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Oracle SCM Cloud

Using Supply Chain CostManagement19D

Oracle SCM CloudUsing Supply Chain Cost Management

19DPart Number F22512-01Copyright © 2011, 2019, Oracle and/or its aliates. All rights reserved.

Authors: C Fehily, Pratap Paleti

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Contents

Preface i

1 Introduction 1Overview of Cost Management .................................................................................................................................................. 1

Supported Cost Methods ............................................................................................................................................................. 1

Time Zone Seings ...................................................................................................................................................................... 2

Overview of Importing Cost Data .............................................................................................................................................. 2

Web Services You Can Use to Integrate Cost Management ............................................................................................... 3

2 Receipt Accounting 5Overview of Receipt Accounting ............................................................................................................................................... 5

Considerations for Accrual Seings .......................................................................................................................................... 5

Receipt Accounting Tasks and Accounting Events ............................................................................................................... 6

Receipt Accrual, Reconciliation, and Clearing ........................................................................................................................ 9

Receipt Accrual Clearing Rules ................................................................................................................................................ 10

Receipt Accounting Cuto Dates ............................................................................................................................................. 14

Overview of Accrual Reversal ................................................................................................................................................... 14

Close a Receipt Accounting Period ......................................................................................................................................... 15

Cost Management for Internal Material Transfers .............................................................................................................. 17

Receipt Accounting for Outside Processing .......................................................................................................................... 18

Receipt Accounting for Manual Procurement of Items for Work Orders ........................................................................ 18

Receipt Accounting for Drop Shipments ............................................................................................................................... 19

Global Procurement ................................................................................................................................................................... 20

Receipt Accounting Examples .................................................................................................................................................. 25

Overview of Reports and Analytics for Receipt Accounting ............................................................................................. 117

FAQs for Receipt Accounting .................................................................................................................................................. 118


3 Cost Planning 121Cost Planning Process .............................................................................................................................................................. 121

Create a Cost Planning Scenario ............................................................................................................................................ 123

Create Standard Costs ............................................................................................................................................................. 124

Upload Standard Costs Using ADFdi .................................................................................................................................... 124

Import Standard Costs Using File-Based Data Import ...................................................................................................... 125

Create Resource Rates ............................................................................................................................................................. 126

Cost Analysis .............................................................................................................................................................................. 126

Publish Costs .............................................................................................................................................................................. 126

FAQs for Cost Planning ........................................................................................................................................................... 127

4 Cost Accounting 129Overview of Cost Accounting ................................................................................................................................................. 129

Scheduled Processes for Cost Accounting .......................................................................................................................... 130

Cost Accounting Process Flow ............................................................................................................................................... 130

Cost Accounting Periods .......................................................................................................................................................... 133

Cost Processing ......................................................................................................................................................................... 136

Global Procurement .................................................................................................................................................................. 155

Cost Accounting Examples ..................................................................................................................................................... 177

Oracle Project Portfolio Management Cloud Integration ................................................................................................. 253

Overview of Reports and Analytics for Cost Accounting ................................................................................................. 255

Analyze Inventory Valuation .................................................................................................................................................. 256

FAQs for Cost Accounting ...................................................................................................................................................... 256

5 Landed Cost Management 261Overview of Landed Cost Management .............................................................................................................................. 261

Landed Cost Management Tasks ......................................................................................................................................... 262

Trade Operations ...................................................................................................................................................................... 262

Landed Cost Charges .............................................................................................................................................................. 264

Trade Operation Templates ................................................................................................................................................... 264

Create Estimate Landed Costs .............................................................................................................................................. 264

How You Enable an Invoice for Landed Cost Processing ................................................................................................ 265

Create Actual Landed Costs ................................................................................................................................................... 266

Charge Invoice Association Status ....................................................................................................................................... 267

Upload Trade Operation Charges in a Spreadsheet ......................................................................................................... 268

Analyze Landed Costs ............................................................................................................................................................. 268

FAQs for Landed Cost Management ................................................................................................................................... 269


6 Appendix: Events and Cost Accounting Distributions 271Overview of Cost Accounting Distributions ......................................................................................................................... 271

Inventory Transaction Events ................................................................................................................................................. 271

Purchasing Events .................................................................................................................................................................... 293

Sales Events ............................................................................................................................................................................... 306

Work in Process Events .......................................................................................................................................................... 307

Cost Adjustment Events ........................................................................................................................................................... 311

Consigned Material Events ..................................................................................................................................................... 314


Preface

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PrefaceThis preface introduces information sources that can help you use the application.

Using Oracle Applications

Using Applications HelpUse help icons to access help in the application. If you don't see any help icons on your page, click your user imageor name in the global header and select Show Help Icons. Not all pages have help icons. You can also access OracleApplications Help.

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> Greater than symbol separates elements in a navigation path.

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Preface

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Documentation AccessibilityFor information about Oracle's commitment to accessibility, visit the Oracle Accessibility Program website.

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Chapter 1Introduction

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1 Introduction

Overview of Cost ManagementCost Management is a cost accounting solution that helps companies to eectively manage their product costing,manufacturing, and inventory accounting business ows. The solution enables companies to maintain multiple costbooks and nancial ledgers to beer meet external regulatory reporting and internal management reporting needs.It reduces manual cost maintenance tasks by providing automated rules-based engines and ecient cost processorstuned for high volume transaction environments.

Cost Management and related features are covered in the documentation listed in the following table.

Functional Area Documentation

Cost accounting

See the Cost Accounting chapter of the Using Supply Chain Cost Management guide.

Receipt accounting

See the Receipt Accounting chapter of the Using Supply Chain Cost Management guide.

Landed cost management

See the Landed Costs chapter of the Using Supply Chain Cost Management guide.

Intercompany transactions andintracompany ows

See the Using Supply Chain Financial Orchestration guide.

Subledger accounting for the Frenchmarket

See the Implementing Subledger Accounting for France chapter of the ImplementingManufacturing and Supply Chain Materials Management guide.

Fiscal document capture for theBrazilian market

See the Using Fiscal Document Capture guide.

Reports and analytics

See the Creating and Administering Analytics and Reports for SCM guide.

Related Topics

• Exploring Work Areas

• Viewing Analytics and Reports

• Overview of Creating and Administering SCM Analytics and Reports

• Overview of Cost Accounting

• Overview of Subledger Accounting for France

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Supported Cost MethodsThe cost methods used to cost your transactions are congured using the Manage Cost Proles task in the Setup andMaintenance work area. You can use multiple cost methods in your cost proles. The following table describes thesupported cost methods.

Cost Method Description

Standard

Inventory is valued at a predetermined standard value. You track variances for the dierencebetween the standard cost and the actual transaction cost, and you periodically update thestandard cost to bring it in line with actual costs.

Actual

Tracks the actual cost of each receipt into inventory. When depleting inventory, the processoridenties the receipts that are consumed to satisfy the depletion, and assigns the associatedreceipt costs to the depletion.

Perpetual Average

The average cost of an item, derived by continually averaging its valuation after each incomingtransaction. The average cost of an item is the sum of the debits and credits in the inventorygeneral ledger balance, divided by the on-hand quantity.

Time Zone SeingsThe transaction date of inventory and manufacturing transactions determines the accounting date and period in whichthose transactions are booked. If your application administrator has enabled the legal entity time zone feature, thenthe transaction costs are accounted using the organization's legal entity time zone. The dened time zone is used indetermining the accounting date and accounting periods. It is used for displaying Cost Management dates such asthe cost date, general ledger date, currency conversion date, period end validation date, cost cuto date, and costadjustment date. If the legal entity time zone feature is not enabled, then the server time zone is used for displayingdate elds. The time zone dened in the User Preferences is used for the Transaction Date, and overrides the legalentity time zone and the server time zone for this date eld.

Related Topics• About This Guide• How can I set general preferences for myself• Set Up Legal Entity Time Zones

Overview of Importing Cost DataYou can use le-based data import to integrate Cost Management with external systems. Use the Standard Costs le-based data import template to import standard costs from external sources into the Cost Accounting work area. Youcan view the imported cost data on the Manage Standard Costs page. For more information on le-based data import,

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see the chapter on Standard Costs Import in the File Based Data Import guide for Oracle Supply Chain ManagementCloud.

Related Topics

• Import Standard Costs Using File-Based Data Import

Web Services You Can Use to Integrate CostManagementOracle Supply Chain Management Cloud provides REST web services you can use to access data stored in Supply ChainManagement Cloud and to construct integrations to other systems. The following table describes some of the REST webservices provided for Cost Management integration tasks.

Task Description REST Service Name

Retrieve receipt transaction costs

Retrieve item cost details of purchaseorder and internal receipt transactions, bycalling a REST web service. The retrievedreceipt transaction cost details can beused in conjunction with cloud or third-party applications to create analyticalreports, or as inputs for other REST webservices, such as the Cost AdjustmentsREST web service.

Receipt Costs

Manage cost accounting overhead rules

Create, update, or delete Cost Accountingoverhead rules by calling a REST webservice. You can create a new overheadrule, or update an existing overhead rule,by specifying rule details such as rulename, transaction type, item category,eectivity date, and overhead rate.

Overhead Rules for Cost Accounting

Create receipt and layer cost adjustments

Create receipt cost adjustments and costlayer adjustments using a REST webservice. This capability is useful when youneed to create cost adjustments for a largenumber of previously received items. Youcan, for example, adjust the receipt cost ofitems to factor in the rebated amounts ofsupplier rebates. This REST service allowsyou to adjust receipt costs, receipts withzero cost, and receipt layer costs. It can beused in conjunction with other services,such as the Receipt Costs REST service.

Cost Adjustments

Manage landed cost trade operations

Create, update, or delete landed cost tradeoperations and associated charges usinga REST web service. Automatically createtrade operations when integrating with anexternal system or when dealing with a

Landed Cost Trade Operations



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Task Description REST Service Name

high volume of trade operations or a highvolume of charges.

For the full list of REST web services available for Cost Management, see the guide REST API for Oracle Supply ChainManagement Cloud.


Chapter 2Receipt Accounting

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2 Receipt Accounting

Overview of Receipt AccountingOracle Fusion Receipt Accounting is used to create, manage, review, and audit purchase accruals. It includes thefollowing features:

• Create Receipt Accounting Distributions. Create accounting distributions for receipts of accrue at receiptpurchase orders.

• Review Receipt Accounting Distributions. Review the accrual accounting distributions created by receiptaccounting for purchase order transactions, such as receipts, returns, corrections, and matches of uninvoicedreceipts to purchase orders. You can also review the accounting distributions created by receipt accounting fordeliveries that are expensed rather than stored as inventory.

• Manage Accrual Clearing Rules. Dene business rules for the automatic clearing of balances in the purchaseorder accrual accounts, set the conditions for each rule, and set the order in which rules must be applied.

• Clear Receipt Accrual Balances. Automatic clearing of accrual balances based on predened rules.

• Review Receipt Accrual Clearing Balances. Review the General Ledger accounted accrual balances on a periodicbasis.

• Adjust Accrual Clearing Balances. Review uncleared accrual balances and perform adjustments. Manually adjustor clear accrual balances to inventory valuation for accounts not covered by automatic clearing rules, or reversesuch clearing adjustments.

• Run reports and analytics for Receipt Accounting. The reports available include the following:

◦ Accrual Clearing

◦ Accrual Reconciliation

◦ Uninvoiced Receipt Accrual

◦ Receipt Accounting Period Close

◦ Landed Costs

Related Topics• Accrual Reversals

Considerations for Accrual SeingsThe key policy decision that you need to make for receipt accounting is whether or not you want to accrue at receipt.The following table outlines the points to consider for each accrual option.

Accrual Seing Points to Consider

Accrue at Receipt

• Purchases are accrued at receipt. An accrued liability account is credited when thegoods are received.

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Accrual Seing Points to Consider

• Optional for expense destination purchases, and mandatory for inventory purchases.• More accounting and more reconciliation than when accruing at period end. The receipt

accounting application provides tools to help reconcile the accrued liability clearingaccount.

• Accounting is more timely than when accruing at period end.

Accrue at Period End

• The accounts payable account is credited when the supplier invoice is processed inaccounts payable. Receipt accounting has a function to accrue uninvoiced receipts atperiod end.

• Less accounting and less reconciliation than when accruing at receipt.• Accounting may be less timely than when accrued at receipt, but will be accrued by

period end.

The accrual options are congured in the Procurement oering. For more information on conguring the accrualoptions, see the related topics section.

Related Topics

• Guidelines for Common Options for Payables and Procurement

• How Purchase Order Schedule Defaults Work

Receipt Accounting Tasks and Accounting EventsUse Receipt Accounting to:

• Create accruals for purchase order receipts that are expensed or shipped to inventory.

• Create accruals for intercompany trade ows.

• Create receipt inspection accounting for purchase order and interorganization receipt ows.

• Support budgetary control and encumbrance accounting

Receipt Accounting also has tools to help you reconcile the accrual clearing accounts as the accruals are oset by theaccounts payable accounting when invoices are processed.

Receipt Accounting Tasks and Accounting EventsThe following table describes the Receipt Accounting tasks and processes to support receipt, inventory, andmanufacturing accounting, and the sequence in which the tasks should be executed.

Task Navigation Resulting Events

Transfer receipt transactions and taxdeterminants from Receiving to ReceiptAccounting.

Scheduled Processes work area >Schedule New Process > TransferTransactions from Receiving to Costing

• All receiving transactions aretransferred from the Receivingapplication to the ReceiptAccounting application, along withthe tax determinants and relatedinformation that is present onreceipts.

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• Receipt transactions are thenready in the Receipt Accountingapplication for further processing.

Transfer accounts payable transactionsfrom Payables to Receipt Accounting.

Scheduled Processes work area >Schedule New Process > Transfer Costs toCost Management

• All payable invoices that areaccounted are transferred from theAccounts Payable application to theReceipt Accounting application.

• Payable Invoices are then ready inthe Receipt Accounting applicationfor further processing.

Create accounting distributions forreceipts of accrue at receipt purchaseorders.

Receipt Accounting Work Area > CreateReceipt Accounting Distributions

• Accruals for all types of purchases• Accrual accounting distributions

at the time of receipt or return ofgoods and services

• Trade accrual distributionsfor global procurement,interorganization transfers, andcross-business unit shipments tocustomers

• Accounting distributions forexpense destination deliveriesof purchases marked for accrualat receipt. These purchases aretypically for services procurement,one-time item purchases, andexpense usage purchases.

• Accounting distributions for invoicevariances for IPV, ERV, TRV, TERV,and TIPV

• Staging of variances into receivinginspection for subsequent washby the inventory and expenserevaluation processes

• Accounting distributions forinventory and expense revaluations

• Tax amounts are recalculatedfor all receipt transactions. Taxesare calculated by calling the Taxapplication programming interface.

• Tax accounting distributions• Budgetary control and

encumbrance accounting. You canenable and perform budgetarycontrol, encumbrance accounting,or both. Budgetary control andencumbrance accounting are



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optional tasks, and are enabled inFinancials.

Create period end uninvoiced receiptaccruals.

Receipt Accounting work area > CreateUninvoiced Receipt Accruals

• Provisional expense accruals forpurchases not marked for accrual atreceipt

Create subledger accounting. Receipt Accounting work area > Create

Accounting

• Journal entries for receiptaccounting distributions

Review accrual distributions and taxcalculations.

Receipt Accounting work area > ReviewReceipt Accounting Distributions

• Review accrual distributions and taxcalculations.

Clear receipt accruals. Receipt Accounting work area > Clear

Receipt Accrual Balances

• Automatic clearing of accrualbalances based on predened rules

• Staging of information forrevaluation of inventory andexpenses by cost accounting andreceipt accounting processes

Generate and view reconciliation reports. Scheduled Processes work area >

Schedule New Process > AccrualReconciliation report

Scheduled Processes work area >Scheduled Processes > Accrual Clearingreport

• Accrual Reconciliation report• Accrual Clearing report

Create receipt accounting distributions. Receipt Accounting work area > Create

Receipt Accounting Distributions

• Accounting distributions for clearedaccrual balances

• Revaluation and expenseadjustment entries for invoicevariances or accrual clearing eventsthat modify acquisition costs forpurchases

Review uncleared accrual balances andperform adjustments.

Receipt Accounting work area > AdjustReceipt Accrual Balances

• Staging for manual intervention forexceptions of high material value

• Manual accrual clearing• Manual adjustments and

reversals of prior accrual clearingadjustments

• Automatic creation of accountingdistributions for these adjustments

Match purchase order receipt accrualswith invoices from payables.

Receipt Accounting work area > MatchReceipt Accruals

• Manual reconciliation of accrualbalances

• Review and audit accrual balancesthat were nal accounted.

Review accrual clearing balances. Receipt Accounting work area > Audit

Receipt Accrual Clearing Balances

• Audit the General Ledgeraccounted accrual balances on aperiodic basis.



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Related Topics

• Accrual Reversals

Receipt Accrual, Reconciliation, and ClearingWhen goods are interfaced from Receiving to Oracle Fusion Receipt Accounting, Receipt Accounting recognizes theliability to the supplier, and creates accruals for receipts destined for inventory or expense. For consigned purchases,the supplier accrual is booked upon change of ownership.

Receipt Accounting then reconciles these accrual balances against the corresponding invoices from accounts payableand clears them to inventory valuation.

The following discusses receipt accruals, their reconciliation, and clearing.

Receipt Accrual CreationWhen goods are received and delivered to inventory or expense destinations, the receipt accounting application createsaccrued liability balances for the estimated cost of purchase order receipts. The application creates accruals for:

• Inventory destination receipts, which are always accrued on receipt

• Expense destination receipts, which are accrued on receipt, or at period end if the supplier invoice has not yetbeen processed

When it processes the supplier invoice, Accounts Payable creates the actual supplier liability and osets the accrualbalances. The accrued liability account typically has high volumes of entries going through it, and may have remainingbalances that must be justied if the account payable invoice has not yet been processed; or if the Account Payableinvoice has been processed, any remaining balance must be resolved and cleared. Receipt Accounting provides tools tohelp with this reconciliation.

Receipt Accrual Reconciliation and ClearingSome of the remaining balance in the accrued liability account can be automatically cleared by Receipt Accountingand Cost Accounting to the appropriate purchase expense or asset account, based on your predened clearing rules.However, some of this balance will represent uninvoiced quantities, or other discrepancies which you will want toresolve and clear manually.

Example 1: Assume that the purchase order receipt is for 100 units at $5 each; the application creates a credit to theaccrued liability account in the amount of $500. When the corresponding invoice arrives from the supplier, it reects100 units at $6 each; the application debits the accrued liability account in the amount of $600. The dierence of $100automatically clears and ows to inventory valuation.

Example 2: Assume that the quantity received is 99.4, and the quantity on the supplier invoice is 100. The processordoes not always know if that is the nal invoice or if more invoices are pending for the uninvoiced quantity. If smallvariations are normal, you can set up rules to automatically clear small variations, while large variations are veriedmanually. If there is a predened rule for the treatment of such a discrepancy, the application automatically clears thedierence to inventory valuation. However if no such rule exists, then you must clear it manually.




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Audit Receipt Accrual Clearing BalancesAfter accrual balances are cleared to the appropriate expense or asset account, you can review and audit the nalaccounting distributions generated by Receipt Accounting.

Receipt Accrual Clearing RulesDene accrual clearing rules to clear accrual balances automatically. Accrual balances are often of unknown origin andunpredictable. With accrual clearing rules you can specify when accrual balances should be cleared and wrien o. TheClear Receipt Accrual process scans for applicable rules on the transactions, and clears the balances when rule criteriaare met.

The following discusses the creation of accrual clearing rules using predened aributes, and illustrates the results withan example.

Predened AributesThe following table describes the aributes that are available in the Accrual Line tree in the Conditions browser:

Aribute Name Description

CmrPODistributionID

Purchase order structure is based on the hierarchy of purchase order header > purchase orderline > purchase order schedule > purchase order distribution. The accounting for purchaseorder transaction is at the lowest level of purchase order distribution. The accrual and chargeaccount codes are dened at this level. Invoices are matched and accrual is oset at the POdistribution level. This aribute represents the PO distribution ID on the PO document.

Percentage Over-Invoiced

At each purchase order distribution level, receipt accounting tracks the original orderedquantity, total received quantity, and total invoiced quantity. Percentage Over-Invoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) < 0then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty

Percentage Uninvoiced

At each purchase order distribution level, receipt accounting tracks the original orderedquantity, total received quantity, and total invoiced quantity. Percentage Uninvoiced Quantity represents the condition: IF (Net Rct qty - Invoice Qty) > 0then ABS(NetRecptQty - InvoiceQty)/ NetRecptQty

PO Status

Status of the purchase order document. If the PO status is Finally closed, then it is treated asClosed. For all other PO statuses, you can dene the accrual clearing rules.

PO Match Option

Invoice match option dened on the purchase order schedule. It can be PO or Receipt.

Invoice Age Days or time since the latest invoice was recorded for a purchase order distribution.



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Aribute Name Description

Receipt Age

Days or time since the latest receipt was recorded for a purchase order distribution.

Over-Invoiced Quantity

When the invoiced quantity is greater than the ordered quantity, it represents thedierence between the two: IF (Net Rct qty - Invoice Qty) < 0 then Over Invoiced Quantity =ABS(InvoiceQty - NetRecptQty)

Under-Invoiced Quantity

When the invoiced quantity is less than the ordered quantity, it represents the dierencebetween the two: IF (Net Rct qty - Invoice Qty) > 0 then Under Invoiced Quantity =ABS(NetRecptQty - InvoiceQty)

Percentage PO Accrual Amount

The balance in the accrual account for a PO distribution divided by the accrual value for theordered quantity: Sum(accruals in CMR and AP)/PO amount PO amount = Net Order Qty * PO Price

Accrual Clear Amount

Absolute value of balance in an accrual account for a PO distribution.

AP Accrual Amount

Absolute value of balance (net of invoices and debit memos) in an accrual account in PayablesSubledger for a PO distribution.

CMR Accrual Amount

Absolute value of balance (net of receipts, corrections and returns) in an accrual account inReceipt Accounting Subledger for a PO distribution.

Supplier

Supplier name on the purchase order document.

Supplier Site

Supplier site code on the purchase order document.

Item

Item on the purchase order line.

Item Category

Item category on the purchase order line.

ExampleThis example illustrates the distributions for a purchase order with associated receipts and invoices.

The following table describes the purchase order details:

PO Header Supplier Supplier Site Status

PO#1234

Advanced Network Devices

New York

Open/ Close/Final Close



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The following table describes the purchase order lines:

Item Item Category PO Price Ordered Quantity

AS54888

Raw Materials

100 USD

100 EA

The following table describes the purchase order schedules:

Schedule Order Quantity Match Option Status

1

100 EA

Order or Receipt

Open

The following table describes the receipts and invoices:

Receipts Ordered Quantity ReceivedQuantity

Invoiced Quantity Accrual Account Status

Receipt 1

60

58

55

01-2210

Open

Receipt 2

40

40

45

01-2220

Open

The following table describes the purchase order distributions and accrual balances:

PODistribution

CMRAccrualAmount(A)

APAccrualAccount(B)

AccrualClearAmount(C) = (A-B)

Under-InvoicedQuantity

Over-InvoicedQuantity

PercentageUnder-Invoiced

PercentageOver-Invoiced

PercentagePOAccrualAmount(C)/OrderedQuantity*POPrice

Distribution1

58*100USD =5800 USD

55*100USD =5500 USD

300 USD

60 - 55 = 5

NotApplicable

5/58*100= 8.62%

NotApplicable

300USD/60*100= 5%

Distribution2

40*100USD =4000 USD

45*100USD =4500 USD

(500) USD

NotApplicable

45-40 = 5

NotApplicable

5/40*100= 12.50 %

500USD/40*100= 12.50 %

The following table describes the Rule 1:



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Aribute Operator Value Conditions

PO Status

=

OPEN

And

Percentage Under-Invoiced

Less Than

10%

Not Applicable

Results: The PO Status and the Percentage Under-Invoiced values meet the criteria of Rule 1; therefore the accrualbalance of 300 USD is automatically cleared.

The following table describes the Accrual Amounts Cleared Based on Rule 1:

PODistribution

CMRAccrualAmount(A)

APAccrualAccount(B)







Distribution1

58*100USD =5800 USD

55*100USD =5500 USD

300 USD

60 - 55 = 5

NotApplicable

5/58*100= 8.62%

NotApplicable

300USD/60*100= 5%

The following table describes the Rule 2:

Aribute Operator Value Conditions

PO Status

=

OPEN

And

Accrual Clear Amount

Less Than

Absolute (1000) USD

Or

Percentage Under-Invoiced

Less Than

10%

Or

Percentage Over-Invoiced

Less Than

10%

Not Applicable

Results: The PO Status, Percentage Under-Invoiced, and Accrual Clear Amount Absolute values meet the criteria of Rule2; therefore the accrual balances of 300 USD and (500) USD are automatically cleared.

The following table describes the Accrual Amounts Cleared Based on Rule 2:



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PODistribution

CMRAccrualAmount(A)

APAccrualAccount(B)







Distribution1

58*100USD =5800 USD

55*100USD =5500 USD

300 USD

60 - 55 = 5

NotApplicable

5/58*100= 8.62%

NotApplicable

300USD/60*100= 5%

Distribution2

40*100USD =4000 USD

45*100USD =4500 USD

(500) USD

NotApplicable

45-40 = 5

NotApplicable

5/40*100= 12.50 %

500USD/40*100= 12.50 %

Receipt Accounting Cuto DatesThe accrual cuto date enables you to control when backdated receipts are accounted.

The following describes how Receipt Accounting uses oset days to determine the accrual cuto date for processingbackdated receipts.

Using Oset DaysOset days dene the grace period for processing backdated transactions in the prior GL period. You can indicate thenumber of oset days for a business unit in the Receipt Accounting work area, on the Manage Accrual Clearing Rulespage, Manage Accrual Cuto Rules tab. Receipt Accounting uses the oset days to calculate the accrual cuto date.

For example, assume the number of oset days is 3, then the accrual cuto date for processing receipts in the OctoberGL period is November 3:

• A receipt that is backdated to October 31 but is processed on November 3 is accounted in October

• A receipt that is backdated to October 31 but is processed on November 4 is accounted in the November GLperiod

If the oset days are not dened, then the backdated receipts are processed in the prior GL period until the period isclosed.

