\Expense A/P Accrual account @ PO price

              While Delivering
              DR --> Subinventory accounts @ standard cost (for inventory)
              or
              PO distribution charge accounts @ PO price (For expense)
              CR -->Receiving Inspection account @ PO price
              • 4. Re: Accounting in Purchasing
                Mahendra
                Paarthy wrote:
                While receiving:
                DR -->Receiving Inspection account @ PO price
                CR -->Inventory\Expense A/P Accrual account @ PO price

                While Delivering
                DR --> Subinventory accounts @ standard cost (for inventory)
                or
                PO distribution charge accounts @ PO price (For expense)
                CR -->Receiving Inspection account @ PO price
                Thanks Paarthy

                Can you be more specific with the name of the accounts...I mean what is the account name which is present in the org parameter window or sub inventory account window?
                • 5. Re: Accounting in Purchasing
                  Paarthy-Oracle
                  Sub-inventory account is same as the material valuation account, that you are referring.
                  Do you want the navigation to enter the same?
                  • 6. Re: Accounting in Purchasing
                    Mahendra
                    Mahendra wrote:
                    Paarthy wrote:
                    While receiving:
                    DR -->Receiving Inspection account @ PO price
                    CR -->Inventory\Expense A/P Accrual account @ PO price

                    While Delivering
                    DR --> Subinventory accounts @ standard cost (for inventory)
                    or
                    PO distribution charge accounts @ PO price (For expense)
                    CR -->Receiving Inspection account @ PO price
                    I mean what's the exact name for the above mentioned account we see in org parameters?
                    Like as you said above DR -->Receiving Inspection account @ PO price...which account name in org parameter?
                    i don't see a Receiving Inspection account name in org parameters or sub inv account..

                    Hope you got my question

                    Thanks
                    Mahendra
                    • 7. Re: Accounting in Purchasing
                      Prakash Kumar
                      Hi Mahendra,

                      If I am correct, Paarthy is mentioning about Receiving Inventory Account.

                      And other accounts are
                      Subinventory Account :- Material Account
                      Inventory AP Accrual Account
                      Expense AP Accrual Account
                      Distribution Charge Account :- Expense Account

                      Thanks & Regards
                      Prakash Kumar
                      • 8. Re: Accounting in Purchasing
                        Mahendra
                        Prakash Kumar wrote:
                        Hi Mahendra,

                        If I am correct, Paarthy is mentioning about Receiving Inventory Account.

                        And other accounts are
                        Subinventory Account :- Material Account
                        Inventory AP Accrual Account
                        Expense AP Accrual Account
                        Distribution Charge Account :- Expense Account

                        Thanks & Regards
                        Prakash Kumar
                        Prakash,

                        My question is with respective to name of the accounts which will be hit with respect to org parameters or sub inventory account naming conventions...

                        Like i want to know what accounts will be debited and what will be credited if item is received and so on...
                        and when will price variance account will be hit and invoice variance account will be hit..

                        Ex paarthy has mentioned
                        While receiving:
                        DR -->Receiving Inspection account @ PO price
                        but the above account i couldn't find in org or sub inv accounts

                        Hope you got my question

                        Mahendra
                        • 9. Re: Accounting in Purchasing
                          Prakash Kumar
                          Hi Mahendra,

                          Please go through the doc Metalink Doc ID: 386807.1. It will give you fair idea on accounting in Purchasing. Accounting is explained for encumbrance environment, which can be modified to be suited for without encumbrance also. Additionally you can have Metalink Doc ID: 243641.1.

                          Thanks & Regards
                          Prakash Kumar

                          Edited by: Prakash Kumar on Mar 20, 2012 5:53 PM