Overview of Accrual ReversalUse the Create Accrual Reversal Accounting process in the Scheduled Processes work area to reverse accrual journalentries. You can schedule this process to run automatically at predened intervals, or run it on demand. You can denehow and when accrual reversals are automatically performed by:

• Indicating that an accounting event is eligible for accrual reversal.



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• Determining when the accrual is reversed.

• Scheduling the Create Accrual Reversal Accounting process to generate the reversal entries.

For more information on accrual reversal, prerequisites, and step-by-step instructions, see the links in the RelatedTopics section.

Related Topics

• Accrual Reversals

• How You Submit the Create Accrual Reversal Accounting Process

• Submit Scheduled Processes and Process Sets

Close a Receipt Accounting Period

VideoWatch: This video tutorial shows you how to process receipt accruals in preparation for the closing of a receipt accountingperiod. It also shows you how to schedule receipt accounting processes to run automatically. The content of this video isalso covered in text topics.

ProcedureThis procedure shows you how to process receipt accruals in preparation for the closing of a receipt accounting period.You can schedule Receipt Accounting to automatically process receipts that are set to be accrued on receipt. If receiptsare not marked for automatic accrual on receipt, you can run the Create Uninvoiced Receipt Accruals process. This willaccrue all receipts that are not yet invoiced in Accounts Payable.

You can access the following Receipt Accounting processes in the Scheduled Processes work area:

• Transfer Costs to Cost Management

• Transfer Transactions from Receiving to Costing

• Accrual Clearing Report

• Accrual Reconciliation Report

• Create Accrual Reversal Accounting

You can access the following Receipt Accounting processes in the Receipt Accounting work area:

• Create Receipt Accounting Distributions

• Clear Receipt Accrual Balances

• Create Uninvoiced Receipt Accruals

• Create Entries for Receipt Accounting

• Match Receipt Accruals

You can schedule the processes, or you can run them on demand.


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This procedure covers the following tasks:

• Transferring Cost Data to Receipt Accounting

• Creating Receipt Accounting Distributions

• Creating Uninvoiced Receipt Accruals

Transferring Cost Data to Receipt AccountingThis task covers processes that should be run in the Scheduled Processes work area before closing a receipt accountingperiod.

To transfer cost data to Receipt Accounting, complete the following steps.

1. From the Navigator menu, select Scheduled Processes.2. Select the processes that you want to run or schedule. The following receipt accounting processes should be

completed before closing a receipt accounting period:

◦ Transfer Costs to Cost Management. This process transfers invoice information to Receipt Accounting.

◦ Transfer Transactions from Receiving to Costing. This process transfers receipt information to ReceiptAccounting.

3. Review the Status column to conrm that the processes have completed successfully.

Creating Receipt Accounting DistributionsThis task creates receipt accounting distributions in preparation for the closing of a receipt accounting period. You canschedule this process, or run it on demand.

To create receipt accounting distributions, complete the following steps.

1. Navigate to the Receipt Accounting work area, and select the Create Receipt Accounting Distributions task.2. Enter the Bill-to Business Unit, and select the Advanced option.3. Click on the Schedule tab, and select the option Run Using a Schedule.4. Complete the Frequency, Start Date, and End Date elds, and click Submit.5. From the tasks menu, select the Review Receipt Accounting Distributions task to view the receipt accounting

distributions that were created.6. On the Review Receipt Accounting Distributions page, search for transactions that have a Transaction Status of

Final Accounted and a Transaction Type of Receipt into Receiving Inspection.7. Click on the Distributions tab, and click the Detach buon to view the details on a new page.8. Click on the Journal Entries tab to view the journal entries for the accounting distributions. Click the Detach

buon to view the details on a new page.

Creating Uninvoiced Receipt AccrualsIf receipts are not marked for automatic accrual on receipt, you can run the Create Uninvoiced Receipt Accrualsprocess. This will accrue all receipts that are not yet invoiced in Accounts Payable. You can run this job more than onceduring the period close process. At a minimum it should be run after the Accounts Payable period is closed and all theAccounts Payable invoices are interfaced to Cost Management, and before the General Ledger period is closed. Forperiod end accrual, the accounted date always falls on the last date of the period selected.

You can specify a cuto date within the accounting period for accounting purposes. Then, period end accrual foruninvoiced receipts is created on the cuto date. This enables you to ensure that when you have multiple ledgers withdierent calendar period end dates, the period end accrual is booked in the same period that they are accrued.



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When you have a primary general ledger and multiple secondary ledgers with dierent calendar periods, do thefollowing:

• If there are two ledgers running on dierent calendar period end dates, choose the lesser period end date asthe cuto date. For example, if the secondary ledger ends on the 27th day of the month and the scal ledgerends on the 30th day, choose the 27th day as the cuto date.

• If you are specifying a cuto date, ensure that it is set to a date that is before the period end date. Else, you willget errors.

• If you have congured the application to automatically reverse and post in general ledgers, the reversalaccounting entries are automatically posted to the journals. However, if you haven't opted for automaticreversal, you must manually reverse the period-end accrual that was already booked and post it in the nextperiod. For more information about conguring automatic reversal in general ledgers, see the Oracle FinancialsCloud Using General Ledger guide on the Oracle Help Center.

• Once the accounting period is closed, in all ledgers, move the cuto date to a date that is in the next period.

To create uninvoiced receipt accruals, complete the following steps.

1. Navigate to the Receipt Accounting work area, and select the Create Uninvoiced Receipt Accruals task.2. On the Create Uninvoiced Receipt Accruals page, complete the Bill-to Business Unit and Accounting Period

elds.3. Select a Period End Accrual Cuto and Accounting Date. If you do not select any date, the last date of the

accounting period is taken as the cuto and accounting date.4. Click Submit.5. On the Review Receipt Accounting Distributions page, search for transactions with a Transaction Type of Period

End Accrual.6. Scroll down and select the Distributions and Journal Entries tabs to view the accounting details.

Related Topics• Accrual Reversals• Oracle Fusion Subledger Accounting Predened Reports

Cost Management for Internal Material TransfersCost Management supports receipt accounting and cost accounting for requisition based internal transfers for itemsgoing to either an expense or an inventory destination, with or without a receipt at the destination.

Self-Service Procurement, Supply Chain Financial Orchestration, and Cost Management have been integrated toprovide an estimated transfer price based on the internal cost of the items on the requisition. A transfer price is requiredon the internal material transfer requisition line for approval, budgetary control, and encumbrance accounting.

Cost Management supports requisition-sourced transfer orders going to expense destinations with multipledistributions and dierent expense accounts. Based on the account dened at the distribution level, Cost Managementwill book the expense for the appropriate account. In the case of transfers to expense destinations where a receipt is notrequired, new logical receipt and delivery transactions are created in Cost Management, similar to the physical eventscreated with receipt expense destination transfers when a receipt is required. Budgetary control and encumbranceaccounting are supported for expense destination internal transfer orders.

Budgetary ControlYou can ensure that budget funds are available before a requisition for an internal transfer is submied for approval.Depending on your budgetary control conguration, the funds will be reserved either at the time the requisition is


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submied for approval, or when the requisition is approved. Insucient funds override rules and approvers can becongured as part of budgetary control setup. Cost Management liquidates the commitment and books an expenditureat the time of delivery when a receipt is required, or at the time of shipment by creating a virtual receipt when thereceipt is not required. The Requisition for Internal Material Transfer transaction subtype has been added to enablebudgetary control of requisitions for internal material transfers.

Encumbrance AccountingEncumbrance accounting entries are created for transactions subject to budgetary control and encumbranceaccounting when the Create Accounting process is run. Cost Management liquidates the reserve for the encumbranceaccount and creates journal entries for the actual expense value.

Receipt Accounting for Outside ProcessingReceipt Accounting supports manufacturing outside processing, where one or more work order operations areoutsourced to a supplier who provides specialized manufacturing services. Outside processing transactions areaccounted in Receipt Accounting under the Destination Type of Manufacturing.

Accounting Distributions Created for Outside ProcessingCost Accounting supports the Purchase Order Receipt into Manufacturing transaction type for the costing of outsideprocessing items delivered to Manufacturing. The transaction processing depends on the cost method, as follows.

• Actual or Average cost method. The purchase price multiplied by the number of items received is added to thework in process valuation.

• Standard cost method. The standard cost multiplied by the number of items received is added to the workin process valuation. The dierence between the purchase price and the purchase order is accounted as apurchase price variance.

Related Topics

• How Outside Processing Costs are Planned, Accounted, and Reviewed

• How Items Are Set Up for Outside Processing

Receipt Accounting for Manual Procurement of Items forWork OrdersReceipt Accounting supports creating accruals and processing of purchase order receipts for items that are directlyprocured from a maintenance or manufacturing work order and are received against the Destination Type of WorkOrder.

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Accounting Distributions for Manual Procurement of Items for WorkOrdersFor all purchase orders with the destination type: Work Order, the following accounting entry is created for the Receipttransaction.

Accounting Line Type Transaction Type

Receiving Inspection

Debit

Accruals

Credit

For purchase orders that are for description-only items (both quantity and amount based purchase orders), the DirectDelivery to Manufacturing transaction is also processed by Receipt Accounting.

The following table lists the accounting distribution entries for description-only items:


Expense

Debit


Credit

Receipt Accounting for Drop ShipmentsGlobal drop shipment is an order fulllment strategy where the seller does not keep products in the inventory. Theseller relies on suppliers or contract manufacturers to build, store, and ship orders to the customers. When a customerplaces an order for a drop shipped product, the seller issues a purchase order for the item. The seller also providesinstructions to the suppliers to ship directly to the customer. The supply chain nancial orchestration process routes theorchestration ow of drop shipments through one or more business units within the corporation. These business unitscan belong to the same legal entity or may occur across legal entities.

The nancial ow starts when the supplier sends the advanced shipment notice, or when the supplier matches theinvoice with the purchase order for the drop shipment. The ow creates cost accounting distributions and intercompanyinvoices for the ownership transfers that occur between parties, including supplier, one or more organizations, and thecustomer. Supply Chain Financial Orchestration sends a request to the receiving system to create a drop ship receipton the supplier invoice that references the purchase order. Receiving creates a logical receipt, and then noties OrderManagement to start customer billing. This automation helps to reduce billing cycle time.



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Receipt Accounting Distributions for Drop ShipmentsYou can review the receipt accounting distributions for drop shipments on the Review Receipt Accounting Distributionspage. The following accounting line types are created for drop shipment events.

Event Application Source Accounting Line Type Transaction Type

Drop Ship Receipt

Receiving


Debit

Drop Ship Receipt

Receiving

Accrual

Credit

Global Procurement

Overview of Global Procurement Trade AccountingCompanies often design their legal structure for nancial eciency as well as eciency in the physical ow of goodsthrough the supply chain. Typically, the most optimal nancial movement of goods is dierent from the most optimalphysical movement of goods. For example, the purchase requisitions from a group of subsidiary companies could berouted through a single international purchasing company who deals with the suppliers. As a result, the legal ownersof the purchasing organizations will be dierent from the legal owners of the receiving organizations. This form ofpurchasing is known as global procurement.The following discusses:

• Global procurement trade ows

• Trade agreements and accounting rule sets

• Agreements converted to purchase orders

• Commonly used terms



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Global Procurement Trade FlowsThis gure illustrates a typical global procurement trade ow, in this case between a US corporation and its Chinasupplier. The US corporation has a central procurement business unit which creates trade agreements and purchaseorders on behalf of its subsidiaries.

China Supplier US Corporation

Procurement Business Unit

US IncReceiving Legal

EntityChina Ltd

Sold-to Legal Entity(Purchasing Affiliate)

US EastReceiving Profit

Center Business Unit

OwnershipChangeEvent

PhysicalFlow

CN BUChina Sold-to Profit


M1US Receiving

Inventory Organization

M2US Receiving



US West Receiving Profit


ManagementFlow

CN INV ORGChina Purchasing

Trade Organization

The China supplier drop ships the goods directly to the US receiving inventory organization M1. However for legal andaccounting purposes, the trade ows from the China supplier through the China sold-to legal entity (China Ltd), to theUS receiving legal entity (US Inc). For management and prot tracking purposes, the trade ows from the China sold-toprot center business unit CN BU to the US receiving prot center business unit US West.



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Financial Trade Agreements and Accounting Rule SetsA trade agreement denes the parties in the trade relationship. In this example the trade agreement is between the UScorporation and the China supplier, and it denes the buying, selling, sold-to, and receiving legal entities, prot centerbusiness units, inventory organizations, and trade organizations.

The accounting rule sets dene source documents and accounting that is required in the legal and nancial ow, alsoknown as the ownership change event ow. A rule set is associated with a nancial route, and nancial routes can havedierent accounting rule sets.

The following illustrates a trade agreement setup for the US corporation:

• Agreement #: GP001

• Type: Procurement

• Supplier Ownership Change: ASN (Advance Shipment Notice)

• Primary Trade Relationship #: PTR1

• Sold-to Legal Entity: China Ltd.

• Sold-to Business Unit: CN BU

• Deliver-to Legal Entity: US Inc.

• Deliver-to Business Unit: US West

• Financial Trade Relationship #: FTR1

• From Legal Entity: China Ltd.

• From Business Unit: CN BU

• From Organization: CN INV ORG

• To Legal Entity: US Inc.

• To Business Unit: US West

• To Organization: M1

• Prot Tracking: Yes

• Invoicing: Yes

• Obligation Currency: CNY

• Rate Type: Corporate

• Transfer Pricing: Purchase Order - 10%

• Purchase Order/Sales Order: No

Trade Agreement Converted to Purchase OrdersThe trade agreement is used to create purchase orders. The following illustrates a purchase order created under the USCorporation trade agreement # GP001:

• Document Type: Purchase Order

• Document #: PO-GP001

• Document Line #: 1

• Document Line Detail: 1.1

• Document Line Distribution #: 1.1.1

• Item: SFO-CST_ASSET



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• Quantity: 100

• UOM: Each

• Currency: CNY

• Price: 650


• Trade Organization: CN INV ORG

• Deliver-to Organization: M1


Global Procurement Common TermsThe following table describes the terms commonly used in global procurement trading:

Terms Denitions and Rules

buy-sell relationship

Relationship between two business units where one acts as a buyer and the other as a sellerof goods or services. The seller records the revenue, cost of sale, and receivables. The buyerrecords the payables and inventory or expense. A buy-sell trade between internal businessunits is seled through the transfer price.

asset item

Inventory item where the cost of acquisition is valued as an asset on the balance sheet. Theinventory cost is expensed when it is consumed or sold.

expense item

Inventory item whose cost of acquisition is booked as an expense.

transfer price

The unit price that one business unit charges another for goods or services traded within theenterprise. The transfer price is typically based on the price list, cost plus or minus, or purchaseprice plus or minus.

nancial route

Designates how nancial transactions are seled, can be dierent from the physical route, andmay involve one or more intermediary nodes. The intermediary nodes are internal businessunits that are not part of the physical supply chain transaction but are part of the nancialroute.

Incoterms

A series of sales terms in international trade, used to dene the rights and obligations ofthe trade partners with respect to the delivery of goods sold. Incoterms are used to dividetransaction costs and responsibilities between buyer and seller, and to reect transportationpractices.

intercompany prot and loss

The internal prot or loss arising out of trade among business units in the enterprise. Theseinternal prots and losses are used for internal management but are typically eliminated whenproducing the enterprise consolidated nancial statements for external stakeholders.

intercompany trade

The trade of goods and services between organizations belonging to dierent legal entitieswithin a conglomerate.

intracompany trade The trade of goods or services between two internal organizations within a legal entity.



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ownership change event

The transfer of title of goods and services from one party to another. This results in accountingand the creation of nancial documents such as Accounts Receivable and Accounts Payableinvoices.

price list

Contains the basic list information and pricing aributes for items or product groups.

pricing option

A method to compute the transfer price based on cost, source document price, or price list.

prot center

A business unit that operates with its own income statement and reports to the legal entity.

purchasing trade organization

The inventory organization reporting to the sold-to legal entity identied in the purchaseorder. This organization is used for cost accounting the transactions in the sold-to legal entity.

qualiers

Business aributes of a supply chain document or transaction that determine the applicabilityof the trade agreement.

supply chain nancial orchestrationagreement

An agreement between the legal entities, business units, and trade organizations of acorporate group. The agreement denes the parties in the trade relationship and the nancialselement process.

trade distributions

Subledger entries created by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for Oracle Fusion Supply Chain Financial Orchestration trade transactions.

procurement business unit

Has central responsibility for the creation of trade agreements and purchase orders on behalfof legal entities and business units under the holding company.

Prot Center Business Units and Bill-to Business UnitsOracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting create accounting distributions for tradetransactions in the supply chain. These accounting distributions are associated with two kinds of business units: protcenter business units and bill-to business units.

The following explains the dierent business units associated with trade transactions and the assumptions used toderive them.

Prot Center Business UnitA prot center business unit reports to a single legal entity and is responsible for measuring the protability ofinventory organizations under that legal entity. All trade transactions are associated with a prot center business unitwhich, in turn, is derived from the inventory organization that owns the trade transaction. Cost Accounting uses theprot center business unit to process all inventory transactions.



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Bill-to Business UnitA bill-to business unit is used to process receipt accruals in a trade transaction, and is the same business unit thatprocesses the invoice in Accounts Payable. For supplier accruals, the bill-to business unit is derived from the purchaseorder. For intercompany accruals, the bill-to business unit is derived from the prot center business unit.

Related Topics

• How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

Review Item Cost and Global Procurement Trade TransactionAccountingReceipt Accounting and Cost Accounting process and create accounting distributions for trade transactions in thesupply chain.

The following explains how to review the results of global procurement trade transactions processed by ReceiptAccounting and Cost Accounting.

Receipt Accounting ResultsIn the Receipt Accounting work area, access the Review Receipt Accounting Distributions page. On this page you canview accounting details by Source Document Number and Source Document Line Number. Source documents arepurchase order schedules, transfer orders, and sales orders.

Cost Accounting ResultsIn the Cost Accounting work area:

• Access the Review Item Costs page. On this page you can view a breakdown of the cost of items, costcomparisons of items across organizations, and cost trends over time.

• Access the Review Cost Accounting Distributions page. On this page you can view accounting details of tradetransactions by Reference Document Number.

Related Topics

• Review Item Costs

Receipt Accounting Examples

Example of Consigned Inventory Accounting in a Simple PurchaseOrderWhen an organization receives a shipment of goods under a consignment purchase order, the ownership of the goodsremains with the supplier even after they are in the custody of the buyer. Ownership passes from the supplier to thebuyer when the inventory is consumed.

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When the inventory is consumed, two events occur: First there is a transfer of ownership to the buyer and the consignedgoods become owned inventory for a brief period of time, then the owned inventory is depleted.

The following example illustrates:

• The physical and nancial ow of consigned inventory under a consigned purchase order (PO).

• The transaction that ows from Oracle Fusion Inventory Management into Oracle Fusion Cost Accounting andOracle Fusion Receipt Accounting.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the forward ow.

• Accounting entries that Cost Accounting and Receipt Accounting generate for the return ow.

ScenarioSupplier Advanced Network Devices (AND-Fresno) ships the goods under a consigned purchase order to inventoryorganization M1-Seale.



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The following diagram illustrates the ow of consigned inventory:

SupplierAdvanced Network Devices

(AND-Fresno)

Inventory Organization M1-SeattleConsigned Owner = AND-FresnoContingent Owner = M1-Seattle

Inventory Organization M1-SeattleOwner = M1-Seattle

OwnershipChange

Financial Flow

Physical Flow

Transaction from Oracle Fusion Inventory ManagementCost Accounting and Receipt Accounting receive the following transaction from Inventory:

• Supplier Advanced Network Devices (AND-Fresno).

• Consignment Purchase Order #1000.

• Purchase Order price USD 100.



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• Ship-to organization is M1-Seale which is the contingent owner. Contingent owner assumes ownership fromthe supplier when inventory is consumed.

• Receipt and put away transactions performed in M1-Seale inventory organization in consigned status.

• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M1-Seale.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions for the forward and return shipment of goods.

Accounting Entries



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The following diagram illustrates the accounting entries for the forward ow from supplier AND-Fresno to inventoryorganization M1-Seale.

AND-FresnoSupplier

Physical Flow

M1-SeattleConsigned Owner

M1- SeattleOwner

Ownership Change

M1:Transfer to Owned (Receipt)

Dr Inventory ValuationCr Trade In-Transit

M1:Transfer to Owned IssueDr Consigned Inventory Offset

Cr Consigned Inventory

M1:Trade Receipt AccrualDr Trade Clearing

Cr Accrual

M1:Trade In-Transit ReceiptDr Trade In-TransitCr Trade Clearing

M1:PO ReceiptDr Consigned ClearingCr Consigned Accrual

M1:PO DeliveryDr Consigned InventoryCr Consigned Clearing

M1:Consigned Receipt ConsumptionDr Consigned AccrualCr Consigned Clearing

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seale for thereceipt of goods.

The following table describes those accounting entries:



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Subledger Event Type AccountingLine Type

TransactionType

Amount inFunctionalCurrency

FunctionalCurrency

Basis ofAmount

ReceiptAccounting

PO Receipt

ConsignedClearing

Debit

100

USD

PO Price

ReceiptAccounting

PO Receipt

ConsignedAccrual

Credit

100

USD

PO Price

CostAccounting

PO Delivery

ConsignedInventory

Debit

100

USD

PO Price

CostAccounting

PO Delivery

ConsignedClearing

Credit

100

USD

PO Price

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seale for thechange of ownership from supplier AND-Fresno to M1-Seale.



TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting

Transfer toOwned Issue

ConsignedInventoryOset

Debit

100

USD

Material

PO Price

CostAccounting


ConsignedInventory

Credit

100

USD

Material

PO Price

ReceiptAccounting

ConsignedReceiptConsumption

ConsignedAccrual

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting


ConsignedClearing

Credit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReceiptAccrual

TradeClearing

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReceiptAccrual

Accrual

Credit

100

USD

Notapplicable

PO Price



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TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting

Trade In-TransitReceipt

Trade In-Transit

Debit

100

USD

Material

PO Price

CostAccounting


TradeClearing

Credit

100

USD

Material

PO Price

CostAccounting

Transferto Owned(Receipt)

InventoryValuation

Debit

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

Credit

100

USD

Material

PO Price

Organization M1-Seale returns goods to supplier AND-Fresno.

This gure illustrates the accounting entries for the return ow from M1-Seale to AND-Fresno.



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AND-FresnoSupplier

Physical Flow


M1- SeattleOwner

Ownership Change

M1:Transfer to Cons (Issue)Dr Trade In-Transit

Cr Inventory Valuation

M1:Transfer to Cons (Recpt)Dr Consigned Inventory

Cr Consigned Inventory Offset

M1:Trade Return AccrualDr Accrual

Cr Trade Clearing

M1:Trade In-Transit ReturnDr Trade ClearingCr Trade In-Transit

M1:PO Return to VendorDr Consigned AccrualCr Consigned Clearing

M1:PO Return to ReceivingDr Consigned ClearingCr Consigned Inventory

LegendCons = Consigned

Recpt = Receipt

M1:Consigned Recpt Consumption

Dr Consigned ClearingCr Consigned Accrual

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seale for thechange of ownership from M1-Seale to supplier AND-Fresno.

The following table describes the accounting entries for the change in ownership.



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TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting

Transfer toConsigned(Receipt)

ConsignedInventory

Debit

100

USD

Material

PO Price

CostAccounting



Credit

100

USD

Material

PO Price

ReceiptAccounting


ConsignedClearing

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting


ConsignedAccrual

Credit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReturnAccrual

Accrual

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReturnAccrual

TradeClearing

Credit

100

USD

Notapplicable

PO Price

ReceiptAccounting

Trade In-TransitReturn

TradeClearing

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting


Trade In-Transit

Credit

100

USD

Notapplicable

PO Price

CostAccounting

Transfer toConsignedIssue

Trade In-Transit

Debit

100

USD

Material

PO Price

CostAccounting


CostVariance*

Debit

5

USD

Notapplicable

Inventory isreceived atthe currentcost, and thedierencebetweentransferprice andcost isbookedas costvariance.



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TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting


InventoryValuation

Credit

105

USD

Material

Current Cost

* Inventory is received at the current cost, and the dierence between transfer price and cost is booked as cost variance.

Receipt Accounting generates accounting entries under inventory organization M1-Seale for the return of consignedgoods from M1-Seale to AND-Fresno.


Subledger Event Type Accounting LineType

Amount inFunctionalCurrency +Dr/-Cr

FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Return toSupplier

Consigned Accrual

100

USD

PO Price

ReceiptAccounting


ConsignedClearing

-100

USD

PO Price

ReceiptAccounting

PO Return toReceiving

ConsignedClearing

100

USD

PO Price

ReceiptAccounting


ConsignedInventory

-100

USD

PO Price

Related Topics

• Cost Proles, Default Cost Proles, and Item Cost Proles

• Consigned Inventory Lifecycle

• Consigned Inventory

Example of Consigned Inventory Accounting of anInterorganization Transfer Across Business UnitsAn interorganization transfer is a trade transaction involving the movement of goods or services between organizationsin the supply chain. The following is an example of accounting performed by Oracle Fusion Cost Accounting and OracleFusion Receipt Accounting in a simple purchase order with an interorganization transfer of goods across prot centerbusiness units. The goods remain in consigned status until ownership changes in the receiving organization.

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=8C9EC2B3DE4CAF79E040D30A68814E1E

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=F7E0DA95E6937377E043B69BF40ADCC6

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=F7D85F17981869CEE043B69BF40A6C01



35

This example illustrates:

• Transactions captured in Oracle Fusion Inventory and interfaced to Cost Accounting and Receipt Accounting.

• Transactions captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Cost Accountingand Receipt Accounting.





36

ScenarioSupplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M1-Seale, who in turn transfers the consigned goods to inventory organization M2-LA. Inventory organizations, M1-Sealeand M2-LA, are in dierent business units.


(AND-Fresno)

Business Unit 1Inventory Organization M1-SeattleConsigned Owner = AND-FresnoContingent Owner = M1-Seattle

Business Unit 2Inventory Organization M2-LA

Owner = M2-LA

OwnershipChange

Financial Flow Physical Flow


Consigned Owner = AND-FresnoContingent Owner = M1-SeattleFinancial Flow

Physical Flow

Interfaced TransactionsOracle Fusion Inventory sends the following transactions to Receipt Accounting and Cost Accounting:




37





• Goods transferred in consigned status from inventory organization M1-Seale to M2-LA.

• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M2-LAthrough M1-Seale.

Oracle Fusion Supply Chain Financial Orchestration sets up the trade agreement, accounting rule sets, and associatedpurchase orders, and the information ows into Receipt Accounting and Cost Accounting. The transfer from M1-Sealeto M2-LA is based on trade agreement SFO #123 which has the following terms:

• Intercompany transfer price is USD 120.

• Intercompany invoicing is set to Yes.

• Prot tracking is set to Yes.




38

Accounting EntriesThe following are accounting entries for the forward ow.

M1:Trade In-Transit IssueDr IC COGS

Cr Trade In-Transit


Dr Inv Valuation MATDr Inv Valuation GP

Cr Trade In-Transit MATCr Trade In-Transit GP

M2:Transfer to Owned Issue

Dr Consigned Inv OffsetCr Consigned Inventory

M2:Trade In-Transit Receipt

Dr Trade In-Transit MATDr Trade In-Transit GP

Cr Trade Clearing


Cr Accrual

M2:Trade Recpt AccrualDr Trade Clearing

Cr IC Accrual

M1:Trade In-Transit RecptDr Trade In-TransitCr Trade Clearing



M2:Consigned Trade Receipt Accrual

Dr Consigned ClearingCr Consigned Payable

M2:In-Transit DeliveryDr Consigned InventoryCr Consigned Inspection

M2:In-Transit ReceiptDr Consigned InspectionCr Consigned In-Transit

M2:Consigned Trade In-Transit Receipt

Dr Consigned In-TransitCr Consigned Clearing

M1:Consigned Trade In-Transit Issue

Dr Consigned ReceivableCr Consigned In-Transit

M1:In-Transit ShipmentDr Consigned In-TransitCr Consigned Inventory

AND-FresnoSupplier

M2-LAOwner

Physical Flow

Ownership Change


M2-LAConsigned Owner

Physical Flow

Legend Inv = Inventory IC = Intercompany COGS = Cost of Goods Sold MAT = Material GP = Gross Profit Recpt = Receipt

Receipt Accounting generates distributions under inventory organization M1-Seale for the shipment from supplierAND-Fresno to M1-Seale.



39



FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedInventory

100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedClearing

-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M1-Seale for the interorganization transfer fromM1-Seale to M2-LA.



FunctionalCurrency

Basis of Amount

Cost Accounting

In-TransitShipment

Consigned In-Transit

100

USD

PO Price

Cost Accounting

In-TransitShipment

ConsignedInventory

-100

USD

PO Price

Cost Accounting

Consigned TradeIn-Transit Issue

ConsignedReceivable

100

USD

PO Price

Cost Accounting



-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for theinterorganization transfer from M1-Seale to M2-LA.



FunctionalCurrency

Basis of Amount

ReceiptAccounting

Consigned TradeReceipt Accrual

Trade Clearing

100

USD

PO Price



40



FunctionalCurrency

Basis of Amount

ReceiptAccounting



-100

USD

PO Price

ReceiptAccounting

Consigned TradeIn-Transit Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

Consigned ReceiptConsumption

Trade Clearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

ConsignedInspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt


-100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInspection

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seale for the changeof ownership from supplier AND-Fresno to M1-Seale.


Amount inFunctionalCurrency+Dr/-Cr

FunctionalCurrency

Cost Element Basis ofAmount

ReceiptAccounting

Trade ReceiptAccrual

Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

CostAccounting

Trade In-Transit Receipt

Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price



41



FunctionalCurrency


CostAccounting

Trade In-Transit Issue

IntercompanyCost of GoodsSold

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seale for the changeof ownership from M1-Seale to M2-LA.



FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price

CostAccounting



100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change ofownership from M1-Seale to M2-LA.



42



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


ConsignedInventory

-100

USD

Material

PO Price

ReceiptAccounting


Trade Clearing

120

USD

Not applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-120

USD

Not applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-120

USD

Material

Transfer Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


InventoryValuation

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

Inventory organization M2-LA returns the goods to supplier AND-Fresno. The return of the consignment is executed intwo parts:

• An interorganization transfer from M2-LA to M1-Seale. The accounting is the same as simple purchase orderreturn transactions.



43

• A consignment return from M1-Seale to the supplier. The accounting is the same as regular return to suppliertransactions.

Related Topics



Example of Consigned Inventory Accounting of anInterorganization Transfer Within the Same Business UnitAn intraorganization transfer is a trade transaction involving the movement of goods or services between organizationsin the supply chain. The following is an example of accounting performed by Oracle Fusion Cost Accounting and OracleFusion Receipt Accounting for an interorganization transfer of goods within the same prot center business unit.









44

ScenarioSupplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M3-NY, who in turn transfers the goods to inventory organization M4-NJ. Inventory organizations, M3-NY and M4-NJ, arewithin the same business unit.


(AND-Fresno)

Inventory Organization M3-NYConsigned Owner = AND-Fresno

Contingent Owner = M3-NY

Inventory Organization M4-NJOwner = M4-NJ

OwnershipChange


Inventory Organization M4-NJConsigned Owner = AND-Fresno

Contingent Owner = M4-NJFinancial Flow

Physical Flow

Interfaced TransactionsCost Accounting and Receipt Accounting receive the following transaction from Oracle Fusion Inventory:

• Consignment Purchase Order (PO) #1000.



45


• Ship-to organization is M3-NY which is also the contingent owner. Contingent owner assumes ownership fromthe supplier when inventory is consumed.

• Receipt and put away transactions are performed in M3-NY in consigned status.

• Goods are transferred in consigned status from M3-NY to M4-NJ.

• Ownership changes from supplier to M4-NJ through M3-NY when the goods are consumed.

Cost Accounting generates transactions for:

• Ownership changes from supplier AND-Fresno to inventory organization M3-NY and from M3-NY to M4-NJ.

• Transfer of goods from M3-NY to M4-NJ. The transfer is at cost because the organizations are within the sameprot center business unit.





46

The following diagram lists the accounting entries for the forward ow.

AND-FresnoSupplier

M4-NJOwner

Physical Flow

Ownership Change

M3-NYConsigned Owner

M4-NJConsigned Owner

Physical Flow

M3:Trade In-Transit IssueDr Interorg Receivable

Cr Trade In-Transit


Dr Inv Valuation MATCr Trade In-Transit




Dr Trade In-TransitCr Trade Clearing


Cr Accrual


Cr Interorg Payable













Legend Inv = Inventory Interorg = Interorganization MAT = Material Recpt = Receipt

The following table lists the distributions that Receipt Accounting generates under inventory organization M3-NY forthe shipment from supplier AND-Fresno to M3-NY.



47



FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedInventory

100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedClearing

-100

USD

PO Price

The following table lists the distributions generated by Cost Accounting under inventory organization M3-NY for theinterorganization transfer from M3-NY to organization M4-NJ.



FunctionalCurrency

Basis of Amount

Cost Accounting

In-TransitShipment


100

USD

PO Price

Cost Accounting

In-TransitShipment

ConsignedInventory

-100

USD

PO Price

Cost Accounting


ConsignedReceivable

100

USD

PO Price

Cost Accounting



-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M4-NJ for the interorganization transfer fromM3-NY to M4-NJ.



FunctionalCurrency

Basis of Amount

Cost Accounting


ConsignedClearing

100

USD

PO Price



48



FunctionalCurrency

Basis of Amount

Cost Accounting


ConsignedPayable

-100

USD

PO Price

Cost Accounting



100

USD

PO Price

Cost Accounting


ConsignedClearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

ConsignedInspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt


-100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInspection

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M3-NY for the change ofownership from supplier AND-Fresno to M3-NY.



FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price

CostAccounting


InterorganizationReceivable

100

USD

Material

PO Price



49



FunctionalCurrency


CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M4-NJ for the change ofownership from M3-NY to M4-NJ.



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


ConsignedInventory

-100

USD

Material

PO Price

ReceiptAccounting


Trade Clearing

100

USD

Not applicable

Transfer Price

ReceiptAccounting


InterorganizationPayable

-100

USD

Not applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price



50

Inventory organization M4-NJ returns goods to supplier AND-Fresno. The return of the consignment is executed in twoparts:

• An interorganization transfer from M4-NJ to M3-NY. The accounting is the same as simple purchase orderreturn transactions.

• A consignment return from M3-NY to the supplier. The accounting is the same as regular return to suppliertransactions.

Related Topics



Example of Consigned Inventory Accounting in a Global PurchaseOrderMost large enterprises use a global procurement approach to their purchasing needs, where a central buyingorganization buys goods from suppliers on behalf of the internal organizations. This includes trade transactionsinvolving consigned inventory executed under a global purchase order. Oracle Fusion Receipt Accounting and OracleFusion Cost Accounting process these consigned inventory transactions and generate subledger journal entries.


• The physical and nancial ow of consigned inventory in a global purchase order.

• Transactions that ow from Oracle Fusion Inventory into Cost Accounting and Receipt Accounting.

• Transactions that ow from Oracle Fusion Supply Chain Financial Orchestration into Cost Accounting andReceipt Accounting.







51

ScenarioThe supplier AND-Fresno ships the goods in consigned status to inventory organization M2-LA, through the purchasingtrade organization M1-Seale.


(AND-Fresno)

Sold-to Legal EntitySold-to Profit Center BU 1

Purchasing Trade Org = M1-Seattle

Profit Center BU 2Inventory Organization M2-LA

Owner = M2-LA

OwnershipChange

FinancialFlow

Profit Center BU 2Ship-To Inventory Org M2-LA

Consigned Owner = AND-FresnoContingent Owner = M2-LAFinancial

Flow

PhysicalFlow

LegendBU = Business UnitOrg = Organization






52

• Sold-to Legal Entity is LE1.

• Ship-to organization is M2-LA which is also the contingent owner. Contingent owner assumes ownership fromthe supplier when inventory is consumed.

• Receipt and put away transactions performed in M2-LA in consigned status.

• Ownership changes from supplier AND-Fresno to M2-LA through M1-Seale when the goods are consumed.

The trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain FinancialOrchestration, and the transactions ow into Receipt Accounting and Cost Accounting. The shipment from supplier toinventory organization M2-LA is based on trade agreement GP #123 which has the following terms:







53


Legend Inv = Inventory IC = Intercompany COGS = Cost of Goods Sold Recpt = Receipt MAT = Material GP = Gross Profit

AND-FresnoSupplier

M2-LAConsigned Owner =

AND-FresnoContingent Owner =

M2-LA

M1-SeattleOwner

Physical Flow



M1:Trade In-Transit Issue

Dr IC COGSCr Trade In-Transit






M2:Trade In-Transit RecptDr Trade In-Transit MATDr Trade In-Transit GP

Cr Trade Clearing

M1:Trade Receipt Accrual

Dr Trade ClearingCr Accrual


Cr IC Accrual

M1:Trade In-Transit Recpt


M2:Consigned Receipt Consignment

Dr Consigned AccrualCr Consigned Clearing

OwnershipChange

OwnershipChange

Receipt Accounting generates distributions under inventory organization M2-LA for the consigned shipment fromsupplier AND-Fresno to M2-LA.



54



FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedInventory

100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedClearing

-100

USD

PO Price




FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

ReceiptAccounting


Trade In-Transit

100

USD

Not applicable

PO Price

ReceiptAccounting


Trade clearing

-100

USD

Not applicable

PO Price

CostAccounting



100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price




55



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


ConsignedInventory

-100

USD

Material

PO Price

ReceiptAccounting


ConsignedAccrual

100

USD

Not applicable

PO Price

ReceiptAccounting


ConsignedClearing

-100

USD

Not applicable

PO Price

ReceiptAccounting


Trade Clearing

120

USD

Not applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-120

USD

Not applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-120

USD

Material

Transfer Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


InventoryValuation

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price



56



FunctionalCurrency


CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

Organization M2-LA returns goods to supplier AND-Fresno. The following are accounting entries for the return ow.



57

Legend Inv = Inventory IC = Intercompany COGS = Cost of Goods Sold Recpt = Receipt Ret = Return MAT = Material GP = Gross Profit OH = Overhead

OwnershipChange


M2:PO Ret to ReceivingDr Consigned ClearingCr Consigned Inventory

M1:Trade In-Transit Return Receipt

Dr Trade In-TransitCr IC COGS

M2:Transfer to Consigned Issue

Dr Inv Valuation MATDr Inv Valuation GPDr Inv Valuation OH

Cr trade In-Transit MATCr Trade In-TransitCr Cost Variance

M2:Transfer to Consigned (Receipt)

Dr Consigned InventoryCr Consigned Inv Offset

M2:Trade In-Transit Ret Dr Trade ClearingCr Trade In-TransitM1:Trade Ret Accrual

Dr AccrualCr Trade Clearing

M2:Trade Ret AccrualDr IC Accrual

Cr Trade Clearing

M1:Trade In-Transit RetDr Trade ClearingCr Trade In-Transit

AND-FresnoSupplier



M2-LA

M1-SeattleOwner

OwnershipChange

PhysicalFlow

M2:Consigned Receipt Consumption


Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change ofownership from M2-LA to M1-Seale:



58



FunctionalCurrency


CostAccounting

Transfer toConsignedReceipt

ConsignedInventory

100

USD

Material

PO Price

CostAccounting



-100

USD

Material

PO Price

ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

120

USD

Not applicable

Transfer Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-120

USD

Not applicable

Transfer Price

CostAccounting

Trade In-Transit Return

Trade Clearing

120

USD

Material

Transfer Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

CostAccounting


ConsignedClearing

100

USD

Material

PO Price

CostAccounting


ConsignedAccrual

-100

USD

Material

PO Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


InventoryValuation

20

USD

Prot inInventory

InternalMarkup

CostAccounting


InventoryValuation

10

USD

Overhead

Not applicable



59



FunctionalCurrency


CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

CostAccounting


Cost Variance*

-10

USD

Material

Not applicable

*Inventory is depleted at the current cost, and the dierence between transfer price and cost is booked as cost variance.

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-LA for the change ofownership from M1-LA to supplier AND-Fresno:



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

Accrual

100

USD

Not applicable

PO Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not applicable

PO Price

CostAccounting


Trade Clearing

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting

Trade In-Transit ReturnReceipt

Trade In-Transit

100

USD

Material

PO Price

CostAccounting



-100

USD

Material

PO Price



60

Receipt Accounting generates distributions under inventory organization M2-LA for the return shipment from M2-LA tosupplier AND-Fresno:



FunctionalCurrency

Basis of Amount

ReceiptAccounting


Consigned Accrual

100

USD

PO Price

ReceiptAccounting


ConsignedClearing

-100

USD

PO Price

ReceiptAccounting


ConsignedClearing

100

USD

PO Price

ReceiptAccounting


ConsignedInventory

-100

USD

PO Price

Related Topics



Example of Accounting of Global Procurement Trade Transactionsinto InventoryMost large enterprises use a global procurement approach to their purchasing needs, wherein a central buyingorganization buys goods from suppliers on behalf of the internal organizations. Oracle Fusion Receipt Accounting andOracle Fusion Cost Accounting process transactions for these global procurement trade events and generate subledgerjournal entries.

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a globalprocurement ow into inventory. It illustrates:

• Transactions that are captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to ReceiptAccounting and Cost Accounting.

• Accounting entries that Receipt Accounting and Cost Accounting generate for the forward ow of a shipmentfrom the supplier, through the intermediary distributor, to the nal receiving organization.

• Accounting entries that Receipt Accounting and Cost Accounting generate for the return ow from thereceiving organization to the supplier.

ScenarioChina Supplier ships the goods to US Inc. through the intermediary distributor, China Ltd.





61

Transactions from Oracle Fusion Supply Chain Financial OrchestrationThe global procurement trade agreement, accounting rule sets, and associated purchase orders are set up in SupplyChain Financial Orchestration, and the transactions ow into Receipt Accounting and Cost Accounting based on thissetup:

• Purchase Order (PO) price from China Supplier to China Ltd. is USD 50.

• Intercompany transfer price from China Ltd. to US Inc. is USD 100.



• Overhead rule is congured in Cost Accounting for transaction type Trade in-Transit Receipt in CostOrganization CO1.

• China Ltd books a prot of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).


Accounting Entries



62

The following gure illustrates accounting entries for the forward ow from legal entity China Ltd. to legal entity US Inc.

China Supplier

Trade Receipt Accrual Dr Trade Clearing $50 Cr Accrual $50

Trade In-Transit Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr Trade Clearing $50 Cr OVH Absorption $10

Trade In-Transit Issue Dr IC COGS MAT $50 Dr IC COGS OVH $10 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10

IC AR Invoice Dr IC Receivable $100 Cr IC Revenue $100

Supplier Invoice Dr Accrual $50 Cr Liability $50

Trade Receipt Accrual Dr Trade Clearing $100 Cr IC Accrual $100

Trade In-Transit ReceiptDr Trade In-Transit MAT $50Dr Trade In-Transit OVH $10Dr Trade In-Transit GP $40Cr Trade Clearing $100

IC AP Invoice Dr IC Accrual $100 Cr IC Liability $100

PO Receipt Dr Receiving Inspection $100 Cr Trade In-Transit $100

Legend LE = Legal Entity BU = Business Unit MAT = Material OVH = Overhead IC = Intercompany COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization

China Ltd (Sold-to LE)CN (Sold-to Profit Ctr BU)

CO1 (Sold-to Cst Org)M1 (Sold-to Inv Org)

US Inc (Receiving LE)US West (Receiving Profit

Ctr BU)CO2 (Receiving Cst Org)M2 (Receiving Inv Org)

PO DeliveryDr Inventory Valuation MAT$50Dr Inventory Valuation OVH$10Dr Inventory Valuation GP $40Cr Receiving Inspection $100

Receipt Accounting generates distributions under business unit CN and inventory organization M1. Cost Accountinggenerates distributions under cost organization CO1 and inventory organization M1.

The following table describes those distributions.



63



FunctionalCurrency


ReceiptAccounting


Trade Clearing

50

USD

Not Applicable

PO Price

ReceiptAccounting


Accrual

-50

USD

Not Applicable

PO Price

CostAccounting


Trade In-Transit

50

USD

Material

PO Price

CostAccounting


Trade Clearing

-50

USD

Material

PO Price

CostAccounting


Expense

10

USD

Overhead

Overhead Rate

CostAccounting


OverheadAbsorption

-10

USD

Overhead

Overhead Rate

CostAccounting


IntercompanyCOGS

50

USD

Material

PO Price

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

AccountsReceivable

IntercompanyAccountsReceivableInvoice

IntercompanyReceivable

100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyRevenue

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

SupplierInvoice

Accrual

50

USD

Not Applicable

PO Price

ReceiptAccounting

SupplierInvoice

Liability

-50

USD

Not Applicable

PO Price

Receipt Accounting generates distributions under business unit US West and inventory organization M2. CostAccounting generates distributions under cost organization CO2 and inventory organization M2.



64




FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not Applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

50

USD

Material

SendingOrganizationCost

CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-100

USD

Material

Transfer Price

AccountsPayable

IntercompanyAccountsPayable Invoice

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

AccountsPayable


IntercompanyLiability

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

ReceivingInspection

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

Trade In-Transit

-100

USD

Not Applicable

Transfer Price

CostAccounting

PO Delivery

InventoryValuation

50

USD

Material


CostAccounting

PO Delivery

InventoryValuation

10

USD

Overhead




65



FunctionalCurrency


CostAccounting

PO Delivery

InventoryValuation

40

USD

Prot inInventory

InternalMarkup

CostAccounting

PO Delivery

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

US Inc returns goods directly to China Supplier.

The following gure illustrates accounting entries for the return ow from legal entity US Inc to legal entity China Ltd.



66

China Supplier

Trade Return Accrual Dr Accrual $50 Cr Trade Clearing $50

Trade In-Transit Return Dr Trade Clearing $50 Dr Cost Variance $10 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10

Trade In-Transit Ret Rec Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr IC COGS MAT $50 Cr IC COGS OVH $10

IC AR Invoice Dr IC Revenue $100 Cr IC Receivable $100

Supplier Invoice Dr Liability $50 Cr Accrual $50

Trade Return Accrual Dr IC Accrual $100 Cr Trade Clearing $100

Trade In-Transit ReturnDr Trade Clearing $100Cr Trade In-Transit MAT $50Cr Trade In-Transit OVH $10Cr Trade In-Transit GP $40

IC AP Invoice Dr IC Liability $100 Cr IC Accrual $100

Return to Vendor Dr Trade In-Transit $100 Cr Receiving Inspection $100

Legend LE = Legal Entity BU = Business Unit MAT = Material OVH = Overhead IC = Intercompany COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization Ret Rec = Return Receipt





Return to ReceivingDr Receiving Inspection $100Cr Inventory Valuation MAT$50Cr Inventory Valuation OVH$10Cr Inventory Valuation GP $40





67



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade Clearing

100

USD

Material

Transfer Price

CostAccounting


Trade In-Transit

-50

USD

Material


CostAccounting


Trade In-Transit

-10

USD

Overhead


CostAccounting


Trade In-Transit

-40

USD

Prot inInventory

InternalMarkup

CostAccounting

Return toReceiving

ReceivingInspection

100

USD

Material,Overhead,and Prot inInventory

Transfer Price

CostAccounting

Return toReceiving

InventoryValuation

-50

USD

Material


CostAccounting

Return toReceiving

InventoryValuation

-10

USD

Overhead


CostAccounting

Return toReceiving

InventoryValuation

-40

USD

Prot inInventory

InternalMarkup

ReceiptAccounting

Return toSupplier

Trade In-Transit

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toSupplier

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

IntercompanyAP Invoice


100

USD

Not Applicable

Transfer Price



68



FunctionalCurrency


ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price





FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

Accrual

50

USD

Not Applicable

PO Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-50

USD

Not Applicable

PO Price

CostAccounting


Trade Clearing

50

USD

Material

PO Price

CostAccounting


Cost Variance*

10

USD

Not Applicable

Inventory isdepleted atthe currentcost, and thedierencebetweentransfer priceand cost isbooked as costvariance

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

CostAccounting


Trade In-Transit

-10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

50

USD

Material

PO Price



69



FunctionalCurrency


CostAccounting


Trade In-Transit

10

USD

Overhead

Overhead Rate

CostAccounting


IntercompanyCOGS

-50

USD

Material

PO Price

CostAccounting


IntercompanyCOGS

-10

USD

Overhead

Overhead Rate

AccountsReceivable


IntercompanyRevenue

100

USD

Not Applicable

Transfer Price

AccountsReceivable



-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

SupplierInvoice

Liability

50

USD

Not Applicable

PO Price

ReceiptAccounting

SupplierInvoice

Accrual

-50

USD

Not Applicable

PO Price


Example of Accounting of Interorganization Transfers AcrossBusiness UnitsThis example illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the transfer of goods acrossprot center business units.

ScenarioChina Ltd. ships the goods to US Inc. The organizations are in two dierent prot center business units.



70

Transactions from Oracle Fusion Supply Chain Financial OrchestrationThe trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain FinancialOrchestration, and the transactions ow into Receipt Accounting and Cost Accounting based on this setup:

• China Ltd. acquires goods locally at the cost of USD 50, plus USD 10 overhead on the receipt of goods.


• Intercompany invoicing is set to No.



• China Ltd. books a prot of USD 40 (USD 100 transfer price - USD 50 acquisition cost - USD 10 overhead).

AnalysisReceipt Accounting and Cost Accounting create accounting distributions for the transfer of goods.

Accounting Entries



71

The following gure illustrates accounting entries for the shipment from legal entity China Ltd. to legal entity US Inc.

Trade Receipt Accrual Dr Trade Clearing $100 Cr IO Payable $100


Interorganization Delivery Dr Inventory MAT $50 Dr Inventory OVH $10 Dr Inventory GP $40 Cr Receiving Inspection $100

Legend LE = Legal Entity BU = Business Unit MAT = Material OVH = Overhead IC = Intercompany COGS = Cost of Goods Sold AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IO = Interorganization



Interorganization ReceiptDr Receiving Inspection $100Cr Trade In-Transit $100

In-Transit Shipment Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr Inventory MAT $50 Cr Inventory OVH $10

Trade In-Transit Issue Dr IO Receivable $100 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10 Cr IO Gain/Loss $40

China Ltd (LE)CN (Profit Ctr BU)

CO1 (Cst Org)M1 (Inv Org)

Cost Accounting generates distributions under cost organization CO1 and inventory organization M1.

The following table describes the distributions:



72



FunctionalCurrency


CostAccounting

In-TransitShipment

Trade In-Transit

50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting

In-TransitShipment

Inventory

-50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Inventory

-10

USD

Overhead

Current Cost

CostAccounting



100

USD

Material,Overhead

Transfer Price

CostAccounting


Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

-10

USD

Not applicable

InternalMarkup(Transfer Priceminus CurrentCost)

CostAccounting


InterorganizationGain/Loss

-40

USD

Not applicable

InternalMarkup





FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

Transfer Price

ReceiptAccounting



-100

USD

Not applicable

Transfer Price



73



FunctionalCurrency


CostAccounting


Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-100

USD


Transfer Price

ReceiptAccounting

InterorganizationReceipt

ReceivingInspection

100

USD

Not applicable

Transfer Price

ReceiptAccounting


Trade In-Transit

-100

USD

Not applicable

Transfer Price

CostAccounting

InterorganizationDelivery

Inventory

50

USD

Material


CostAccounting


Inventory

10

USD

Overhead


CostAccounting


Inventory

40

USD

Prot inInventory

InternalMarkup

CostAccounting


ReceivingInspection

-100

USD


Transfer Price



74

Example of Accounting of Trade Transactions in Internal DropShipmentsAn internal drop shipment is a trade transaction involving the movement of goods from an inventory organizationdirectly to a customer, yet the business unit that sells the goods to the customer is dierent from the business unitto which the inventory organization belongs. From the nancial standpoint, the business unit to which the inventoryorganization belongs sells the goods to the other business unit who, in turn, sells the goods to the customer.

The following is an example of accounting performed by Oracle Fusion Cost Accounting and Oracle Fusion ReceiptAccounting for an internal drop shipment. It illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the drop shipment ow from theselling organization to the customer of the buying organization.

• Accounting entries that Receipt Accounting and Cost Accounting generate for the return ow from thecustomer to the seller.

ScenarioChina Ltd. drop ships the goods to the customer of US Inc.

Transactions from Oracle Fusion Supply Chain Financial OrchestrationThe trade agreement, accounting rule sets, and associated purchase orders are set up in Oracle Fusion Supply ChainFinancial Orchestration, and the transactions ow into Receipt Accounting and Cost Accounting based on this setup:





• US Inc. books a prot of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).


Accounting Entries



75


Legend LE = Legal Entity BU = Business Unit MAT = Material OVH = Overhead IC = Intercompany COGS = Cost of Goods Sold DCOGS = Deferred COGS AR = Accounts Receivable AP = Accounts payable GP = Gross Profit Cst Org = Cost Organization Inv Org = Inventory Organization IO = Interorganization

Sales Order Issue Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr Inventory MAT $50 Cr Inventory OVH $10

Trade In-Transit Issue Dr IC COGS MAT $50 Dr IC COGS OVH $10 Cr Trade In-Transit MAT $50 Cr Trade in-Transit OVH $10




Trade In-Transit Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Dr Trade In-Transit GP $40 Cr Trade Clearing $100

Trade Sales Issue Dr DCOGS MAT $50 Dr DCOGS OVH $10 Dr DCOGS GP $40 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10 Cr Trade In-Transit GP $40

US Inc (Sold-to LE)US West (Sold-to Profit Ctr

BU)CO2 (Sold-to Cst Org)M2 (Sold-to Inv Org)

IC AP Invoice Dr IC Accrual $100 Cr IC Liatility $100

Customer AR Invoice Dr Receivable $120 Cr Revenue $120

COGS Recognition Dr COGS MAT $50 Dr COGS OVH $10 Dr COGS GP $40 Cr DCOGS MAT $50 Cr DCOGS OVH $10 Cr DCOGS GP $40

Customer



The following table describes the cost accounting entries.



76



FunctionalCurrency


CostAccounting

Sales OrderIssue

Trade In-Transit

50

USD

Material

Current Cost

CostAccounting

Sales OrderIssue

Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting

Sales OrderIssue

Inventory

-50

USD

Material

Current Cost

CostAccounting

Sales OrderIssue

Inventory

-10

USD

Overhead

Current Cost

CostAccounting



50

USD

Material

Current Cost

CostAccounting



10

USD

Overhead

Current Cost

CostAccounting


Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

-10

USD

Overhead

Current Cost

AccountsReceivable



100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyRevenue

-100

USD

Not Applicable

Transfer Price


The following table describes the receipt and cost accounting entries.



77



FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not Applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-100

USD


Transfer Price

AccountsPayable


IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

AccountsPayable



-100

USD

Not Applicable

Transfer Price

CostAccounting

Trade SalesIssue

Deferred Costof Goods Sold

50

USD

Material


CostAccounting

Trade SalesIssue


10

USD

Overhead


CostAccounting

Trade SalesIssue


40

USD

Prot inInventory

InternalMarkup

CostAccounting

Trade SalesIssue

Trade In-Transit

-50

USD

Material




78



FunctionalCurrency


CostAccounting

Trade SalesIssue

Trade In-Transit

-10

USD

Overhead


CostAccounting

Trade SalesIssue

Trade In-Transit

-40

USD

Prot inInventory

InternalMarkup

The customer returns goods directly to China Ltd.

The following gure illustrates accounting entries for the return ow from US Inc (Sold-to Legal Entity) to China Ltd(Legal Entity).



79


RMA Receipt Dr Inentory MAT $50 Dr Inventory OVH $10 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10

Trade In-Transit Return Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr IC COGS MAT $50 Cr IC COGS OVH $10



Trade Receipt Accrual Dr IC Accrual $100 Cr Trade Clearing $100

Trade In-Transit Return Dr Trade Clearing $100 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10 Cr Trade In-Transit GP $40

Trade Sales Return Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Dr Trade In-Transit GP $40 Cr DCOGS MAT $50 Cr DCOGS OVH $10 Cr DCOGS GP $40



IC AP Debit Memo Dr IC Liability $100 Cr IC Accrual $100

Customer AR Credit Memo Dr Revenue $120 Cr Receivable $120

RMA Gain/Loss Recognition Dr Deferred RMA Gain/Loss MAT $50 Dr Deferred RMA Gain/Loss OVH $10 Dr Deferred RMA Gain/Loss GP $40 Cr RMA Gain/Loss MAT $50 Cr RMA Gain/Loss OVH $10 Cr RMA Gain/Loss GP $40

Customer

IC AR Credit Memo Dr IC Revenue $100 Cr IC Receivable $100


The following table describes those receipt and cost accounting entries.



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price



80



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade Clearing

100

USD

Split into threelines (Material,Overhead,and Prot inInventory)

Transfer Price

CostAccounting


Trade In-Transit

-50

USD

Material


CostAccounting


Trade In-Transit

-10

USD

Overhead


CostAccounting


Trade In-Transit

-40

USD

Prot inInventory

InternalMarkup

AccountsPayable

IntercompanyAccountsPayable DebitMemo


100

USD

Not Applicable

Transfer Price

AccountsPayable


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting

Trade SalesReturn Receipt

Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Deferred RMAGain/Loss

-50

USD

Material




81



FunctionalCurrency


CostAccounting



-10

USD

Overhead


CostAccounting



-40

USD

Prot inInventory

InternalMarkup


The following table describes those accounting entries.



FunctionalCurrency


CostAccounting

RMA Receipt

Inventory*

50

USD

Material

Current Cost

CostAccounting

RMA Receipt

Inventory

10

USD

Overhead

Current Cost

CostAccounting

RMA Receipt

Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting

RMA Receipt

Trade In-Transit

-10

USD

Overhead

Current Cost

CostAccounting


Trade In-Transit

50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting



-50

USD

Material

Current Cost



82



FunctionalCurrency


CostAccounting



-10

USD

Overhead

Current Cost

AccountsReceivable

IntercompanyAccountsReceivableCredit Memo

IntercompanyRevenue

100

USD

Not Applicable

Transfer Price

AccountsReceivable



-100

USD

Not Applicable

Transfer Price


Example of Accounting of Global Procurement Trade Transactionsinto ExpenseOracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting process transactions and create distributions forglobal procurement purchases that are received into expense destinations rather than inventory, and for services thatare expensed.

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a globalprocurement ow into expense. It illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the forward ow of goods orservices from the supplier, through the intermediary distributor, to the nal receiving organization.


ScenarioChina Supplier ships the goods to US Inc. and the goods ow through an intermediary distributor, China Ltd.


• Purchase Order (PO) price from China Supplier to China Ltd is USD 50.



83

• Intercompany transfer price from China Ltd to US Inc is USD 100.



• Overhead rule is congured in Cost Accounting for transaction type Trade in-Transit Receipt in costorganization CO1.


Accounting Entries



84

The following gure illustrates the accounting entries for the forward ow from China Ltd (sold-to legal entity) to US Inc(receiving legal entity).

China Supplier







Trade In-Transit ReceiptDr Trade In-Transit $100Cr Trade Clearing $100








PO Delivery Dr Expense $100 Cr Receiving Inspection $100





85



FunctionalCurrency


ReceiptAccounting


Trade Clearing

50

USD

Not Applicable

PO Price

ReceiptAccounting


Accrual

-50

USD

Not Applicable

PO Price

CostAccounting


Trade In-Transit

50

USD

Material

PO Price

CostAccounting


Trade Clearing

-50

USD

Material

PO Price

CostAccounting


Trade In-Transit

10

USD

Overhead

Overhead Rate

CostAccounting


OverheadAbsorption

-10

USD

Overhead

Overhead Rate

CostAccounting


IntercompanyCOGS

50

USD

Material

PO Price

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

CostAccounting


IntercompanyCOGS

10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

-10

USD

Overhead

Overhead Rate

AccountsReceivable



100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyRevenue

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

SupplierInvoice

Accrual

50

USD

Not Applicable

PO Price



86



FunctionalCurrency


ReceiptAccounting

SupplierInvoice

Liability

-50

USD

Not Applicable

PO Price





FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not Applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

Transfer Price

CostAccounting


Trade Clearing

-100

USD

Material

Transfer Price

AccountsPayable


IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

AccountsPayable



-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

ReceivingInspection

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

Trade In-Transit

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Delivery

Expense

100

USD

Not Applicable

Transfer Price



87



FunctionalCurrency


ReceiptAccounting

PO Delivery

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

US Inc. returns goods directly to China Supplier.

The following gure illustrates the accounting entries for the return ow from legal entity US Inc. to legal entity ChinaLtd .



88

China Supplier







Trade In-Transit ReturnDr Trade Clearing $100Cr Trade In-Transit $100








Return to ReceivingDr Receiving Inspection $100Cr Expense $100





89



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade Clearing

100

USD

Material

Transfer Price

CostAccounting


Trade In-Transit

-100

USD

Material

Transfer Price

ReceiptAccounting

Return toReceiving

ReceivingInspection

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toReceiving

Expense

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toSupplier

Trade In-Transit

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toSupplier

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

AccountsPayable



100

USD

Not Applicable

Transfer Price

AccountsPayable


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price





90



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

50

USD

Not Applicable

PO Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-50

USD

Not Applicable

PO Price

CostAccounting


Trade Clearing

50

USD

Material

PO Price

CostAccounting


Cost Variance*

10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

CostAccounting


Trade Clearing

-10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

50

USD

Material

PO Price

CostAccounting


Trade In-Transit

10

USD

Overhead

Overhead Rate

CostAccounting



-50

USD

Material

PO Price

CostAccounting



-10

USD

Overhead

Overhead Rate

AccountsReceivable


IntercompanyRevenue

100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyReceivables

-100

USD

Not Applicable

Transfer Price



91



FunctionalCurrency


ReceiptAccounting

SupplierInvoice

Liability

50

USD

Not Applicable

PO Price

ReceiptAccounting

SupplierInvoice

Accrual

-50

USD

Not Applicable

PO Price


Example of Accounting of Interorganization Transfers Within theSame Business UnitAn interorganization transfer is a trade transaction involving the movement of goods or services between organizationsin the supply chain. When the transfer occurs between organizations within the same prot center business unit, thetransfer is always at cost and there is no intercompany invoicing. Oracle Fusion Cost Accounting creates the tradeevents and they do not ow through Oracle Fusion Supply Chain Financial Orchestration.

The following is an example of accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for an interorganization transfer of goods between inventory organizations within the same prot centerbusiness unit.

ScenarioInventory organization M1 makes a transfer of goods to inventory organization M2. Both inventory organizations areunder the prot center business unit US West, which is under the legal entity US Inc.

Interorganization TransferThe cost of goods transferred from M1 to M2 is USD 50 plus overhead of USD 10.

AnalysisReceipt Accounting and Cost Accounting create accounting entries for the transfer of goods.



92

The following gure illustrates those accounting entries.


Trade In-Transit ReceiptDr Trade In-Transit MAT $50Dr Trade In-Transit OVH $10Cr Trade Clearing $60

Interorganization Delivery Dr Inventory MAT $50 Dr Inventory OVH $10 Cr Receiving Inspection $60






Trade In-Transit Issue Dr IO Receivable $60 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10

US Inc (Shipping LE)US West (Shipping Profit

Ctr BU)CO1 (Shipping Cst Org)M1 (Shipping Inv Org)

Accounting EntriesReceipt Accounting generates distributions under business unit US West and inventory organization M1. CostAccounting generates distributions under cost organization CO1 and inventory organization M1.




93



FunctionalCurrency


CostAccounting

In-TransitShipment

Trade In-Transit

50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting

In-TransitShipment

Inventory

-50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Inventory

-10

USD

Overhead

Current Cost

CostAccounting



60

USD

Material +Overhead

Current Cost

CostAccounting


Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

-10

USD

Overhead

Current Cost





FunctionalCurrency


ReceiptAccounting


Trade Clearing

60

USD

Not Applicable


ReceiptAccounting



-60

USD

Not Applicable


CostAccounting


Trade In-Transit

50

USD

Material




94



FunctionalCurrency


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade Clearing

-60

USD

Material +Overhead


ReceiptAccounting


ReceivingInspection

60

USD

Not Applicable


ReceiptAccounting


Trade In-Transit

-60

USD

Not Applicable


CostAccounting


Inventory

50

USD

Material


CostAccounting


Inventory

10

USD

Overhead


CostAccounting


ReceivingInspection

-60

USD

Material +Overhead


Tax Accounting for Receipt TransactionsTo comply with tax regulations, calculate taxes and generate tax distributions for all receipt transactions. You cancapture item prices, inclusive and exclusive taxes on your purchases. Receipt costs are adjusted to account inclusivetaxes that were included in the item purchase price. Inclusive taxes are booked to a tax liability or recovery account.

You congure the tax point basis and tax point date in Oracle Fusion Financials. Based on this conguration, taxes arecalculated either on delivery or invoice generation. For more information about conguring and calculating taxes, seethe Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

Prerequisites



95

Congure the following to automatically calculate and account taxes. You must have the Application ImplementationConsultant role to do these tasks.

• In the Oerings work area, enable the Tax Calculation on Receipt Accounting Distributions feature at theFinancials oering level.

• Enable delivery-based tax calculation for invoices:a. In the Setup and Maintenance work area, go to the following:

• Oering: Financials• Functional Area: Transaction Tax• Task: Manage Conguration Owner Tax

b. From the Conguration Owner drop-down list, select the relevant business unit.c. From the Application Name drop-down list, select Payables.d. From the Event Class drop-down list, select Standard Invoices.e. From the Tax Point Basis drop-down list, select Invoice.f. From the Tax Point Date drop-down list, select Receipt Date.

For more information about conguring and calculating taxes, see the Oracle Financials Cloud Using Taxguide available on the Oracle Help Center.

• Congure the application to automatically calculate taxes for trade receipt accrual:a. In the Setup and Maintenance work area, go to the following:

• Oering: Manufacturing and Supply Chain Materials Management• Functional Area: Supply Chain Financial Flows• Task: Manage Supply Chain Financial Orchestration System Options

b. Select Calculate tax for trade receipt accrual.

• Congure the application to automatically calculate and account nonrecoverable taxes on intercompanyinvoices:

a. Navigate to the Financial Orchestration work area.b. In the Tasks pane, click Manage Documentation and Accounting Rules.c. Click the required documentation and accounting rule.d. Under Required Tasks, select Intercompany Invoices.

How Taxes are Calculated and Accounted

Here's how taxes are calculated and accounted for dierent combinations of tax point basis and tax point dates:

Tax Point Basis Tax Point Date Tax Calculation Tax Accounting Variance Calculationand Accounting

Delivery

Receipt Date

Taxes are calculated ongoods receipt

Recoverable andnonrecoverable taxesare accounted ongoods receipt

Not Applicable

Invoice

Receipt Date


• Nonrecoverabletaxes are

Not Applicable



96


accounted ongoods receipt

• Recoverabletaxes areaccountedon invoicegeneration

Invoice

Invoice Date

Taxes are calculated oninvoice generation

Recoverable andnonrecoverable taxesare accounted oninvoice generation

Tax variance iscalculated andaccounted fordierence in the taxesestimated on purchaseorder and nal taxcalculated on invoice

Receipt Accounting receives transactions and related tax determinants from outside sources such as Oracle FusionReceiving, Inventory, and Accounts Payable. The following discusses:

• Import of tax determinants into Receipt Accounting

• Tax distributions created by Receipt Accounting

• Tax distributions by Cost Accounting



97

• Review of tax distributions

Receiving

Accounts PayableInventory

Transactions and Tax

Determinants

Receipt Accounting

Cost Accounting

Create Cost Accounting DistributionsCreate Receipt

Accounting Distributions and Calculate Taxes

Review Receipt Accounting Distributions

and Tax Details

Review Cost Accounting Distributions and

Inventory Valuation

Tax Calculations

Acquisition Cost Processor

Transactions

Import Tax DeterminantsHere's how you can import transactions and related tax determinants from outside sources on the Scheduled Processespage in the Scheduled Processes work area.

• Select the Transfer Transactions from Receiving to Receipt Accounting process to import receipt transactionsinto Receipt Accounting.

• Select the Transfer Costs to Cost Management process to import accounts payable transactions into ReceiptAccounting and Cost Accounting.



98

Tax Distributions by Receipt AccountingThe Receipt Accounting Processor calls the Tax Application Programming Interface to calculate transaction taxes basedon imported tax determinants. The processor also generates tax distributions for receipt transactions.

Run the Receipt Accounting Processor on the Create Receipt Accounting Distributions page in the Receipt Accountingwork area.

Tax Distributions by Cost AccountingThe Cost Accounting Processor uses tax results generated by Receipt Accounting to calculate inventory acquisitioncosts including nonrecoverable taxes.

Run the Cost Accounting Processor on the Create Cost Accounting Distributions page in the Cost Accounting work area.

Review Tax DistributionsOn the Review Receipt Accounting Distributions page in the Receipt Accounting work area view results of the ReceiptAccounting Processor:

• Distributions and journal entries for receipt transactions

• Tax determinants accessed by clicking the links in the Tax Determinants column

• Transaction taxes accessed by clicking the Transaction Unit Cost links in the Cost Information tab

On the Review Cost Accounting Distributions page in the Cost Accounting work area view results of the Cost AccountingProcessor:

• Distributions and journal entries for inventory transactions

• Inventory unit costs including taxes in the Cost Information tab

Example of Tax Accounting for a Simple Procurement TransactionThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for a simple procurement transaction that uses a tax point basis of delivery, that is, taxes are accounted atreceipt of the goods.

ScenarioThe supplier makes a shipment to the inventory organization based on a purchase order (PO) for USD 1,000, with thefollowing tax details:

• Tax A delivery basis = 10%. Recoverable and nonrecoverable portions are both 50%

• Tax B invoice basis = 20%. Recoverable and nonrecoverable portions are both 50%

Tax Details at Receipt and InvoiceTax details at the time of receipt of goods are:

• Tax A delivery basis = 15%, which is changed from 10% estimated at the time of purchase order. Recoverableand nonrecoverable portions are both 50%, which is equal to USD 75 (that is, USD 1,000 * 15% * 50%).

• Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable andnonrecoverable portions are both 50%, which is equal to USD 125 (that is, USD 1,000 * 25% * 50%).



99

Tax details at the time of invoice are:

• Tax A delivery basis = 20%, which is changed from 15% reported and accounted on receipt. Recoverable andnonrecoverable portions are both 50%, however taxes are not recalculated because this transaction uses a taxpoint basis of delivery.

• Tax B invoice basis = 30%, which is changed from 25% estimated on receipt. Recoverable and nonrecoverableportions are both 50%, which is equal to USD 150.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions when the goods are received and when theinvoice is accounted.

Tax Accounting EntriesReceipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt:



FunctionalCurrency


ReceiptAccounting

PO Receipt

ReceivingInspection

1,000

USD

Material

PO Price

ReceiptAccounting

PO Receipt

ReceivingInspection

75

USD

Tax

Tax A Delivery-BasedNonrecoverable:USD 1,000 *15% * 50%

ReceiptAccounting

PO Receipt

TaxRecoverable

75

USD

Tax

Tax A Delivery-BasedRecoverable:USD 1,000 *15% * 50%

ReceiptAccounting

PO Receipt

ReceivingInspection

125

USD

Tax

Tax B Invoice-BasedNonrecoverable:USD 1,000 *25% * 50%

ReceiptAccounting

PO Receipt

SupplierAccrual

-1,275

USD

Not applicable

Not applicable

CostAccounting

PO Delivery

InventoryValuation

1,200*

USD

Not applicable

Not applicable

CostAccounting

PO Delivery

ReceivingInspection

-1,200*

USD

Not applicable

Not applicable



100

*PO price plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the supplier when invoice is created:



FunctionalCurrency


AccountsPayable

Invoice

SupplierAccrual

1,275

USD

Not applicable

Not applicable

AccountsPayable

Invoice

TaxRecoverable

150

USD

Tax

Tax B Invoice-BasedRecoverable:USD 1,000 *30% * 50%

AccountsPayable

Invoice

Tax B RateVariance*

25

USD

Not applicable

Dierencebetween taxestimated at25% and actualcalculated at30%

AccountsPayable

Invoice

SupplierLiability

-1,450

USD

Not applicable

Not applicable

*Tax variance due to the dierence between rates at time of delivery versus invoice.

Receipt Accounting and Cost Accounting generate the following accounting entries when invoice is accounted:

Subledger Event Type Accounting Line Type Amount in FunctionalCurrency +Dr/-Cr

Functional Currency

Receipt Accounting

Invoice Price


25

USD

Receipt Accounting

Invoice PriceAdjustment

Tax B Rate Variance*

-25

USD

Cost Accounting

Acquisition CostAdjustment

Inventory Valuation**

25

USD

Cost Accounting



-25

USD

*Tax variance due to the dierence between tax rates at time of delivery versus invoice.



101

**Inventory acquisition cost adjustment for nonrecoverable tax B.

Example of Tax Accounting for a Consigned Inventory TransactionThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for a consigned inventory transaction in the supply chain. This transaction uses a tax point basis of delivery,that is, taxes are accounted at receipt of the goods.

ScenarioThe supplier makes a consigned shipment to the inventory organization based on a consigned purchase order (PO) forUSD 1,000 with the following tax details:



Tax Details at Receipt and InvoiceTax details at the consigned receipt of goods are:

• Item value = USD 1,000

• Tax A delivery basis = 15%, which is changed from 10% estimated at the time of PO. Recoverable andnonrecoverable portions are both 50%, or USD 75, that is, USD 1,000 * 15% * 50%.

• Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable andnonrecoverable portions are both 50%, or USD 125, that is, USD 1,000 * 25% * 50%.



• Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both both 50%, however taxes arenot recalculated because this transaction uses a tax point basis of delivery.

• Tax B invoice basis = 30%, which is changed from 25% estimated at the time of receipt. Recoverable andnonrecoverable portions are both 50%, or USD 150.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions when the consigned good are received, whenthe status changes from consigned to owned, and when the invoice is accounted.

Tax Accounting EntriesReceipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of consignedgoods:



FunctionalCurrency


ReceiptAccounting

Consigned POReceipt

ConsignedClearing

1,000

USD

Material

PO Price



102



FunctionalCurrency


ReceiptAccounting

Consigned POReceipt

ConsignedClearing

75

USD

Tax


ReceiptAccounting

Consigned POReceipt

ConsignedClearing

125

USD

Tax


ReceiptAccounting

Consigned POReceipt

ConsignedAccrual

-1,200

USD

Not applicable

Not applicable

CostAccounting

Consigned PODelivery

ConsignedInventory*

1,200

USD

Not applicable

Not applicable

ReceiptAccounting


ConsignedClearing

-1,200

USD

Not applicable

Not applicable


Receipt Accounting and Cost Accounting generate the following accounting entries at the time of change of status fromconsigned to owned stock:



FunctionalCurrency


ReceiptAccounting


ConsignedAccrual

1,000

USD

Material

PO Price

ReceiptAccounting


ConsignedAccrual

75

USD

Not applicable


ReceiptAccounting


ConsignedAccrual

125

USD

Not applicable

Tax B Invoice-BasedNonrecoverable:



103



FunctionalCurrency


USD 1,000 *15% * 50%

ReceiptAccounting


ConsignedClearing

-1,200

USD

Not applicable

Not applicable

CostAccounting



1,000

USD

Material

PO Price

CostAccounting



75

USD

NonrecoverableTax

Tax A Delivery-BasedNonrecoverable

CostAccounting



125

USD

NonrecoverableTax

Tax B Invoice-BasedNonrecoverable

CostAccounting


ConsignedInventory

-1,200

USD

Not applicable

PO Price

ReceiptAccounting


Trade Clearing

1,000

USD

Not applicable

PO Price

ReceiptAccounting


Trade Clearing

75

USD

Not applicable


ReceiptAccounting


Trade Clearing

125

USD

Not applicable


ReceiptAccounting


TaxRecoverable*

75

USD

Not applicable

Tax A Delivery-BasedRecoverable

ReceiptAccounting


SupplierAccrual

-1,275

USD

Not applicable

Not applicable

CostAccounting


Trade In-Transit

1,000

USD

Not applicable

PO Price



104



FunctionalCurrency


CostAccounting


Trade In-Transit

75

USD

Not applicable


CostAccounting


Trade In-Transit

125

USD

Not applicable


CostAccounting


Trade Clearing

-1,200

USD

Not applicable

Not applicable

CostAccounting


InventoryValuation

1,000

USD

Material

PO Price

CostAccounting


InventoryValuation

75

USD

NonrecoverableTax


CostAccounting


InventoryValuation

125

USD

NonrecoverableTax


CostAccounting


Trade In-Transit

-1,200

USD

Not applicable

Not applicable

*Delivery-based recoverable tax A is calculated on consigned receipt but will be accounted after ownership changeevent.

Accounts Payable generates the following accounting entries when the invoice is created:



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

1,275

USD

Not applicable

Accounts Payable

Invoice

Tax B Recovery

150

USD

Tax B Invoice-Based Recoverable

Accounts Payable

Invoice

Tax B RateVariance*

25

USD

Not applicable



105



FunctionalCurrency

Basis of Amount

Accounts payable

Invoice

Supplier Liability

-1,450

USD

Not applicable




Functional Currency

Receipt Accounting


Trade Clearing

25

USD

Receipt Accounting



-25

USD

Cost Accounting



25

USD

Cost Accounting


Trade Clearing

-25

USD



Example of Tax Accounting for a Purchase Order Retroactive PriceChangeThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for a retroactive price change on a purchase order (PO) receipt that is partially invoiced.

ScenarioThe supplier makes a shipment to the inventory organization based on a purchase order for 10 units, at a per unit priceof USD 100. After receipt of the goods, a partial invoice is created for 2 units at USD 100 per unit.

The purchase order price changes retroactively from USD 100 to USD 120. The remaining balance of 8 units is invoicedat USD 120 per unit.



106

Tax DetailsThis transaction uses a tax point basis of delivery, that is, taxes are accounted at the time of receipt of goods.

Taxes details are the same after the retroactive price change on the PO:

• Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both 50%.

• Tax B invoice basis = 30%. Recoverable and nonrecoverable portions are both 50%.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions at the time of receipt of goods, after theretroactive purchase order price change, and for the dierential invoice.

Tax Accounting EntriesReceipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of goods:



FunctionalCurrency


ReceiptAccounting

PO Receipt

ReceivingInspection

1,000

USD

Material

PO Price

ReceiptAccounting

PO Receipt

ReceivingInspection

100

USD

Tax


ReceiptAccounting

PO Receipt

TaxRecoverable(Tax A)

100

USD

Tax


ReceiptAccounting

PO Receipt

ReceivingInspection

150

USD

Tax


ReceiptAccounting

PO Receipt

SupplierAccrual

-1,350

USD

Material

Not applicable

CostAccounting

PO Delivery

InventoryValuation

1,250*

USD

Not applicable

Not applicable

CostAccounting

PO Delivery

ReceivingInspection

-1,250*

USD

Not applicable

Not applicable



107



FunctionalCurrency



Accounts Payable generates the following accounting entries for the supplier when partial invoice is accounted:



FunctionalCurrency


AccountsPayable

Invoice

SupplierAccrual

270*

USD

Not applicable

Item Price plusNonrecoverableTaxes A andB for 2 units =USD 1,350/10* 2

AccountsPayable

Invoice

TaxRecoverable

30

USD

Tax

Tax B Invoice-BasedRecoverable:USD 200 * 30%* 50%

AccountsPayable

Invoice

SupplierLiability

-300

USD

Not applicable

Not applicable

*Accrual is debited to the extent quantity is invoiced, which is 2 units.

Receipt Accounting and Cost Accounting generate the following accounting entries after the retroactive purchase orderprice change:



FunctionalCurrency


ReceiptAccounting

RetroactivePriceAdjustment

ReceivingInspection

160*

USD

Material

USD 120 -USD 100 *uninvoicedquantity of 8units

ReceiptAccounting


ReceivingInspection

16

USD

Tax

Tax A Delivery-BasedNonrecoverable:



108



FunctionalCurrency


USD 160 * 20%* 50%

ReceiptAccounting



16

USD

Tax

Tax A Delivery-BasedRecoverable:USD 160 * 20%* 50%

ReceiptAccounting


ReceivingInspection

24

USD

Tax

Tax B Invoice-BasedNonrecoverable:USD 160 * 20%* 50%

ReceiptAccounting


SupplierAccrual

-216

USD

Material

Not applicable

CostAccounting

AcquisitionCostAdjustment

InventoryValuation

200**

USD

Not applicable

Not applicable

CostAccounting


ReceivingInspection

-200

USD

Not applicable

Not applicable

*Retroactive price adjustment accounted only for the uninvoiced quantity, that is, 10 units received minus 2 unitsinvoiced = 8 units uninvoiced.

** Retroactive PO price change plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the balance of 8 units:



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

960

USD

Item Price USD 120* 8

Accounts Payable

Invoice

Supplier Accrual

96

USD

Tax A Delivery-BasedNonrecoverable:USD 120 * 8 * 20%* 50%



109



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

96

USD

Tax A Delivery-BasedRecoverable: USD120 * 8 * 20% *50%

Accounts Payable

Invoice

Supplier Accrual

144

USD

Tax B Invoice-BasedNonrecoverable:USD 120 * 8 * 30%* 50%

Accounts Payable

Invoice

Recoverable Tax B

144

USD

Tax B Invoice-BasedRecoverable: USD120 * 8 * 30% *50%

Accounts Payable

Invoice

Supplier Liability

-1,440

USD

Not applicable

Accounts Payable generates the following accounting entries for the original invoice quantity of 2 units at the revisedPO price:



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Invoice PriceVariance

40

USD

Dierence in POItem Price USD 20* 2

Accounts Payable

Invoice

Tax Invoice PriceVariance Tax A

4

USD


Accounts Payable

Invoice

Tax Invoice PriceVariance Tax B

6

USD


Accounts Payable

Invoice

Recoverable Tax A

4

USD

Tax A Delivery-Based Recoverable

Accounts Payable

Invoice

Recoverable Tax B

6

USD




110



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Supplier Liability

-60

USD

Not applicable

Cost Accounting and Receipt Accounting generate the following accounting entries for the dierential invoice:


Functional Currency

Receipt Accounting



50

USD

Receipt Accounting



-40

USD

Receipt Accounting


Tax Invoice PriceAdjustment

-10*

USD

Cost Accounting


Inventory Valuation

50**

USD

Cost Accounting



-50

USD

*Nonrecoverable taxes A and B on the dierential invoice price.

**Dierence between invoice price and nonrecoverable taxes A and B.

Example of Tax Accounting for Interorganization Transfers AcrossBusiness UnitsThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for interorganization transfers across business units.

ScenarioVision Operations ships the goods to Singapore Operations. The organizations are in two dierent prot centerbusiness units.



111


• Vision Operations acquires goods locally at the cost of USD 12.

• Intercompany transfer price from Vision Operations to Singapore Operations is USD 15, with the following taxdetails:

◦ Exclusive Tax A = 1.5 USD.

◦ Recoverable and nonrecoverable portions are both same, that is, 50%.

• Order is for 1 unit.


• Intercompany Invoicing is set to Yes.

• Vision Operations books a prot of USD 3 (USD 15 transfer price - USD 12 acquisition cost).


Accounting Entries

Accounting entries are created for shipment of goods from the legal entity Vision Operations to the other legal entitySingapore Operations.

The following table describes the accounting entries for the shipping organization, that is, for Vision Operations:

Subledger Event Type Account Line Type Cost Element Amount in FunctionalCurrency +Dr/-Cr

Cost Accounting

Transfer OrderShipment

Trade In-Transit

Item Cost

12

Cost Accounting

Transfer OrderShipment

Inventory Valuation

Item Cost

-12

Cost Accounting


Intercompany Cost ofGoods Sold

Item Cost

12

Cost Accounting


Trade In-Transit

Item Cost

-12

Accounts Receivable

IntercompanyAccounts ReceivableInvoice


Transfer Price

15

Accounts Receivable


Intercompany Revenue

Transfer Price

-15



112


Accounts Receivable



Total Tax

1.5

Accounts Receivable


Tax Liability

Total Tax

-1.5

The following table describes the accounting entries for the receiving organization, that is, for Singapore Operations:

Event Event Type Account Line Type Cost Element Amount in FunctionalCurrency +Dr/-Cr

Receipt Accounting

Trade Receipt Accrual

Trade Clearing

Transfer Price

15

Receipt Accounting


Trade Clearing

Nonrecoverable Tax

0.75

Receipt Accounting


Intercompany Accrual

Transfer Price

-15

Receipt Accounting



Nonrecoverable Tax

-0.75

Receipt Accounting

Transfer Order Receipt


Transfer Price

15

Receipt Accounting



Nonrecoverable Tax

0.75

Receipt Accounting


Trade In-Transit

Transfer Price

-15

Receipt Accounting


Trade In-Transit

Nonrecoverable Tax

-0.75

Cost Accounting


Trade In-Transit

Item Cost

12

Cost Accounting


Trade Clearing

Item Cost

-12

Cost Accounting


Trade In-Transit

Nonrecoverable Tax

0.75

Cost Accounting


Trade Clearing

Nonrecoverable Tax

-0.75



113

Event Event Type Account Line Type Cost Element Amount in FunctionalCurrency +Dr/-Cr

Cost Accounting


Trade In-Transit

Prot In Inventory

3

Cost Accounting


Trade Clearing

Prot In Inventory

-3

Cost Accounting


Inventory Valuation

Item Cost

12

Cost Accounting



Item Cost

-12

Cost Accounting


Inventory Valuation

Nonrecoverable Tax

0.75

Cost Accounting



Nonrecoverable Tax

-0.75

Cost Accounting


Inventory Valuation

Prot In Inventory

3

Cost Accounting



Prot In Inventory

-3

Accounts Payable

IntercompanyAccounts PayableInvoice


Transfer Price

15

Accounts Payable


Intercompany Liability

Transfer Price

-15

Accounts Payable



Nonrecoverable Tax

0.75

Accounts Payable



Nonrecoverable Tax

-0.75

Accounts Payable


Tax Recoverable

Recoverable Tax

0.75

Accounts Payable



Recoverable Tax

-0.75



114

Example of Tax Accounting for Internal Drop ShipmentsThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for internal drop shipment.

ScenarioVision Operations drop ships the goods to the customer of Singapore Operations.


• Vision Operations acquires goods locally at the cost of USD 12.

• Intercompany transfer price from Vision Operations to Singapore Operations is USD 15, with the following taxdetails:

◦ Exclusive Tax A = 1.5 USD.

◦ Recoverable and nonrecoverable portions are both same, that is, 50%.

• Order is for 1 unit.


• Intercompany Invoicing is set to Yes.

• Vision Operations books a prot of USD 3 (USD 15 transfer price - USD 12 PO price).


Accounting Entries

Accounting entries are created for shipment of goods from the legal entity Vision Operations to the other legal entitySingapore Operations.

The following table describes the accounting entries for the shipping organization, that is, for Vision Operations:


Cost Accounting

Sales Order Shipment

Trade In Transit

Item Cost

12

Cost Accounting

Sales Order Shipment

Inventory Valuation

Item Cost

-12

Cost Accounting

Trade In Transit Issue

Intercompany Cost ofGoods Sold

Item Cost

12

Cost Accounting Trade In Transit Issue Trade In Transit Item Cost -12



115


Accounts Receivable



Transfer Price

15

Accounts Receivable


Intercompany Revenue

Transfer Price

-15

Accounts Receivable



Total Tax

1.5

Accounts Receivable


Tax Liability

Total Tax

-1.5

The following table describes the accounting entries for the receiving organization, that is, for Singapore Operations:


Receipt Accounting


Trade Clearing

Transfer Price

15

Receipt Accounting


Trade Clearing

Nonrecoverable Tax

0.75

Receipt Accounting



Transfer Price

-15

Receipt Accounting



Nonrecoverable Tax

-0.75

Cost Accounting

Trade In TransitReceipt

Trade In Transit

Item Cost

12

Cost Accounting


Trade Clearing

Item Cost

-12

Cost Accounting


Trade In Transit

Nonrecoverable Tax

0.75

Cost Accounting


Trade Clearing

Nonrecoverable Tax

-0.75



116


Cost Accounting


Trade In Transit

Prot In Inventory

3

Cost Accounting


Trade Clearing

Prot In Inventory

-3

Cost Accounting

Trade Sales Issue

Deferred Cost of GoodsSold

Item Cost

12

Cost Accounting

Trade Sales Issue

Trade In Transit

Item Cost

-12

Cost Accounting

Trade Sales Issue


Nonrecoverable Tax

0.75

Cost Accounting

Trade Sales Issue

Trade In Transit

Nonrecoverable Tax

-0.75

Cost Accounting

Trade Sales Issue


Prot In Inventory

3

Cost Accounting

Trade Sales Issue

Trade In Transit

Prot In Inventory

-3

Cost Accounting

Cost of Goods SoldRecognition

Cost of Goods Sold

Item Cost

12

Cost Accounting



Item Cost

12

Cost Accounting


Cost of Goods Sold

Nonrecoverable Tax

0.75

Cost Accounting



Nonrecoverable Tax

-0.75

Cost Accounting


Cost of Goods Sold

Prot In Inventory

3

Cost Accounting



Prot In Inventory

-3

Accounts Payable



Transfer Price

15



117


Accounts Payable



Transfer Price

-15

Accounts Payable



Nonrecoverable Tax

0.75

Accounts Payable



Nonrecoverable Tax

-0.75

Accounts Payable


Tax Recoverable

Recoverable Tax

0.75

Accounts Payable



Recoverable Tax

-0.75

Note: Inventory is received at the current cost, and the dierence between transfer price and cost is bookedas cost variance.

Overview of Reports and Analytics for ReceiptAccountingYou can use the Reports and Analytics work area to access predened reports and analytics that are related to your role,and to modify existing reports and analytics.

The following reports and analytics are available for Receipt Accounting.

• Accrual Clearing Report

• Accrual Reconciliation Report

• Uninvoiced Receipt Accrual Report

• Receipt Accounting Real Time

• Receipt Accounting Period Close Real Time

• Landed Costs Real Time

For more information on accessing and modifying reports and analytics, refer to the guide Creating and AdministeringAnalytics and Reports.

For descriptions of the reports and analyses, and information on accessing them, see the topic Oracle Supply ChainManagement Cloud: View Supply Chain Management Reports and Analyses.



118

Related Topics• Overview of Creating and Administering SCM Analytics and Reports• Oracle Supply Chain Management Cloud: View Supply Chain Management Reports and Analyses• Reports and Analytics Work Area and Panel Tab• Business Intelligence Catalog• SCM Subject Areas in Oracle Transactional Business Intelligence

FAQs for Receipt Accounting

What is the recommended sequence for scheduling of receiptaccounting processes?The recommended sequence for scheduling the receipt accounting processes is:

1. Incoming transactions:

◦ Transfer Transactions from Receiving to Receipt Accounting process. Interfaces receipt transactions.

◦ Transfer Costs from Payables to Cost Management process. Interfaces accounts payable transactions.

2. Receipt accounting:

◦ Receipt Accounting Distribution process.

◦ Clear Receipt Accrual Balances process. Executes only if you have predened accrual clearing rules.Marks purchase orders for automatic clearing.

◦ Receipt Accounting Distribution process. Creates distributions for cleared accrual balances.

3. Subledger accounting:

◦ Create Accounting process.

4. Reconciliation and reporting:

◦ Match Receipt Accruals process. Matches purchase order receipt accruals with invoices from the payablesapplication. Perform at period close or as needed for internal reporting and reconciliation.

◦ Audit Receipt Accrual Clearing Balances process. Audit the General Ledger accounted accrual balances.

What are the accounting distribution basis options for consignedinventory transactions?You can perform cost accounting of consigned inventory transactions using zero value or actual cost. Typically, thevaluation on the balance sheet for supplier-owned consigned inventory is zero. But you may sometimes want toperform accounting using actual cost. In either case, the inventory valuation reports always display the pro forma valueof consigned goods.

Select the accounting distribution basis for consigned inventory on the Manage Cost Proles page in the Setup andMaintenance work area.


http://www.oracle.com/webfolder/technetwork/docs/reports/r13/Supply-Chain-Management-Reports-R13.xls

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What's a tax point basis?A point in the receipt transaction process where taxes are accounted and reported to the tax authorities. These can beclassied into two categories: delivery-based and invoice-based tax points.

Delivery-based taxes are accounted and reported on the receipt transaction. Invoice-based taxes are accounted andreported when the supplier invoice is created, accounted, or paid.

What's a tax point date?Tax point date is the date on which the tax is calculated. Tax point date can be either the receipt date or invoice date.Tax rate as on the tax point date is considered for tax calculation.

Tax point date is used in conjunction with tax point basis. For more information about conguring and calculating taxes,see the Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

When are nonrecoverable taxes calculated on Intercompanytransactions?When trade receipt accrual occurs in the receiving organization, the receipt accounting distributions are created for:

• internal material transfers

• internal drop shipments

• intercompany returns

When creating receipt accounting distributions, both recoverable and nonrecoverable taxes are calculated andaccounted. The item cost includes both transfer price and nonrecoverable exclusive tax accrued in the receivingorganization.

For material return transactions, tax is calculated only if the referenced transaction has taxes on it.

What's the dierence between inclusive basis and exclusive basisin tax calculations?Inclusive taxes are included in the assessable value or purchase price. For example:

• PO amount: USD 100

• Inclusive tax rate: 10%

• Tax: 100/1.10 = USD 9.09 (distribution amount divided by (1 + tax rate))

Exclusive taxes are added to the purchase price or assessable value. For example:


• Exclusive tax rate: 10%



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• Tax: 100*0.10 = USD 10.00 (distribution amount multiplied by tax rate)

How can I create subledger account rules and subledger journalentry rule sets for receipt accounting?Create your subledger account rules on the Manage Account Rules page. It is recommended that you highlight theaccount rules predened by Oracle, copy, and modify them as needed.

Create your subledger journal entry rule sets on the Manage Subledger Journal Entry Rule Sets page. It isrecommended that you highlight the journal entry rule sets predened by Oracle, copy, and modify them as needed.For each journal line rule specify the copied account combination rule.

In the Setup and Maintenance work area, you can access both the Manage Account Rules task and the ManageSubledger Journal Entry Rule Sets task in the Manufacturing and Supply Chain Materials Management oering.

Note: You must congure the account rules and journal entry rule sets before proceeding with the setup ofsubledger accounting rules for receipt accounting.


Chapter 3Cost Planning

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3 Cost Planning

Cost Planning ProcessCost Management provides robust support for planning, costing and analysis of manufacturing costs. It allows youto determine which work denitions to use in costing, eciently enter material, resource, and overhead costs usingspreadsheet import, and perform cost roll up. You can use multiple simultaneous costs, for example, one for ocialexternal reporting, and one for your internal simulations. It oers exible, user dened account defaulting rules andvaluation policies using cost proles. In terms of cost analysis, you can view costs by work order, operation, costelement, and variances.

The following topics describe the cost planning tasks:

• Conguring Item Aributes to Enable Costing

• Estimating Standard Costs

• Managing Resource Rates

• Managing Overhead Rates

• Estimating Standard Costs for Assemblies

• Cost Processing for Deactivated Work Denitions

Conguring Item Aributes to Enable CostingThe following Costing prerequisite seings should be congured on the Manage Items page of the Product InformationManagement work area:

• Costing Enabled. Set this aribute to Yes to report, value, and account for item costs.

• Include in Rollup. Set this aribute to Yes to include an item in the cost rollup.

For more information on conguring Product Information Management seings for Cost Planning, see the guide UsingProduct Master Data Management.

Estimating Standard CostsYou can use the Manage Standard Costs task in the Cost Accounting work area to create estimated standard costs forall purchased items. The standards are created for a scenario, which is in turn mapped to a cost organization and costbook. The cost estimation process includes the following functionality:

• Cost Estimates for purchased items can be shared across all of the inventory organizations mapped to the costorganization and pointing to the same valuation unit.

• Estimated costs for purchased items can be entered directly in the UI or imported using a spreadsheet.

• You can enter estimates for one or more cost elements.

• If you enter a cost estimate for an overhead cost element, you can specify an expense pool.

• If you want to absorb costs against multiple expense pools, you can enter multiple rows for overhead costs.

• Standard cost material overheads can be dened for CTO model work denitions. The CTO model overhead isapplied to congured items created from the model's work denition.



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• The logical receipt for a drop shipped standard costed item is costed at its eective standard cost. Thevaluation of logical receipts is aligned with the valuation of physical purchase order receipts.

• Estimated costs for purchased items can have eective dates that are in the past, current, or in the future.

• Cost estimates for purchased items can be revised using the mass edit functionality and can be increased ordecreased by a percentage or a specic value.

• You can calculate standard costs for congurations on Purchase Order approval, and use these costs tocalculate variances at purchase receipt.

• You can initiate and run multiple simultaneous standard cost roll ups. You can submit a request and run a costroll up for a cost organization even if a prior cost roll up for that organization has not yet completed.

Managing Resource RatesResources are set up in the Manufacturing application. The Costed option in the resource denition must be selected inManufacturing to enable estimating resource rates in Cost Accounting. Resource Rates can be entered when a resourceis created in Manufacturing, or can be entered in Cost Accounting on the Manage Resource Rates page. Any pool ofexpenses can be absorbed by resource rates. You can dene hourly rates for labor and for equipment. A resource canhave one or many rates, each absorbing a share of a pool of expenses. You can enter multiple rows of resource rates toabsorb multiple pools of expenses.

Managing Overhead RatesPlant Overheads, such as lighting and security, are absorbed by the cost object Item as a percentage of the materialcost. Work Center Overheads are absorbed by the cost objects as a percentage of the resource cost. You can use anycombination of resource rates and overhead rates to absorb factory costs into the work in process and nished goodsinventory value. When you use overhead rates to absorb factory expenses, you can dene rates as a percentage ofmaterial, or you can dene hourly work center rates.

Overhead absorption rates are date-eective, enabling you to set dierent absorption rates for each quarter. You canhave one or many rates at dierent levels, such as at Inventory Organization, Item Category, or Item level. Each levelabsorbs a share of the pool of expenses. These rates are used in cost roll up of an item and are published with therolled-up item cost. All of the indirect costs modeled as overhead are absorbed by the Work in Process cost object whenpublished to cost accounting.

Estimating Standard Costs for AssembliesYou can use the cost planning scenario to estimate the rolled-up cost of the manufactured items based on the selectedwork denitions. You can perform incremental cost roll-ups to estimate manufactured item costs, and incorporate mid-period corrections and rolling forecasts into estimates. You can use the Roll Up Costs task on the Manage Cost Scenariopage to calculate the total product costs.

The cost roll-up process calculates the unit cost to produce an item in two steps. The total cost is calculated as the xedcost operations plus the variable costs (the unit resource cost multiplied by the quantity consumed). The per-unit costis calculated as the total divided by the cost quantity. The cost roll-up experience is designed to facilitate an interactivecost estimation process. You can review errors reported, review the work denitions being used for cost roll-up, changeyour work denition selection criteria, and modify component purchase prices and the resource rate as many timesas required. Once you are happy with the cost calculations, you can publish the scenario to be used for standard costaccounting using the Update Standard Costs task on the Manage Cost Scenario Page. You can use the Undo CostUpdate task to reverse the eects of any unintended cost updates.



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Cost Processing for Deactivated Work DenitionsWhen a product or a production line becomes obsolete, the aected work denitions can be deactivated to make themunavailable for use in downstream supply chain activities. When a work denition is deactivated, the header is updatedwith an inactive status, and with a date that species when the work denition became inactive. This prevents usage ofthe work denition in supply chain planning, work execution, and cost rollup.

Any released work orders, or published cost scenarios that reference an inactive work denition version, can continue touse it. In the event that a deactivated work denition has been used in an existing, unpublished cost scenario, cost rolluphas to be re-run. Planning collections can be performed again to select the eective work denitions.

After a work denition is deactivated, you cannot reactivate the work denition or make changes of any kind to any ofits versions, and its work denition name cannot be reused for the item. As a result, there is a clear separation betweenthe obsolete and the active work denitions. This facilitates downstream supply chain activities.

Create a Cost Planning ScenarioYou can use a cost scenario to dene the cost scope for cost organization and cost book combinations. You can use acost scenario to dene the following costs:

• Material rates

• Resource rates

• Overhead rates

Use separate cost scenarios for planning costs for regular items and congured items. You can run processes such asRoll Up Costs and Update Costs from the Cost Scenario, or you can schedule these processes to run at periodic intervals.

To create a cost scenario:

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Manage Cost Scenarios.3. Click on the plus icon to launch the Create Cost Scenario page.4. Select the Cost Organization and Cost Book, and complete the required elds.

Field Description

Eective Date

The date on which the estimated standard costs for materials, resources, and overheads willbe eective as published frozen standard costs. The eective date can be a future, current, orprior date. Multiple standard cost scenarios can have the same eective date. Retroactive costsare supported by default. The eective date of a Manufacturing work denition must be the same as or prior to the CostScenario Eective Date in order for the work denition costs to be processed.

Scenario Type

Species whether the cost scenario is for regular items or congured items.

Use Latest Work Denitions

Species whether the roll up process should check for the latest work denition changes fromManufacturing every time the cost roll up process is run. If you do not enable this option, workdenitions from the previous published cost scenario will be used.



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Field Description

Work Denition Priority Dene the priority for selecting work denitions. You can use the up and down arrows to order

the priority based on the following:

• Top production priority• Top costing priority• Work denition name• A combination of the above

Rollup Scope Dene the criteria for selecting items for cost rollup for this cost scenario. You can select from

the following options:

• All Items. The cost rollup will include all items with an active work denition in theproduction plant.

• Where Used. The cost rollup will include only the manufactured items where componentcosts have changed. Use this option to avoid changing standard costs of items that arenot impacted by component cost changes.

Create Standard CostsYou can use a Cost Scenario to create standard costs, and dene the associated valuation unit, cost element, andexpense pool.

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Manage Standard Costs under Cost and Prot Planning.3. On the Manage Standard Costs page, click the Create icon in the Search Results region.4. On the Create Standard Cost page, complete the following elds:

◦ Cost Scenario. Select the Cost Scenario that you want to create costs for.

◦ Item

◦ Valuation Unit

5. In the Standard Cost Details region, complete the following elds: Cost Element, Cost Element Type, Unit Cost,and Expense Pool (if applicable), and click Done.

Upload Standard Costs Using ADFdiYou can use a spreadsheet for bulk data updates to material standard costs. Add, edit, and delete operations can beperformed in online or oine mode, and then updated to the server. You can use a spreadsheet to complete bulkupdates for the following elds:

• Scenario Name

• Item

• Valuation Unit



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The ADF Desktop Integrator is a prerequisite for capturing charges in a spreadsheet, and can be installed from the Toolssection of the Navigator menu.

To update standard costs using a spreadsheet, complete the following steps.

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Manage Cost Scenarios.3. Search for the required cost planning scenario.4. Select the scenario, and then select Manage Standard Costs from the Actions menu.5. Click on Create Standard Costs in Spreadsheet.6. Download the Create Standard Costs spreadsheet.7. Open the spreadsheet. A pop-up message asks if you want to connect to an application. Click Yes, and enter

your sign-on credentials.8. Use one of the following data input methods:

◦ Add the required new rows, and enter the values in the required elds. All of the white cells can be edited.

◦ Copy and paste the populated rows into the spreadsheet for bulk updates.

The Changed column is automatically updated with a change indicator icon to conrm which rows have beenmodied.

9. Click Upload to update the values on the server. The Row Status column is updated with a success or errormessage for each changed row.

Import Standard Costs Using File-Based Data ImportYou can use the Standard Costs Import Open Interface to import standard costs from external sources into CostManagement. Once loaded, view the data in the Cost Accounting work area, on the Manage Standard Cost ImportExceptions page. You can validate the data by clicking on the Import Standard Costs buon, which submits the InterfaceStandard Costs process. You can view any errors resulting from the validation process on the Manage Standard CostImport Exceptions page, x the errors, and rerun the Interface Standard Costs process. After validation is complete, thedata is loaded to the Standard Costs Interface table, and to the Manage Standard Costs page of the Cost Accountingapplication. For more information on le-based data import, see the chapter on Standard Costs Import in the File BasedData Import guide for Oracle Supply Chain Management Cloud.

The following tasks should be completed before importing data using le-based data import:

• Set up the Default Cost Prole for Cost Accounting in the Setup and Maintenance work area, and set the NewItem Prole Creation option to Automatic.

• Set up a valuation unit using the Manage Valuation Units task in the Setup and Maintenance work area. Make anote of the Valuation Unit Code, which is required for the CSV le.

• Set up overhead cost elements for Cost Accounting in the Setup and Maintenance work area using the ManageCost Elements task.

To Import Standard Costs Using File-Based Data ImportTo import standard costs using File-Based Data Import, complete the following steps.

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Manage Cost Scenarios.3. Create a cost planning scenario. Make a note of the scenario number, which is required for the CSV le.4. Open the Standard Costs Import le-based data import template.



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5. Complete the Standard Cost Headers and Standard Cost Details tabs using the instructions in the spreadsheet.6. On the CSV Generation tab click Generate CSV File.7. From the Navigator menu, select Tools, and then Scheduled Processes.8. Run the Interface Standard Costs process.

This process validates the data, creates the required Cost proles, and imports the costs into the ManageStandard Costs page.

9. Review the imported data in the Cost Accounting work area, on the Manage Standard Cost Import Exceptionspage. Correct any costs that have a status of Error, and then click on Import Standard Costs.

10. Publish the cost scenarios to make the costs available for costing transactions.

Related Topics• Standard Cost Method

Create Resource RatesYou can use a Cost Scenario to create resource rates, and dene the associated plant, resource, cost element, expensepool, and rate.

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Manage Resource Rates under Cost and Prot Planning.3. On the Manage Resource Rates page, click the Create icon in the Search Results region.4. On the Create Resource Rate page, complete the following elds:

◦ Scenario. Select the Cost Scenario that you want to create resource rates for.

◦ Plant

◦ Resource

5. Select the Create icon in the Details region.6. Complete the following elds: Cost Element, Expense Pool, and Rate.

Cost AnalysisYou can use the cost simulation tools to provide detailed analysis of the rolled-up costs. You can compare costs acrossscenarios, or compare scenario costs with the current published costs, to review the dierences in cost and inventoryvalue adjustments. You can view rolled-up costs for your items by using the tree view or by using the graphicalhierarchical view. In both views, you can drill down into the details which were used to calculate the item costs. You cancreate dierent scenarios to represent dierent manufacturing and cost variables, and then compare the results. Onceyou are happy with the cost calculations, you can publish the scenario to be used for standard cost accounting.

Publish CostsYou can use the Update Standard Costs task to publish the costs to Cost Accounting. The Update Standard Coststask is accessed from the Actions menu on the Manage Cost Scenarios page. The cost update process automaticallyimplements the new standard costs dened in the Cost Scenario on the date set in the Eective Date eld. You canperform standard cost updates for a past, current, or future date.



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When calculating the cost of make items, the roll up process does not include the costs consumed in optionaloperations for manufacturing work denitions. This is for operations that are executed conditionally, for example,a rework step based on inspection results in the previous operation. Similarly, output items yielded from optionaloperations in process manufacturing are also not included in the cost roll up process.

Standard cost rollup supports process manufacturing work denitions with multiple outputs, where the productionmethod requires ways to manage variability that is inherent in materials and processes. This is especially useful if yourequire a hybrid of discrete and process manufacturing capabilities. You can specify the costing batch size to determinethe standard cost of production batches, and allocate costs based on a xed cost, or a percentage of the total cost,for the primary product, co-products, and by-products. The Rollup Costs process calculates the costs of output itemswith active work denitions, based on the cost allocation dened on the work denition operations. You can use theView Rolled-up Costs page to review the cost calculations for each output item, and the manufacturing work denitiondetails.

1. From the Navigator menu, select Cost Accounting.2. Select Manage Cost Scenarios from the tasks menu.3. Search for the cost scenario that you want to publish costs for.4. On the View Cost Scenario page, select Roll up Costs from the Actions menu.5. On the Roll up Costs dialog box, select the following option: Notify me when this process ends. Click Submit,

and Done.6. Run the Update Costs process from the Actions menu to publish the costs to Cost Accounting.

FAQs for Cost Planning

Does a standard cost include overhead costs?Yes. When you dene standard costs you can include overhead cost components. The cost processor processes theseoverhead cost components as part of the total standard cost, at the time of transaction costing.

Why are standard costs not being created for my work denitions?Check the eective dates in Manufacturing and Cost Management. The start date of a Manufacturing work denitionmust be the same as or prior to the Cost Scenario Eective Date in order for the work denition costs to be processed.

How do I enable retroactive costing for standard costs?Retroactive costing is supported by default for standard costs. Use the Create Cost Scenario page in the CostAccounting work area to create retroactive standard costs.

How do I view the cost adjustments resulting from a standard costupdate?You can review the cost adjustments for a standard cost update on the Review Cost Accounting Distributions page.



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Can I update, deactivate, or delete a standard cost?Yes. You can update, deactivate, or delete a standard cost created in a cost scenario as long as it has not yet been usedto cost transactions.


Chapter 4Cost Accounting

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4 Cost Accounting

Overview of Cost AccountingThe Manage Cost Accounting business process is used by cost accountants to calculate inventory transaction costs,maintain inventory valuation, generate accounting distributions for inventory transactions, analyze product costs,analyze usage of working capital for inventory, and analyze gross margins.

The following image lists the Cost Accounting tasks.

Cost Accountant

Manage Inventory Valuation

Manage Period

End

Record

Audit

Review Cost Accounting

Analyze Product Costs

• Manage Period End. Manage the timing of transaction processing, and perform validations in preparation foraccounting period close.



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• Manage Inventory Valuation. Adjust the cost of items to address inventory obsolescence, price changes, andother variances.

• Record, Audit, and Review Cost Accounting. Create cost accounting distributions for transaction data that isreceived from external sources, view and address any processing exceptions, and review results.

• Analyze Product Costs: View the perpetual average cost, actual cost, and standard cost details of an item, chartits cost trend, compare costs across items, analyze usage of working capital and gross margins.

Scheduled Processes for Cost AccountingYou can use the Scheduled Processes Overview page in the Tools work area to run all of the scheduled processes thatyou have access to. You can schedule these processes to run automatically at predened frequencies, or to run onrequest. The following table describes the scheduled processes for Cost Accounting.

Task Description

Transfer transactions from Inventory

Transfers transaction data from Inventory to Cost Accounting.

Transfer work order transactionsfrom Manufacturing

Transfers work order transaction data from Manufacturing to Cost Accounting. This processcan also be launched from the Manufacturing application, as follows: Manufacturing Execution> Tasks > Transfer Transactions from Production to Costing

Transfer Transactions fromMaintenance to Costing

Transfers Maintenance Work Order transaction data from Enterprise Asset Management toCost Management.

Export Standard Costs

Exports standard costs for a Cost Planning Scenario in XML format to the Cost Managementdirectory on the Oracle Universal Content Management server. The Cost Management UCMoutput directory name is scm/ standardCost/ export

Related Topics

• Submit Scheduled Processes and Process Sets

• View Status and Other Details for Scheduled Processes

• Transfer Transactions from Production to Costing

Cost Accounting Process FlowOracle Fusion Cost Accounting creates distributions for transactions related to the physical movement of goods orservices through the supply chain and tracks the corresponding nancial changes in ownership.

The transaction data for physical shipments is interfaced to Cost Accounting from Oracle Fusion InventoryManagement, and the trade events are interfaced from Oracle Fusion Supply Chain Financial Orchestration.

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This gure illustrates the ow of transaction data through the cost processors.

Preprocessor

Cost Processor

Cost Distribution Processor

Review Cost Accounting

Distributions

Review Cost Accounting Processes

Create Cost Accounting Distributions

ImportedTransaction

Data

COGSProcessor

Cost Reports Processor

Create Cost Accounting DistributionsIn the Cost Accounting work area, access the Create Cost Accounting Distributions page to process importedtransaction data. On this page dene the run controls by specifying the cost organization books and cost processorsthat you want to execute.



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The main cost processors are:

• Preprocessor prepares all interfaced data for cost processing:

◦ Checks for invalid or missing data.

◦ Propagates the information to cost organization books and deriving their associated units of measure,currencies, valuation units, and cost proles. Note that the preprocessor runs for all cost books in the costorganization.

◦ Maps incoming cost components to cost elements, based on user-dened mappings.

• Cost Accounting Processor processes:

◦ Physical inventory transactions

• Calculates costs for pre-processed transactions using the perpetual average cost method, actualcost method, or standard cost method.

• Processes user-entered cost adjustments and applies overhead costs based on user-denedoverhead rules.

• Calculates the variance of standard costs from actual transaction costs.• Calls the Acquisition Cost Processor to calculate inventory valuation including the tax component

where applicable.

◦ Trade transactions

• Uses the Trade Accounting Processor to process all in-transit transactions.

• Cost of Goods Sold Processor calculates the cost of goods sold and maintains consistency with the revenuerecognized in accounts receivable.

• Cost Distribution Processor uses the Intercompany Trade Accounting processor, Cost Accounting Processor,and Cost of Goods Sold Processor results to create distributions for transaction costs.

• Cost Reports Processor: Generates inventory valuation data and is the source of truth for reports generated byOracle Fusion Transactional Business Intelligence and Business Intelligence Publisher. This process builds thedata required to report inventory valuation at two levels:

◦ Valuation unit level

◦ Receipt layer level

Review Processing Results and MessagesAfter running the cost processors, check processing results in the Cost Accounting work area:

• View warning and error messages on the Review Cost Accounting Processes page.

• See additional warning and error messages specic to each transaction on the Transaction Errors tab of theReview Cost Accounting Distributions page.

Review Cost Accounting DistributionsA single inventory transaction can generate multiple cost transactions, for which Cost Accounting creates accountingdata.

In the Cost Accounting work area use the Review Cost Accounting Distributions page to see cost information anddistributions related to each transaction, as well as receipt layers for receipt transactions, and depletion layers for issuetransactions.



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Related Topics

• Receipt Accounting Tasks and Accounting Events

Cost Accounting Periods

Cost Accounting PeriodsCost accounting periods enable you to monitor the timing of transaction processing, and to perform validations inpreparation for period close.

Cost periods are associated with combinations of cost organizations and cost books. When you associate a costorganization with a cost book, you also dene the cost accounting period calendar and other aributes.

Cost Period Calendar and AributesThe cost period calendar is based on the ledger that is aached to the cost organization and cost book combination. Forcost books that do not have an associated ledger, you can set the calendar and cost periods manually on the ManageCost Organization Relationships page, Cost Books tab. On this page you also dene the following cost period aributes:

• First opened period. Establishes the period when transaction accounting begins. Any transactions that precedethe rst opened period, are accounted in the rst opened period.

• Maximum open periods. Species the maximum number of concurrent periods that can be open. If the numberof periods is maximized, then no additional period can be opened until one of the open periods changes toClosed, Permanently Closed, or Pending Close status.

Related Topics

• How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

Cost Cuto DatesThe run control parameters that you dene for the cost processors include the cost cuto date option and the cutodate for the cost organization books that you are processing. The cost cuto date sets the last transaction date that willbe processed for an accounting period. This enables you to continue normal business operations with no interruptionsfrom one period to the next, using the cost cuto date to dene accounting period boundaries for these transactions.

The following discusses the cost cuto date option, backdated transactions, and the costing date of transactions.

Cost Cuto Date OptionIn the Cost Accounting work area, access the Create Cost Accounting Distributions page to set the cuto date option toUser-Dened or Auto. The User-Dened option requires you to specify the cuto date, while the Auto option saves youthe eort of redening the cuto date which is automatically moved forward by the cost processor.

When you select the Auto option, the cost processor moves the cuto date forward to the last date of the earliest opencost period and then it stops, until the costing period is closed. After the period is closed, the cost processor advancesthe cuto date into the next open period, and so on. However, for a transaction, if preprocess is successful after thecuto date, then the cuto date for that cost organization book moves forward to the date of the last transaction for




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which the preprocess was successful. This could happen, for example, if you originally set the cuto date option toUser-Dened and subsequently changed it to Auto.

Backdated TransactionsOne of the purposes of the cost cuto date is to allow backdating of transactions in an orderly fashion. For example,if you set the cost cuto date to October 31, you can still process October transactions that were entered in Novemberbut meant for the period ending October 31 by backdating them to October 31 or earlier. However, when the cost cutodate advances forward to a date past October 31 and other transactions are processed beyond October 31, then thebackdated transactions can no longer be processed as October transactions.

If you set a cost cuto date at October 31, the cost processor will queue up but not process any transactions with a dateafter October 31. If you subsequently need to backdate transactions to a date before October 31, you can still processthose backdated transactions as long as you do not process any transactions beyond October 31. You can also backdatetransactions to any date after October 31, with the assurance that these transactions will be processed in the correctorder when the cost cuto date moves forward.

Costing Date of TransactionsThe costing date of transactions is normally the same as the transaction date, or the cost adjustment date, except forbackdated transactions.

The cost date for backdated transactions inherits the greater of: the backdated transaction date, the date of the lastprocessed transaction, or the rst date of the earliest currently open period.

Note: The cost cuto date aects the costed date of the transaction and the inventory value that is reportedas of a given accounting date. It does not aect the inventory transaction date.

Cost Accounting Period ValidationsYou can use the Manage Cost Accounting Periods task in the Cost Accounting work area to perform validations toensure that all transactions are complete and accounted for on an ongoing basis and before closing the accountingperiod.

You can execute the validations one at a time, or all at once. Correct any resulting transaction errors, and rerunvalidations as needed.

ValidationsPerform cost accounting validations for periods that are in status Open, Pending Closed, or Closed. The validationscheck for the following:

• Pending interface. Transactions that are yet to be interfaced to Cost Management.

• Unprocessed transactions. Transactions that have been transferred to Cost Management and that are pendingcost processing.

• Unprocessed distributions. Costing transactions that have no distributions.

• Unprocessed journals. Subledger transactions that have no accounting entries.

• Pending deferred cost of goods sold (DCOGS) transactions. Conrm that the deferred cost of goods soldprocessor has run and transactions are transferred.

• Completed work orders not closed. Work orders that have completed but that have not yet closed.



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Cost Accounting Period Statuses and Transaction AccountingCost period statuses enable you to manage the timing for processing and accounting of transactions.

The following describes rules that apply under each cost period status, and how transactions are sloed into costaccounting periods.

Cost Accounting Period StatusesThe cost period statuses are as follows:

• Never Opened. Default status for new periods assigned to a cost organization and cost book. This status doesnot allow creation of distributions for transactions. You can change the status to Open, but you cannot changeit to Closed, or Permanently Closed.

• Open. A period status can be changed to Open only if the corresponding general ledger accounting period isopen. You can open several periods at a time, so long as they are contiguous. You cannot change the currentperiod to Open if the prior period status is Never Opened. When a period status is Open, inventory transactionscan be accounted in that period; when the period is not open, inventory transactions cannot be accounted inthat period, but they will be accounted in the next open period. Both costing and general ledger periods mustbe open for a transaction to be accounted; if the costing period is open but the corresponding general ledgerperiod is closed, the transaction cannot be accounted and is held pending further user action. You can changean Open period status to Closed or Pending Close.

• Pending Close. Use to stop transactions from being accounted in this period. Any new transactions enteredwith a transaction date that falls in a period that is in Pending Close status will be held pending further useraction. You can set the Pending Close status back to Open status and then process the transactions, so thatthose which fall into the period will be staged for accounting in that period; or you can set the status of theperiod to Permanently Close and set the next period to Open, in which case the transactions will be accountedin the next open period.

• Closed. You can change this status to Permanently Closed or you can revert it to Open. When you set a periodstatus to Closed, you have the option of conguring the processor to allow closing even if all validations donot pass; this enables you to decide when discrepancies are not material enough to delay period close. Youcan also congure the processor to prevent closing a period until all selected validations pass. You set yourpreferences for period close validations when you associate cost books with cost organizations, on the ManageCost Organization Relationships page, Cost Books tab.

• Permanently Closed. Closes the period for all types of transactions irreversibly. You cannot change the periodstatus to Permanently Closed without rst changing the prior period status to Closed.

Transaction Accounting DatesThe costing application is designed to set the proper accounting date for inventory transactions, even when they arenot entered into the application promptly or in the correct order. It does this by enabling backdating of transactions thatare entered on a date later than the physical transaction date. For example, suppose the physical transaction date isNovember 30, and the transaction is entered into the costing application on December 2. In this case, you can backdatethe transaction and, under certain conditions, the application will post that transaction into the prior period.

The application orders your transactions by seing the cost date. To preserve the integrity of previous calculationsand to ensure that inventory balances tie with general ledger balances, the cost date cannot be set to a date prior totransactions that are already processed. The cost processor parameters that you dene include a cost cuto date, whichlets you control the transactions that you want to process, including backdated transactions. In this example, as long asyou have not processed any transactions after November 30, the processor will set the cost date to November 30 fortransactions entered after November 30 with a backdated transaction date that is in November.



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Once the cost date is established, the processor performs cost accounting calculations for the transaction, createsaccounting distributions, and sets the accounting date based on the following logic:

• If the cost date falls in a Never Opened period, the accounting date becomes the same as the cost date whenthat period status is Open. In the rare case where the transaction date is in a period that precedes the rstperiod used in the application, the accounting date is set to a date in the rst subsequent period that is Open.

• If the cost date falls in a Pending Close or Closed period, you are alerted by an error message. You can reopenthe period and the processor will aempt to set the accounting date to a date in that period; or you canpermanently close the period to let the transaction accounting date move into the next Open period.

• If the cost date falls in a period that is Permanently Closed and the next period is not Open, an error messagewarns you that the transaction will remain unaccounted until a subsequent period is opened. Once thesubsequent period is Open, the accounting date of the transaction will move into that Open period.

When accounting distributions are staged within the costing subledger, the accounting distribution accounting datein the costing subledger becomes the proposed accounting date for posting into the general ledger through thesubledger. If the general ledger application accepts the proposed accounting date, the transaction is posted with thatdate. If the proposed accounting date is not accepted (for example if the general ledger period has already closed), thenthe general ledger application returns an error and the cost processor sets the proposed accounting date to a date inthe next open general ledger period.

Cost Processing

Actual Cost MethodThe actual cost method tracks the cost of each receipt into inventory. When depleting inventory, the processor logicallyidenties the receipts that are consumed to satisfy the depletion, and assigns the associated receipt costs to thedepletion.

The actual cost method uses receipt layers for transaction costing and inventory depletion.

Receipt LayersA receipt layer is created for each put away or delivery of an item into a cost organization. The item is assigned a costprole that species the valuation structure of the item, and the valuation structure, in turn, species the valuation unitof the item. The receipt layer falls within the valuation unit. Under the actual cost method, the cost processor identiesthe receipt that is used to satisfy the depletion, and applies the quantity depletion method that is dened in the costprole. The accounting application currently uses the rst in, rst out (FIFO) depletion method.

The FIFO accounting method assumes that the goods received rst are consumed rst. This logic does not require thatthe inventory be physically moved in FIFO order. In reality, the inventory may be moving out in an unknown or randomfashion, especially when the goods are fungible.

Inventory controls the physical ow of inventory, and the actual cost method can be congured to conform to the levelof physical tracking maintained for inventory. For example, if the inventory is tracking at the lot level, the costs can alsobe tracked at that level. If there is more than one receipt for a given lot, the FIFO accounting method assumes that thereceipts in the lot are consumed in FIFO order.

Receipt layers can be identied by combinations of any of the following: cost organization, inventory organization,subinventory, locator, lot, serial and grade.

The following table illustrates the process of creating receipt layers for an item within a valuation unit.



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Transaction Date Transaction Type Quantity Unit Cost Receipt Layer Created

01-Jan-2011

PO Receipt

100

120 USD

Receipt #1

02-Jan-2011

PO Receipt

80

100 USD

Receipt #2

03-Jan-2011

Miscellaneous Receipt

20

105 USD

Receipt #3

Inventory DepletionThis table illustrates the process of depleting the item inventory based on the created receipt layers using FIFO logic:

Transaction Date Transaction Type Quantity Unit Cost Receipt LayerCreated

Receipt LayerUsed forDepletion

01-Jan-2011

PO Receipt

100

120 USD

Receipt #1

Not applicable

02-Jan-2011

PO Receipt

80

100 USD

Receipt #2

Not applicable

03-Jan-2011

MiscellaneousReceipt

20

105 USD

Receipt #3

Not applicable

04-Jan-2011

MiscellaneousIssue

-40

120 USD

Not applicable

Receipt #1

05-Jan-2011

MiscellaneousIssue

-60

120 USD

Not applicable

Receipt #1

06-Jan-2011

MiscellaneousIssue

-15

100 USD

Not applicable

Receipt #2

Standard Cost MethodUse standard costs for inventory valuation to simplify your transaction accounting. For items that use other costmethods for transaction accounting (such as the perpetual average cost method), you can still use standard costs forsimulation and planning purposes.

This topic includes the following:

• Conguring item aributes to enable costing

• Seing up and updating standard costs

• Inventory value adjustments based on standard costs



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Conguring Item Aributes to Enable CostingThe following Costing prerequisite seings should be congured on the Manage Items page of the Product InformationManagement work area:

• Costing Enabled. Set this aribute to Yes to report, value, and account for item costs.

• Include in Rollup. Set this aribute to Yes to include an item in the cost rollup.

For more information on conguring Product Information Management seings for Cost Planning, see the guide UsingProduct Master Data Management.

Seing Up and Updating Standard CostsDene the standard cost for a new item based on purchase information such as quotes from vendors, purchasecontracts, or bill of material. Periodically review the variance between actual transaction costs and the standard cost ofan item, and update the standard cost to ensure that it is close to actual costs.

Inventory Value Adjustments Based on Standard CostWhen you implement a new standard cost for an item, the standard cost processor automatically creates accountingadjustments to update inventory value. The adjustment is based on the revaluation of on-hand inventory as of theeective start date for the current standard cost. The adjustment amount is calculated as follows:

Cost Adjustment = (New Standard Cost minus Current Standard Cost) multiplied by Quantity on Hand

Related Topics• How do I view the cost adjustments resulting from a standard cost update

Standard Cost Denition ProcessYou can create standard costs by:

• Importing them from external sources and legacy applications

• Dening them manually in the costing application

Importing Standard CostsTo import standard cost data from external sources, you must load it into the Standard Cost Interface Table using theapplication interface or spreadsheet. Once loaded, view the data in the Cost Accounting work area, on the ManageStandard Cost Import Exceptions page, and validate the data by running the Import Standard Costs process. On thispage you can also view any errors resulting from the validation process, x the errors, and rerun the Import StandardCosts process. After validation is complete, the data are loaded into the Standard Costs Interface Table.

Dening Standard CostsIn the Cost Accounting work area, use the Manage Standard Cost Denitions page to view imported standard coststhat have been validated, and standard costs that are published from standard cost planning, and also to create newstandard costs..

Related Topics• Cost Planning Process• Can I update, deactivate, or delete a standard cost



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Review Item CostsOn the Review Item Costs page view the perpetual average cost, actual cost, or standard cost details of items, chart costtrends, and compare cost records.

The options available for analyzing item costs are:

• Cost details

• Transaction costs

• Cost comparisons

Cost DetailsView the perpetual average cost, actual cost, or standard cost of an item for combinations of a cost organization, costbook, and valuation unit. View these costs for a current date or any date in the past.

The Cost Details page displays additional information on:

• Cost breakdown: the item cost details for a receipt record. The breakdown is available by cost element, costelement type, and analysis group.

• Cost history: the cost trend of an item over a period of time.

• Depletions: the layer consumption for issues out of a receipt record.

• Cost information: the cost details from the source transaction for a receipt record.

Transaction CostsSelect a time frame to view the perpetual average cost, actual cost, or standard cost history of an item, or specify thenumber of days for the moving average cost calculation.

For each transaction contributing to the item cost history, you can view the cost elements, transaction source,document number, quantity on hand prior to the transaction, transaction date, and transaction quantity.

Cost ComparisonsCompare the cost details for up to six records of:

• Several items

• One item across several cost organizations or cost books

• One item over a period of time

Related Topics• Manage Cost Elements and Analysis Groups• How Cost Components, Cost Elements, and Cost Component Groups Work Together

Standard cost variances arise when the transaction cost of an item diers from the standard cost. The variances couldindicate anomalies in the business process that should be addressed. Or they may signal that the standard cost isunrealistic, leading to over or understatement of inventory value. In this case, you will want to update the standard cost.

This gure illustrates the stages of:

• Processing standard cost transactions

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• Reviewing the resulting standard cost variances

• Updating standard costs

These tasks are performed in the Cost Accounting work area.

The following diagram illustrates the process ow for reviewing standard cost variances.

Cost Processors

Review Standard Cost Variances

Variance Calculations

Manage Standard Cost Definitions

Cost Processors

Receipt Transaction

Accounting Distributions

Issue Transaction

Effective Standard

Cost

Processing Standard Cost TransactionsOn the Create Cost Accounting Distributions page, run the Cost Processor to calculate costs for all receipt andissue transactions using the standard cost method. For receipt transactions, if the standard costs dier from actual



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transaction costs, the Cost Processor also calculates variances, such as purchase price variance, invoice price variance,or transfer price variance.

On this page also run the Cost Distribution Processor to generate the accounting distributions related to the transactioncosts and the calculated variances.

Reviewing Standard Cost VariancesThe Cost Accounting Overview page, Variance Summary tab provides a view of total variances at the cost organizationbook level, for a user-specied time range. Use the pie chart to see what top items are contributing to these variances.This will help to prioritize the standard costs that require review. Use the historical trend graph to identify any costpaerns that should be investigated. Click on any of the total variance links to go to the Review Standard Cost Variancespage. You can also access this page directly from the Cost Accounting work area.

On the Review Standard Cost Variances page you can drill down into more variance details at the item level, valuationunit level, and individual transaction level.

Updating Standard CostsBased on analysis of variances, and knowledge of upcoming cost changes, you may want to revise the standard costsyou use for cost accounting purposes. You can update standard costs on the Manage Cost Planning Scenarios page.Select your Material Cost Plan, Resource Rate Plan, Overhead Rate Plan, and your Work Denition selection criteria. Youcan perform cost rollup, review results, make corrections, then review your results and repeat until you're satised withthe new standard costs. After you have reviewed your costs, in the Cost Planning Scenario you can Publish Costs toCost Accounting. The new standard costs that you publish can take eect on a future date. The Create Cost AccountingDistributions process will then automatically update your previous standard costs and create accounting entries torevalue inventory to the new standard costs on the eective date of the new standard costs.

Cost Adjustments and Cost DistributionsAdjust the cost of items to manage obsolescence, or to mark down inventory to address "lower of cost or marketrequirements", price changes, and variances. You can make adjustments to the perpetual average cost of items,purchase order and miscellaneous receipt costs, and layer inventory cost.



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This gure illustrates the process for making cost adjustments, processing them, and viewing results.

Perpetual Average Item Cost

Adjustments

Cost Processor

Receipt Cost

Adjustments

Distribution Processor

Accounting Distributions

for Adjustments

Updated Item Costs

Layer Inventory

Cost Adjustments

The costing application enables you to adjust costs, process them, and create the corresponding cost accountingdistributions.

Entering Cost AdjustmentsAdjust the cost of items on the Create Cost Adjustments page. You can make three kinds of adjustments forcombinations of a cost organization, cost book, valuation unit, and cost element.

If you want to track the adjustment through the supply chain, use a cost element of type Adjustment:

• Perpetual average item cost. Enter the new average unit cost. The processor will automatically adjust the overallaverage cost for the quantity on hand.



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• Receipt cost. The receipt cost is adjusted by an update from purchasing or accounts payable, or you canmanually enter new receipt costs, PO receipts, interorganization receipts, miscellaneous receipts, or RMAreceipts. The processor will automatically adjust the cost of the remaining receipt quantity.

• Layer inventory cost. You can adjust the unit cost of items that use the actual cost method. The processor willautomatically adjust the value of the on-hand receipt layer quantity.

You can bundle multiple records, such as multiple receipts or valuation units, into a single adjustment transaction, andwhen submied, they are assigned an adjustment number. Optionally, you can also specify a reason code.

Save the adjustment and review the impact to inventory valuations based on the quantity on hand at the time ofadjustment. Do this prior to nal submission for cost processing, so that you can revise as necessary. After nal reviewand submission, you can still void the adjustment, provided it is not yet processed by the cost processor. However, theadjustment cannot be reversed once processed. Accordingly, the adjustment status code is automatically set to: S forsubmied, C for voided, or P for pending processing.

Processing AdjustmentsWhen you review and submit a cost adjustment, the cost processor creates a new adjustment transaction:

• For a perpetual average item cost adjustment, the processor updates the perpetual average cost of the itemin that combination of cost organization, cost book, item, and valuation unit. The processor then applies theperpetual average item cost adjustment against inventory valuation at the rate of quantity on hand times thechange in cost.

• For a receipt cost adjustment, the processor updates the receipt cost for the portion of the receipt that is partof the current on-hand balance. The portion of the adjustment aributable to what is no longer part of the on-hand balance will be accounted for with a write o distribution. However, if the cost prole of the item has costpropagation enabled, the processor revalues the issue transactions that were consumed out of the receipt.

• For a layer inventory cost adjustment, the processor updates the unit cost of the item in that combination ofcost organization, cost book and valuation unit. The processor then updates inventory valuation at the rate ofquantity on hand times the change in cost.

Example 1: Assume a receipt of 8 units, all of which are currently on hand. The valuation unit has a total of 10 units onhand. You adjust the cost of the receipt from $10 to $11 per unit. The processor adjusts the average cost by $0.80 (thatis, 8/ (Division symbol) 10 * (Multiplication symbol) $1).

Example 2: Assume a receipt of 8 units, of which 6 units are currently on hand, and 2 units have been depleted. Thevaluation unit has a total of 10 units on hand. You manually adjust the cost of the receipt from $10 to $11 per unit.The processor adjusts the receipt cost by $6 (that is, 6 *(Multiplication symbol) $1), and creates a write o accountingdistribution of $2 (that is, 2 * (Multiplication symbol) $1).

Example 3: Assume a valuation unit has a total of 7 units on hand, valued at $10 per unit. You manually adjust the unitcost to $12 per unit. The processor adjusts inventory value by $14 (that is, 7 * (Multiplication symbol) $2).

Reviewing Cost Adjustment ResultsAfter running the cost processors, check processing results, including warning and error messages, on the Review CostAccounting Processes page.

Review the accounting entries resulting from the cost adjustments on the Review Cost Distributions page.

Review the updated perpetual average cost or actual cost of items on the Review Item Costs page.



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Receipt Cost Adjustment and PropagationYou may need to adjust the cost of a processed receipt for reasons such as invoice price variances, retroactivepurchase order price changes, or prior adjustments. If you're using the actual cost method for transaction costing,you can propagate such adjustments to downstream inventory consumption transactions; and in the case of aninterorganization transfer, you can propagate the receipt cost adjustment to the destination inventory organization.

The following discusses:

• Receipt cost adjustments

• Propagation of receipt cost adjustments

Receipt Cost AdjustmentsEnter receipt cost adjustments on the Create Cost Adjustments page. Because these adjustments could distort the viewof costs and margins downstream in the supply chain, you have the option of tracking them separately by using costelements of type Adjustment.

If you're not tracking cost adjustments separately, you can use cost elements of type Material, Overhead, or Prot inInventory.

Propagation of Receipt Cost AdjustmentsYou can propagate cost adjustments through the supply chain only if you're using the actual cost method fortransaction costing. To do this you must enable propagation in the cost prole setup on the Create Cost Prole page.

When propagation is enabled, the cost processor:

• Propagates receipt cost adjustments to downstream transactions by revaluing the transactions to the extent ofquantity consumed.

• Revalues any remaining inventory.

For interorganization transfers, the cost processor adjusts receipt costs in the destination organization and allorganizations in between, provided that propagation is enabled in all of them. On the other hand, propagation stopsif an inventory organization is associated with a cost prole that doesn't use the actual cost method, or doesn't havepropagation enabled.

The processor always propagates cost adjustments through in-transit inventory organizations, regardless ofpropagation enablement.

If propagation isn't enabled, then the receipt cost adjustment is wrien o as an expense for all inventory that'sconsumed.

Related Topics

• Cost Proles, Default Cost Proles, and Item Cost Proles

Cost Management for Internal Material TransfersCost Management supports receipt accounting and cost accounting for requisition based internal transfers for itemsgoing to either an expense or an inventory destination, with or without a receipt at the destination.




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Self-Service Procurement, Supply Chain Financial Orchestration, and Cost Management have been integrated toprovide an estimated transfer price based on the internal cost of the items on the requisition. A transfer price is requiredon the internal material transfer requisition line for approval, budgetary control, and encumbrance accounting.

Cost Management supports requisition-sourced transfer orders going to expense destinations with multipledistributions and dierent expense accounts. Based on the account dened at the distribution level, Cost Managementwill book the expense for the appropriate account. In the case of transfers to expense destinations where a receipt is notrequired, new logical receipt and delivery transactions are created in Cost Management, similar to the physical eventscreated with receipt expense destination transfers when a receipt is required. Budgetary control and encumbranceaccounting are supported for expense destination internal transfer orders.

Budgetary ControlYou can ensure that budget funds are available before a requisition for an internal transfer is submied for approval.Depending on your budgetary control conguration, the funds will be reserved either at the time the requisition issubmied for approval, or when the requisition is approved. Insucient funds override rules and approvers can becongured as part of budgetary control setup. Cost Management liquidates the commitment and books an expenditureat the time of delivery when a receipt is required, or at the time of shipment by creating a virtual receipt when thereceipt is not required. The Requisition for Internal Material Transfer transaction subtype has been added to enablebudgetary control of requisitions for internal material transfers.

Encumbrance AccountingEncumbrance accounting entries are created for transactions subject to budgetary control and encumbranceaccounting when the Create Accounting process is run. Cost Management liquidates the reserve for the encumbranceaccount and creates journal entries for the actual expense value.

Costing Subinventory Material Staged for ProductionThis topic covers the costing of material moved from the warehouse or a common stock subinventory to a shop oorsupply subinventory for work orders that are scheduled for production in the near future. This supply subinventory iscommonly marked as not available-to-promise to prevent the production material from being used for other purposes,while enabling cost accountants to report on the value of the material that's staged for production but not yet issued towork orders.

PrerequisitesThe following tasks must be completed in order to enable the costing of subinventory material staged for production:

• Enable the following Subledger Accounting Journal Entry Rule Set: Work in Process Pick

• Run the following process: Transfer Transactions from Inventory to Costing

Accounting DistributionsThe following accounting distributions are created on the Review Cost Accounting Distributions page for thesubinventory material issue:


Oset

Debit



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Inventory Valuation

Credit

The following accounting distributions are created on the Review Cost Accounting Distributions page for the receipt:


Inventory Valuation

Debit

Oset

Credit

Cost Accounting for Outside ProcessingCost Accounting provides costing and accounting features for manufacturing outside processing, where one or morework order operations are outsourced to a supplier who provides specialized manufacturing services.

Costing of Outside Processing Work OrdersAn outside processing work order is costed and processed as follows.

• The outside processing service is modeled as an Item in cost planning, and is aached to a supplier operation.

• You can dene a standard cost and overheads for the outside processing item.

• The outside processing item cost is included in the nished product's rolled up cost.

Transaction Processing for Outside ProcessingCost Accounting supports the Purchase Order Receipt into Manufacturing transaction type for the costing of outsideprocessing items delivered to Manufacturing. The transaction processing depends on the cost method, as follows.



Accounting Distributions Created for Outside ProcessingYou can review the distributions created for outside processing in the Cost Accounting work area on the Review CostAccounting Distributions page. Cost Accounting creates the following distributions for the delivery of the outsideprocessing service item to Manufacturing.


Work In Process Valuation Debit



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Credit

Related Topics

• How Outside Processing Costs are Planned, Accounted, and Reviewed

• How Items Are Set Up for Outside Processing

Cost Accounting for Manual Procurement of Items for WorkOrdersCost Accounting provides costing and accounting features for items that are directly procured from a work order andare received against that work order and operation.

Costing of Manual Procurement of Items for Work OrdersCost Accounting supports the Direct Delivery to Work Order transaction type for the costing of items delivered toManufacturing.

The transaction processing depends on the cost method, as follows.



Accounting Distributions for Manual Procurement of Items for Work OrdersYou can review the distributions created for the Direct Delivery to Work Order transactions in the Cost Accounting workarea on the Review Cost Accounting Distributions page.

The following table lists then accounting distributions for manufacturing work orders.


Work In Process Valuation

Debit


Credit

The following table lists then accounting distributions for maintenance work orders.

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Expense

Debit


Credit

Cost Accounting for Rework and Transformation Work OrdersCost Accounting provides costing and accounting functionality for the following manufacturing work order types:

• Rework Work Orders. A work order of type Rework is created for nished products with defects that need tobe repaired and reworked. For example, a product may need to have a defective component removed andreplaced with a new component.

• Transform Work Orders. A work order of type Transform is created when you want to refurbish a product andtransform it into a dierent product, for example, by upgrading one of the product components.

Transactions Types for Rework and Transform Work OrdersThe following transaction types have been added for rework and transform work orders:

• Material Negative Issue. If the quantity is negative and the transaction type is Issue, then a Material NegativeIssue transaction is used.

• Material Negative Return. If the quantity is negative and the transaction type is Return, then a Material NegativeReturn transaction is used.

Related Topics• Overview of Work Orders

Review Work Order CostsYou can review work order costs for process manufacturing and discrete manufacturing on the Review Work OrderCosts page. The accounting transactions for work in process balances are displayed, including costs of inputs, outputs,scrap, and standard cost variances.

To review work order costs, perform the following steps.

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Review Work Order Costs.3. Search for the work order records by Cost Organization. You can also lter by Cost Book, Plant, Output Item,

Work Order Number, and Work Order Status. The elds are described in the following table.

Field Description

WIP Balance

The work in process balance is equal to the sum of input and resource costs, minuscompletions and scrap costs.

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Field Description

Variance Percentage

The dierence between actual and standard cost as a percentage of output cost.

Scrap Percentage

The scrap cost as a percentage of total work order cost. The processing of scrap valuationand scrap accounting is determined by the Cost Prole seings for your organization. Formore information, see the guide Implementing Manufacturing and Supply Chain MaterialsManagement. The scrap costs are calculated using the following formula: Scrap costs = (The total costs accumulated through this operation) multiplied by the (ScrapQuantity divided by the Batch Quantity)

Amount in Cost Book Currency

The value of input and resources at operation and cost element levels.

Operation Completion Quantity

The total quantity of completions and returns.

Cost Allocation Factor The product costs for process manufacturing transactions are calculated based on the cost

allocation factor dened in the work denition for the primary product, co-products, and by-products. All product completions processed before a work order is closed use an estimatedcost based on the Provisional Completion seing dened for the item's Cost Prole. Once awork order is closed, the cost allocation factor is used to calculate the actual product costs. Thecost allocation factor seings are as follows:

• Fixed. The standard cost of the item is used to cost the provisional completions. Youmust create a standard cost for the output item when you set the cost allocation factorto Fixed.

• Percentage. The following formula is used for products that have the cost allocationfactor set to Percentage:

Percentage = (The total costs accumulated through this operation minus ScrapReported in this operation) multiplied by the Cost Allocation Factor), divided by theQuantity Produced.

You can view the variance details on the Variance Amounts tab. Information is displayed for the following variancetypes:

• Material rate variance

• Yield variance

• Job close variance

• Batch size variance

• Usage variance

• Eciency variance

Yield Variance is used for process manufacturing work orders. The formula for calculating the yield variance is asfollows:

Yield Variance = (The actual reported quantity minus the planned scaled quantity) multiplied by the standard cost of theproduct



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Related Topics• Overview of Work Orders• How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

Review Maintenance Work Order CostsReviewing maintenance work orders enable you to track the costs incurred for the materials and resources used formaintenance activities. These activities include preventive maintenance, break down maintenance, and so on, which canbe either in-house or performed outside by a supplier as outsourced jobs.

PrerequisitesThe two prerequisites are:

1. The following table lists the processes to be run. These processes must be run in the same sequence. They canbe either scheduled or manually run.

Process Run By Navigation

Transfer Transactions from Maintenanceto Costing

Manufacturing Supervisor

Tasks panel of MaintenanceManagement > Transfer Transactionsfrom Maintenance to Costing.

Transfer Transactions from Inventory toCosting

Cost Accountant

Scheduled Processes work area >Schedule New Process > TransferTransactions from Inventory to Costing.

Create Cost Accounting Distributions

Cost Accountant

Cost Accounting Work area > Create CostAccounting Distributions.

Create Accounting to create Accountingin SLA

Cost Accountant

Cost Accounting Work area > CreateAccounting.

2. The maintenance work order is in any status other than the unreleased status. That is, the work order is in anyof the following statuses.

◦ Released

◦ On Hold

◦ Canceled

◦ Completed

◦ Closed

Viewing Costs of a Maintenance Work OrderYou can review the material and resource costs incurred for a maintenance work order on the Maintenance Work OrderCosts page. You can review the cost details and their distributions, separately.

• Details: View the summary of cost details, that is, the total cost, material costs, and the resource costs.

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You can further drill down and view detailed information about the material and resource costs incurred foreach operation and work center in that work order.

• Distributions: View the summary of costs distribution.

Distributions provide accounting information for all the transactions reported against the maintenance workorder that is being analyzed. The summary page shows the processing status of the transactions, that is, NotProcessed, Partially Costed, and so on.

To review maintenance work order costs, do the following:

1. Click Navigator > Cost Accounting.

2. From the Tasks panel, under Cost Processing, select Review Maintenance Work Order Costs.3. Search for the work order records using the search lers: Cost Organization, Cost Book, Plant, Output Item,

Work Order Number, and Work Order Status.4. Select the required work order from the search results and click View Costs.

Note: You can also navigate to this page by clicking View Costs on the Edit Maintenance WorkOrders page.

Reviewing Distributions of a Maintenance Work OrderReview distributions for all transactions reported against a maintenance work order or for a specic transaction. Thetransaction and costing details give you the accounting information of all the resources and materials used for eachitem.

To review distribution of maintenance work order costs, on the Maintenance Work Order Costs page:

1. Select the required work order.2. Click Review Distributions.

Purchase Order Return and Sales Return FlowsThe cost processor uses FIFO logic to cost purchase order (PO) returns. For sales returns that reference an RMA, thecost processor uses the original sales order cost; for sales returns that don't reference an RMA, it uses either the rst orlast receipt layer cost.

The following discusses costing details for purchase order returns and sales order returns.

Purchase Order ReturnsFor PO returns, the cost processor uses the FIFO receipt layer cost to deplete inventory, while it osets receivinginspection at the acquisition PO price. The dierence between the PO price and the FIFO receipt layer cost is booked ascost variance.

This table illustrates several receipts and issues of an item in an inventory organization, followed by a PO return for thesame item:



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Reference Transaction Date Transaction Type Quantity Unit Cost Receipt LayerReference

Receipt #1

01-Jan-2011

PO Receipt

100

$120

Not applicable

Receipt #2

02-Jan-2011

PO Receipt

80

$100

Not applicable

Receipt #3

03-Jan-2011


20

$105

Not applicable

Issue #1

04-Jan-2011

MiscellaneousIssue

-40

$120

Receipt #1

Issue #2

05-Jan-2011

MiscellaneousIssue

-60

$120

Receipt #1

Issue #2

05-Jan-2011

MiscellaneousIssue

-15

$100

Receipt #2

Receipt #1

06-Jan-2011

PO Return

-10

$100

Receipt #2

The cost distribution processor creates the following accounting entries for the PO return:

• Dr Receiving Inspection $100*10 / Cr Inventory $100*10

• Dr Receiving Inspection $20*10 / Cr Cost Variance $20*10

Sales ReturnsWhen you dene the cost prole for an item, you can select one of three options for the costing of a sales return:

• Referenced RMA: the cost processor costs the return using the original sales order issue cost.

• Un-referenced RMA: the cost processor costs the return using:

◦ First available receipt layer; or

◦ Last available receipt layer.

This table illustrates several receipts and issues of an item in an inventory organization, followed by a referenced RMAsales return, and an un-referenced RMA sales return for the same item:


Receipt #1

01-Jan-2011

PO Receipt

100

$120

Not applicable

Receipt #2

02-Jan-2011

PO Receipt

80

$100

Not applicable



153


Receipt #3

03-Jan-2011


20

$105

Not applicable

Issue #1

04-Jan-2011

MiscellaneousIssue

-40

$120

Receipt #1

Issue #2

05-Jan-2011

MiscellaneousIssue

-60

$120

Receipt #1

Issue #2

05-Jan-2011

MiscellaneousIssue

-15

$100

Receipt #2

Referenced RMAof Issue #1

06-Jan-2011

RMA Receipt

25

$120

Not applicable

Un-referencedRMA

07-Jan-2011

RMA Receipt

5

$100 or $105

Not applicable

The processor costs the un-referenced RMA return using:

• $100 per unit if you specify the rst available receipt layer; or

• $105 per unit if you specify the last available receipt layer.

Cost Accounting for Drop ShipmentsGlobal drop shipment is an order fulllment strategy where the seller does not keep products in the inventory. Theseller relies on suppliers or contract manufacturers to build, store, and ship orders to the customers. When a customerplaces an order for a drop shipped product, the seller issues a purchase order for the item. The seller also providesinstructions to the suppliers to ship directly to the customer. The supply chain nancial orchestration process routes theorchestration ow of drop shipments through one or more business units within the corporation. These business unitscan belong to the same legal entity or may occur across legal entities.

The nancial ow starts when the supplier sends the advanced shipment notice, or when the supplier matches theinvoice with the purchase order for the drop shipment. The ow creates cost accounting distributions and intercompanyinvoices for the ownership transfers that occur between parties, including supplier, one or more organizations, and thecustomer. Supply Chain Financial Orchestration sends a request to the receiving system to create a drop ship receipton the supplier invoice that references the purchase order. Receiving creates a logical receipt, and then noties OrderManagement to start customer billing. This automation helps to reduce billing cycle time.

Cost Accounting Distributions for Drop ShipmentsYou can review the cost accounting distributions for drop shipments on the Review Cost Accounting Distributions page.The following accounting line types are created for drop shipment events.



154

Event Application Source Accounting Line Type Transaction Type

Drop Ship Delivery

Receiving/ Inventory

Drop Ship Inventory

Debit

Drop Ship Delivery

Receiving/ Inventory


Credit

Trade Sale Issue

Supply Chain FinancialOrchestration

DCOGS

Debit

Trade Sale Issue

Supply Chain FinancialOrchestration

Drop Ship Delivery

Credit

Cost Management for Inclusive TaxesTo comply with country-specic regulatory requirements, you can capture item prices and all calculated exclusiveand inclusive taxes in your purchases, with receipt costs adjusted to account for amounts of inclusive taxes that wereincorporated in the item purchase price. The amounts of inclusive taxes are booked to a tax liability or recovery account.

Procurement ows for both delivery and non-delivery inclusive taxes are supported, as follows.

• Tax Point Basis Set to Receipt. In the case of delivery based taxes, where the Tax Point Basis is set to Receipt,the tax call is made during the receipt transaction, and inclusive taxes are calculated. Based on the recoverablepercentage dened, inclusive tax can have recoverable and nonrecoverable amounts. On the purchase orderline, the total amount calculation incorporates the receipt quantity. During invoicing, the receipt values arecopied to the invoice, therefore cost variance is not applicable.

• Tax Point Basis Set to Invoice. In the case of non-delivery based taxes, where the Tax Point Basis is set toInvoice, recoverable and nonrecoverable inclusive taxes on the purchase order are copied during the receipttransaction. Any dierence between the amounts on the receipt and the invoice are considered as variances,and are applied to the item cost.

Cost Management supports the following cost adjustments and accounting events for inclusive taxes:

Cost Adjustments and AccountingEvents

Description

Adjust Receipt and Inventory Cost forInclusive Taxes on Purchase Orders.

Segregate and account for recoverable and nonrecoverable inclusive tax. When the item priceon a purchase order line includes taxes, Receipt Accounting separates the item price into basicitem price, inclusive recoverable tax, and inclusive nonrecoverable tax. This lets you accountfor nonrecoverable tax in the item cost when the price on the purchase order line containsinclusive tax.

Adjust Receipt and InventoryCost for Inclusive Taxes on GlobalProcurement Purchase Orders.

Segregate and account for recoverable and nonrecoverable inclusive tax. When the item priceon a global procurement purchase order line includes taxes, Receipt Accounting separates theitem price into basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax.Inclusive tax adjustments are now performed on logical transactions in the supplier-facinginventory organization when you physically receive the items in an inventory organization thatis associated with a dierent business unit.



155

Cost Adjustments and AccountingEvents

Description

Adjust Receipt and Inventory Costfor Inclusive Taxes on ConsignmentPurchase Orders

Segregate and account for recoverable and nonrecoverable inclusive tax. When the item priceon a consignment purchase order line includes taxes, Receipt Accounting separates the itemprice into basic item price, inclusive recoverable tax, and inclusive nonrecoverable tax. This letsyou account for nonrecoverable tax in the consigned item cost when the price on a purchaseorder line contains inclusive tax.

Global Procurement

Overview of Global Procurement Trade AccountingCompanies often design their legal structure for nancial eciency as well as eciency in the physical ow of goodsthrough the supply chain. Typically, the most optimal nancial movement of goods is dierent from the most optimalphysical movement of goods. For example, the purchase requisitions from a group of subsidiary companies could berouted through a single international purchasing company who deals with the suppliers. As a result, the legal ownersof the purchasing organizations will be dierent from the legal owners of the receiving organizations. This form ofpurchasing is known as global procurement.The following discusses:

• Global procurement trade ows

• Trade agreements and accounting rule sets

• Agreements converted to purchase orders

• Commonly used terms



156

Global Procurement Trade FlowsThis gure illustrates a typical global procurement trade ow, in this case between a US corporation and its Chinasupplier. The US corporation has a central procurement business unit which creates trade agreements and purchaseorders on behalf of its subsidiaries.

China Supplier US Corporation

Procurement Business Unit

US IncReceiving Legal

EntityChina Ltd

Sold-to Legal Entity(Purchasing Affiliate)

US EastReceiving Profit



PhysicalFlow

CN BUChina Sold-to Profit


M1US Receiving


M2US Receiving



US West Receiving Profit


ManagementFlow

CN INV ORGChina Purchasing

Trade Organization

The China supplier drop ships the goods directly to the US receiving inventory organization M1. However for legal andaccounting purposes, the trade ows from the China supplier through the China sold-to legal entity (China Ltd), to theUS receiving legal entity (US Inc). For management and prot tracking purposes, the trade ows from the China sold-toprot center business unit CN BU to the US receiving prot center business unit US West.



157

Financial Trade Agreements and Accounting Rule SetsA trade agreement denes the parties in the trade relationship. In this example the trade agreement is between the UScorporation and the China supplier, and it denes the buying, selling, sold-to, and receiving legal entities, prot centerbusiness units, inventory organizations, and trade organizations.

The accounting rule sets dene source documents and accounting that is required in the legal and nancial ow, alsoknown as the ownership change event ow. A rule set is associated with a nancial route, and nancial routes can havedierent accounting rule sets.

The following illustrates a trade agreement setup for the US corporation:

• Agreement #: GP001

• Type: Procurement

• Supplier Ownership Change: ASN (Advance Shipment Notice)



• Sold-to Business Unit: CN BU

• Deliver-to Legal Entity: US Inc.

• Deliver-to Business Unit: US West

• Financial Trade Relationship #: FTR1

• From Legal Entity: China Ltd.

• From Business Unit: CN BU

• From Organization: CN INV ORG

• To Legal Entity: US Inc.

• To Business Unit: US West

• To Organization: M1

• Prot Tracking: Yes

• Invoicing: Yes

• Obligation Currency: CNY

• Rate Type: Corporate

• Transfer Pricing: Purchase Order - 10%

• Purchase Order/Sales Order: No

Trade Agreement Converted to Purchase OrdersThe trade agreement is used to create purchase orders. The following illustrates a purchase order created under the USCorporation trade agreement # GP001:

• Document Type: Purchase Order

• Document #: PO-GP001

• Document Line #: 1

• Document Line Detail: 1.1



158

• Document Line Distribution #: 1.1.1

• Item: SFO-CST_ASSET

• Quantity: 100

• UOM: Each

• Currency: CNY

• Price: 650


• Trade Organization: CN INV ORG

• Deliver-to Organization: M1


Global Procurement Common TermsThe following table describes the terms commonly used in global procurement trading:


buy-sell relationship

Relationship between two business units where one acts as a buyer and the other as a sellerof goods or services. The seller records the revenue, cost of sale, and receivables. The buyerrecords the payables and inventory or expense. A buy-sell trade between internal businessunits is seled through the transfer price.

asset item

Inventory item where the cost of acquisition is valued as an asset on the balance sheet. Theinventory cost is expensed when it is consumed or sold.

expense item

Inventory item whose cost of acquisition is booked as an expense.

transfer price

The unit price that one business unit charges another for goods or services traded within theenterprise. The transfer price is typically based on the price list, cost plus or minus, or purchaseprice plus or minus.

nancial route

Designates how nancial transactions are seled, can be dierent from the physical route, andmay involve one or more intermediary nodes. The intermediary nodes are internal businessunits that are not part of the physical supply chain transaction but are part of the nancialroute.

Incoterms

A series of sales terms in international trade, used to dene the rights and obligations ofthe trade partners with respect to the delivery of goods sold. Incoterms are used to dividetransaction costs and responsibilities between buyer and seller, and to reect transportationpractices.

intercompany prot and loss

The internal prot or loss arising out of trade among business units in the enterprise. Theseinternal prots and losses are used for internal management but are typically eliminated whenproducing the enterprise consolidated nancial statements for external stakeholders.

intercompany trade

The trade of goods and services between organizations belonging to dierent legal entitieswithin a conglomerate.



159


intracompany trade

The trade of goods or services between two internal organizations within a legal entity.

ownership change event

The transfer of title of goods and services from one party to another. This results in accountingand the creation of nancial documents such as Accounts Receivable and Accounts Payableinvoices.

price list

Contains the basic list information and pricing aributes for items or product groups.

pricing option

A method to compute the transfer price based on cost, source document price, or price list.

prot center

A business unit that operates with its own income statement and reports to the legal entity.

purchasing trade organization

The inventory organization reporting to the sold-to legal entity identied in the purchaseorder. This organization is used for cost accounting the transactions in the sold-to legal entity.

qualiers

Business aributes of a supply chain document or transaction that determine the applicabilityof the trade agreement.

supply chain nancial orchestrationagreement

An agreement between the legal entities, business units, and trade organizations of acorporate group. The agreement denes the parties in the trade relationship and the nancialselement process.

trade distributions

Subledger entries created by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for Oracle Fusion Supply Chain Financial Orchestration trade transactions.

procurement business unit

Has central responsibility for the creation of trade agreements and purchase orders on behalfof legal entities and business units under the holding company.

Related Topics• Example of Accounting of Global Procurement Trade Transactions into Inventory• Example of Accounting of Global Procurement Trade Transactions into Expense• Prot Center Business Units and Bill-to Business Units

Prot Center Business Units and Bill-to Business UnitsOracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting create accounting distributions for tradetransactions in the supply chain. These accounting distributions are associated with two kinds of business units: protcenter business units and bill-to business units.

The following explains the dierent business units associated with trade transactions and the assumptions used toderive them.



160

Prot Center Business UnitA prot center business unit reports to a single legal entity and is responsible for measuring the protability ofinventory organizations under that legal entity. All trade transactions are associated with a prot center business unitwhich, in turn, is derived from the inventory organization that owns the trade transaction. Cost Accounting uses theprot center business unit to process all inventory transactions.

Bill-to Business UnitA bill-to business unit is used to process receipt accruals in a trade transaction, and is the same business unit thatprocesses the invoice in Accounts Payable. For supplier accruals, the bill-to business unit is derived from the purchaseorder. For intercompany accruals, the bill-to business unit is derived from the prot center business unit.

Related Topics• How Cost Organizations, Inventory Organizations, and Cost Books Fit Together

Example of Accounting of Global Procurement Trade Transactionsinto InventoryMost large enterprises use a global procurement approach to their purchasing needs, wherein a central buyingorganization buys goods from suppliers on behalf of the internal organizations. Oracle Fusion Receipt Accounting andOracle Fusion Cost Accounting process transactions for these global procurement trade events and generate subledgerjournal entries.

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a globalprocurement ow into inventory. It illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the forward ow of a shipmentfrom the supplier, through the intermediary distributor, to the nal receiving organization.


ScenarioChina Supplier ships the goods to US Inc. through the intermediary distributor, China Ltd.


• Purchase Order (PO) price from China Supplier to China Ltd. is USD 50.








161

• China Ltd books a prot of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).


Accounting Entries

The following gure illustrates accounting entries for the forward ow from legal entity China Ltd. to legal entity US Inc.

China Supplier















PO DeliveryDr Inventory Valuation MAT$50Dr Inventory Valuation OVH$10Dr Inventory Valuation GP $40Cr Receiving Inspection $100



162





FunctionalCurrency


ReceiptAccounting


Trade Clearing

50

USD

Not Applicable

PO Price

ReceiptAccounting


Accrual

-50

USD

Not Applicable

PO Price

CostAccounting


Trade In-Transit

50

USD

Material

PO Price

CostAccounting


Trade Clearing

-50

USD

Material

PO Price

CostAccounting


Expense

10

USD

Overhead

Overhead Rate

CostAccounting


OverheadAbsorption

-10

USD

Overhead

Overhead Rate

CostAccounting


IntercompanyCOGS

50

USD

Material

PO Price

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

AccountsReceivable



100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyRevenue

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

SupplierInvoice

Accrual

50

USD

Not Applicable

PO Price

ReceiptAccounting

SupplierInvoice

Liability

-50

USD

Not Applicable

PO Price



163



FunctionalCurrency






FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not Applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-100

USD

Material

Transfer Price

AccountsPayable


IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

AccountsPayable



-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

ReceivingInspection

100

USD

Not Applicable

Transfer Price



164



FunctionalCurrency


ReceiptAccounting

PO Receipt

Trade In-Transit

-100

USD

Not Applicable

Transfer Price

CostAccounting

PO Delivery

InventoryValuation

50

USD

Material


CostAccounting

PO Delivery

InventoryValuation

10

USD

Overhead


CostAccounting

PO Delivery

InventoryValuation

40

USD

Prot inInventory

InternalMarkup

CostAccounting

PO Delivery

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

US Inc returns goods directly to China Supplier.

The following gure illustrates accounting entries for the return ow from legal entity US Inc to legal entity China Ltd.



165

China Supplier







Trade In-Transit ReturnDr Trade Clearing $100Cr Trade In-Transit MAT $50Cr Trade In-Transit OVH $10Cr Trade In-Transit GP $40








Return to ReceivingDr Receiving Inspection $100Cr Inventory Valuation MAT$50Cr Inventory Valuation OVH$10Cr Inventory Valuation GP $40





166



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade Clearing

100

USD

Material

Transfer Price

CostAccounting


Trade In-Transit

-50

USD

Material


CostAccounting


Trade In-Transit

-10

USD

Overhead


CostAccounting


Trade In-Transit

-40

USD

Prot inInventory

InternalMarkup

CostAccounting

Return toReceiving

ReceivingInspection

100

USD


Transfer Price

CostAccounting

Return toReceiving

InventoryValuation

-50

USD

Material


CostAccounting

Return toReceiving

InventoryValuation

-10

USD

Overhead


CostAccounting

Return toReceiving

InventoryValuation

-40

USD

Prot inInventory

InternalMarkup

ReceiptAccounting

Return toSupplier

Trade In-Transit

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toSupplier

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting



100

USD

Not Applicable

Transfer Price



167



FunctionalCurrency


ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price





FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

Accrual

50

USD

Not Applicable

PO Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-50

USD

Not Applicable

PO Price

CostAccounting


Trade Clearing

50

USD

Material

PO Price

CostAccounting


Cost Variance*

10

USD

Not Applicable

Inventory isdepleted atthe currentcost, and thedierencebetweentransfer priceand cost isbooked as costvariance

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

CostAccounting


Trade In-Transit

-10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

50

USD

Material

PO Price



168



FunctionalCurrency


CostAccounting


Trade In-Transit

10

USD

Overhead

Overhead Rate

CostAccounting


IntercompanyCOGS

-50

USD

Material

PO Price

CostAccounting


IntercompanyCOGS

-10

USD

Overhead

Overhead Rate

AccountsReceivable


IntercompanyRevenue

100

USD

Not Applicable

Transfer Price

AccountsReceivable



-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

SupplierInvoice

Liability

50

USD

Not Applicable

PO Price

ReceiptAccounting

SupplierInvoice

Accrual

-50

USD

Not Applicable

PO Price


Related Topics

• Overview of Global Procurement Trade Accounting

• Example of Accounting of Global Procurement Trade Transactions into Expense

• Review Item Cost and Global Procurement Trade Transaction Accounting

Example of Accounting of Global Procurement Trade Transactionsinto ExpenseOracle Fusion Receipt Accounting and Oracle Fusion Cost Accounting process transactions and create distributions forglobal procurement purchases that are received into expense destinations rather than inventory, and for services thatare expensed.



169

The following is an example of accounting performed by Cost Accounting and Receipt Accounting for a globalprocurement ow into expense. It illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the forward ow of goods orservices from the supplier, through the intermediary distributor, to the nal receiving organization.


ScenarioChina Supplier ships the goods to US Inc. and the goods ow through an intermediary distributor, China Ltd.


• Purchase Order (PO) price from China Supplier to China Ltd is USD 50.

• Intercompany transfer price from China Ltd to US Inc is USD 100.



• Overhead rule is congured in Cost Accounting for transaction type Trade in-Transit Receipt in costorganization CO1.


Accounting Entries



170

The following gure illustrates the accounting entries for the forward ow from China Ltd (sold-to legal entity) to US Inc(receiving legal entity).

China Supplier







Trade In-Transit ReceiptDr Trade In-Transit $100Cr Trade Clearing $100








PO Delivery Dr Expense $100 Cr Receiving Inspection $100





171



FunctionalCurrency


ReceiptAccounting


Trade Clearing

50

USD

Not Applicable

PO Price

ReceiptAccounting


Accrual

-50

USD

Not Applicable

PO Price

CostAccounting


Trade In-Transit

50

USD

Material

PO Price

CostAccounting


Trade Clearing

-50

USD

Material

PO Price

CostAccounting


Trade In-Transit

10

USD

Overhead

Overhead Rate

CostAccounting


OverheadAbsorption

-10

USD

Overhead

Overhead Rate

CostAccounting


IntercompanyCOGS

50

USD

Material

PO Price

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

CostAccounting


IntercompanyCOGS

10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

-10

USD

Overhead

Overhead Rate

AccountsReceivable



100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyRevenue

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

SupplierInvoice

Accrual

50

USD

Not Applicable

PO Price



172



FunctionalCurrency


ReceiptAccounting

SupplierInvoice

Liability

-50

USD

Not Applicable

PO Price





FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not Applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

Transfer Price

CostAccounting


Trade Clearing

-100

USD

Material

Transfer Price

AccountsPayable


IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

AccountsPayable



-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

ReceivingInspection

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Receipt

Trade In-Transit

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

PO Delivery

Expense

100

USD

Not Applicable

Transfer Price



173



FunctionalCurrency


ReceiptAccounting

PO Delivery

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

US Inc. returns goods directly to China Supplier.

The following gure illustrates the accounting entries for the return ow from legal entity US Inc. to legal entity ChinaLtd .



174

China Supplier







Trade In-Transit ReturnDr Trade Clearing $100Cr Trade In-Transit $100








Return to ReceivingDr Receiving Inspection $100Cr Expense $100





175



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade Clearing

100

USD

Material

Transfer Price

CostAccounting


Trade In-Transit

-100

USD

Material

Transfer Price

ReceiptAccounting

Return toReceiving

ReceivingInspection

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toReceiving

Expense

-100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toSupplier

Trade In-Transit

100

USD

Not Applicable

Transfer Price

ReceiptAccounting

Return toSupplier

ReceivingInspection

-100

USD

Not Applicable

Transfer Price

AccountsPayable



100

USD

Not Applicable

Transfer Price

AccountsPayable


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price





176



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

50

USD

Not Applicable

PO Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-50

USD

Not Applicable

PO Price

CostAccounting


Trade Clearing

50

USD

Material

PO Price

CostAccounting


Cost Variance*

10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

-50

USD

Material

PO Price

CostAccounting


Trade Clearing

-10

USD

Overhead

Overhead Rate

CostAccounting


Trade In-Transit

50

USD

Material

PO Price

CostAccounting


Trade In-Transit

10

USD

Overhead

Overhead Rate

CostAccounting



-50

USD

Material

PO Price

CostAccounting



-10

USD

Overhead

Overhead Rate

AccountsReceivable


IntercompanyRevenue

100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyReceivables

-100

USD

Not Applicable

Transfer Price



177



FunctionalCurrency


ReceiptAccounting

SupplierInvoice

Liability

50

USD

Not Applicable

PO Price

ReceiptAccounting

SupplierInvoice

Accrual

-50

USD

Not Applicable

PO Price


Related Topics• Example of Accounting of Global Procurement Trade Transactions into Inventory• Overview of Global Procurement Trade Accounting• Review Item Cost and Global Procurement Trade Transaction Accounting

Review Item Cost and Global Procurement Trade TransactionAccountingReceipt Accounting and Cost Accounting process and create accounting distributions for trade transactions in thesupply chain.

The following explains how to review the results of global procurement trade transactions processed by ReceiptAccounting and Cost Accounting.

Receipt Accounting ResultsIn the Receipt Accounting work area, access the Review Receipt Accounting Distributions page. On this page you canview accounting details by Source Document Number and Source Document Line Number. Source documents arepurchase order schedules, transfer orders, and sales orders.

Cost Accounting ResultsIn the Cost Accounting work area:

• Access the Review Item Costs page. On this page you can view a breakdown of the cost of items, costcomparisons of items across organizations, and cost trends over time.

• Access the Review Cost Accounting Distributions page. On this page you can view accounting details of tradetransactions by Reference Document Number.

Related Topics• Receipt Accounting Tasks and Accounting Events

Cost Accounting Examples



178

Example of Using the Actual Cost MethodThis example illustrates how the cost processor uses the actual cost method to cost: inventory receipts, cost of goodssold, and the value of beginning and ending inventory.

ScenarioA restaurant business receives two shipments of raw material for a total of 25 units, and a sales order of 12 units. Theunit is dened as a sandwich, and the raw material is dened as sandwich food ingredients.

Transaction DetailsThe business needs to calculate:

• Overhead absorption on the two receipts.

• The value of beginning and ending inventory, including raw materials and overhead absorption.

• Cost of good sold.

AnalysisFollowing are the details for two receipts of raw materials:

Receipt ID Inventory Value

Receipt #1

10 * $10 = $100

Receipt #2

15 * $12 = $180

The cost processor calculates overhead absorption for the two receipts as follows:

Receipt ID Overhead Absorption

Receipt #1

Labor: $5 Facility: $3

Receipt #2

Labor: $8 Facility: $7

Resulting Accounting DistributionsThe distribution processor generates the following accounting entries:



179

Event Accounting Entry

Receipt #1: 10 units raw material

Dr Inventory-Raw Material $100 Cr Receiving $100

Receipt #1: overhead

Dr Inventory-Labor $5 Dr Inventory-Facility $3 Cr Overhead Absorption $8

Receipt #2: 15 units raw material

Dr Inventory-Raw Material $180 Cr Receiving $180

Receipt #2: overhead

Dr Inventory-Labor $8 Dr Inventory-Facility $7 Dr Overhead Absorption $15

COGS for 12 units (10 * $108/10) + (2 *$195/15)

Dr COGS $134 Cr Inventory $134

The beginning inventory is 25 units valued at: 10 * $10.8 + 15 * $13 = $303.

The ending inventory is 13 units valued at: 13 * $13 = $169.

Examples of Making Cost AdjustmentsAdjust the cost of an item to reect uctuating market costs, or to reect other changes, such as increased overheadcosts.

The following are examples of cost adjustments.

Adjustment at Item Cost LevelAssume the average cost of an item increases from $5 to $6, and the quantity on hand is 100 each. The distributionprocessor creates the following accounting entry to adjust the item cost.

Accounting Line Type Debit Credit

Inventory Valuation

$100

Not applicable

Oset

Not applicable

$100



180

Adjustment at Cost Element LevelAssume that an item has the following cost structure.

Cost Element Amount

Material

$4.00

Freight

$1.00

Tax

$0.50

Utilities

$0.50

If the quantity on hand is 100 each, and you want to increase utilities cost from $0.50 to $1.00, the distributionprocessor creates the following accounting entry to adjust the item cost.


Inventory Valuation - Utilities

$50

Not applicable

Oset

Not applicable

$50

Layer Inventory Cost AdjustmentAssume that you adjust the cost of an item from $9 to $11, and the remaining receipt layer quantity is 60 units. Thedistribution processor creates the following accounting entry to update inventory valuation.


Inventory Valuation

$120

Not applicable

Oset

Not applicable

$120

Example of Receipt Cost AdjustmentThis example illustrates the accounting entries resulting from a receipt cost adjustment for an invoice price variance,the revaluation of inventory, and propagation of the cost adjustment to interorganization transfers and sales issues.



181

ScenarioOrganization A has a purchase order receipt, for which it subsequently processes an invoice price variance adjustment.Organization A lls a sales order, and transfers some of its inventory to Organization B, who lls another sales order.

Transaction DetailsOrganization A has a PO receipt of 100 units at $100 per unit, of which it sells 30 units, and transfers 20 units toOrganization B at a transfer price of $125. Organization B in turn sells 6 units. The IPV for the initial PO receipt is $20 perunit.

AnalysisRun the cost processor to cost the initial PO receipt, the interorganization transfer, and the sales issues fromOrganization A and Organization B. After entering the receipt cost adjustment for the IPV of $20 per unit, rerun the costprocessor to update the value of remaining inventory, and to propagate the IPV adjustment to the interorganizationtransfer, and the sales issues from Organization A and Organization B.

Resulting Accounting EntriesThe cost distribution processor creates accounting entries for the PO receipt, interorganization transfer to OrganizationB, and sales issues from Organization A and Organization B. The following table describes those accounting entries:

Event Accounting Entries

Organization A PO receipt: 100 unitsat $100

Dr Inventory (Material) $100*100 Cr Receiving Inspection $100*100

Sales issue from Organization A: 30units at $100 per unit

Dr DCOGS $100*30 Cr Inventory $100*30

100 percent COGS recognition forsales issue

Dr COGS $100*30 Cr DCOGS $100*30

Transfer from Organization A toOrganization B: 20 units at $125 perunit

Dr Interorganization Receivable $125*20 Cr Inventory (Material) $100*20 Cr Interorganization (Gain/Loss) $25*20

Interorganization receipt byOrganization B from Organization A:20 units at $125

Dr Inventory (Material) $100*20 Dr Inventory (Prot in Inventory) $25*20 Cr Interorganization Payable $125*20

Sales issue from Organization B: 6units at $125 per unit

Dr DCOGS (Material) $100*6 Dr DCOGS (Prot in Inventory) $25*6



182


Cr Inventory (Material) $100*6 Cr Inventory (Prot in Inventory) $25*6

100 percent COGS recognition forsales issue

Dr COGS (Material) $100*6 Cr DCOGS (Material) $100*6 Dr COGS (Prot in Inventory) $25*6 Cr DCOGS (Prot in Inventory) $25*6

The cost distribution processor creates accounting entries for the IPV adjustment to inventory value, and to propagatethe IPV adjustment to the interorganization transfer, and to the sales issues from Organization A and Organization B.The following table describes those accounting entries :


Organization A Inventory costadjustment: 100 at $20

Dr Inventory (Material) $20*100 Cr Receiving Inspection $20*100

Propagate adjustment tointerorganization transfer fromOrganization A to Organization B: 20units at $20 Because the transfer priceremains the same, we revalue theinterorganization gain/loss.

Dr Interorganization Gain/Loss $20*20 Cr Inventory (Material) $20*20

Propagate adjustment tointerorganization receipt byOrganization B from Organization A:20 units at $20

Dr Inventory (Material) $20*20 Cr Oset Account $20*20 Dr Oset Account $20*20 Cr Inventory (Prot in Inventory) $20*20

Propagate adjustment to sales issuefrom Organization A: 30 units at $20

Dr COGS $20*30 Cr Inventory (Material) $20*30

Propagate adjustment to sales issuefrom Organization A: 30 units at $20

Dr DCOGS (Material) $20*30 Cr Inventory (Material) $20*30

Propagate adjustment to COGSrecognition

Dr COGS (Material) $20*30



183


Dr DCOGS (Material) $20*30

Propagate adjustment to sales issuefrom Organization B: 6 units at $20

Dr DCOGS (Material) $20*6 Cr Inventory (Material) $20*6 Dr Inventory (Prot in Inventory) $20*6 Cr DCOGS (Prot in Inventory) $20*6

Propagate adjustment to COGSrecognition

Cr COGS (Prot in Inventory) $20*6 Dr DCOGS (Prot in Inventory) $20*6 Dr COGS (Material) $20*6 Cr DCCOGS (Material) $20*6

Examples of Backdating of TransactionsBy seing the cost cuto date for a cost accounting period, you can manage which transactions are processed in thatperiod, including backdated transactions. The following examples illustrate how the cost processor sets the accounteddate for backdated transactions.

ScenarioAssume that the current date is November 2, and the cost cuto date is October 31.



184

The following costed and uncosted transactions are in process.

November 2

Costed Transaction 1


October 30


Uncosted Transaction 3


October 31



November 1

Cost Cutoff Date October 31

Example 1Transactions are backdated to a point before the latest costed transaction.



185

In the following gure, the inventory transaction is backdated to position A. The transaction is costed with accountingdate B before transactions 2 and 3 are processed. The transaction created on November 2 and backdated to October 30is costed with the eective date of October 31.

November 2



October 30




October 31



November 1


A

B

Example 2Transactions are backdated to a point between the latest costed transaction and the cost cuto date.



186

In the following gure, the inventory transaction is backdated to position C. The transaction is costed with accountingdate C after transactions 2 and 3 are processed. The transaction created on November 2 and backdated to October 31 iscosted with the eective date of October 31.

November 2



October 30




October 31



November 1


C

Example 3Transactions are backdated to a point after the cost cuto date.



187

In the following gure, the inventory transaction is backdated to position D. The transaction is costed with accountingdate D after the cost cuto is moved past October 31. The transaction created on November 2 and backdated toNovember 1 is costed with the eective date of November 1.


November 2



October 30




October 31



November 1


D

Example of Accounting of Trade Transactions in Internal DropShipmentsAn internal drop shipment is a trade transaction involving the movement of goods from an inventory organizationdirectly to a customer, yet the business unit that sells the goods to the customer is dierent from the business unitto which the inventory organization belongs. From the nancial standpoint, the business unit to which the inventoryorganization belongs sells the goods to the other business unit who, in turn, sells the goods to the customer.

The following is an example of accounting performed by Oracle Fusion Cost Accounting and Oracle Fusion ReceiptAccounting for an internal drop shipment. It illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the drop shipment ow from theselling organization to the customer of the buying organization.

• Accounting entries that Receipt Accounting and Cost Accounting generate for the return ow from thecustomer to the seller.



188

ScenarioChina Ltd. drop ships the goods to the customer of US Inc.

Transactions from Oracle Fusion Supply Chain Financial OrchestrationThe trade agreement, accounting rule sets, and associated purchase orders are set up in Oracle Fusion Supply ChainFinancial Orchestration, and the transactions ow into Receipt Accounting and Cost Accounting based on this setup:





• US Inc. books a prot of USD 40 (USD 100 transfer price - USD 50 PO price - USD 10 overhead).


Accounting Entries



189



Sales Order Issue Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr Inventory MAT $50 Cr Inventory OVH $10

Trade In-Transit Issue Dr IC COGS MAT $50 Dr IC COGS OVH $10 Cr Trade In-Transit MAT $50 Cr Trade in-Transit OVH $10




Trade In-Transit Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Dr Trade In-Transit GP $40 Cr Trade Clearing $100

Trade Sales Issue Dr DCOGS MAT $50 Dr DCOGS OVH $10 Dr DCOGS GP $40 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10 Cr Trade In-Transit GP $40



IC AP Invoice Dr IC Accrual $100 Cr IC Liatility $100

Customer AR Invoice Dr Receivable $120 Cr Revenue $120

COGS Recognition Dr COGS MAT $50 Dr COGS OVH $10 Dr COGS GP $40 Cr DCOGS MAT $50 Cr DCOGS OVH $10 Cr DCOGS GP $40

Customer






190



FunctionalCurrency


CostAccounting

Sales OrderIssue

Trade In-Transit

50

USD

Material

Current Cost

CostAccounting

Sales OrderIssue

Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting

Sales OrderIssue

Inventory

-50

USD

Material

Current Cost

CostAccounting

Sales OrderIssue

Inventory

-10

USD

Overhead

Current Cost

CostAccounting



50

USD

Material

Current Cost

CostAccounting



10

USD

Overhead

Current Cost

CostAccounting


Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

-10

USD

Overhead

Current Cost

AccountsReceivable



100

USD

Not Applicable

Transfer Price

AccountsReceivable


IntercompanyRevenue

-100

USD

Not Applicable

Transfer Price





191



FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not Applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-100

USD


Transfer Price

AccountsPayable


IntercompanyAccrual

100

USD

Not Applicable

Transfer Price

AccountsPayable



-100

USD

Not Applicable

Transfer Price

CostAccounting

Trade SalesIssue


50

USD

Material


CostAccounting

Trade SalesIssue


10

USD

Overhead


CostAccounting

Trade SalesIssue


40

USD

Prot inInventory

InternalMarkup

CostAccounting

Trade SalesIssue

Trade In-Transit

-50

USD

Material




192



FunctionalCurrency


CostAccounting

Trade SalesIssue

Trade In-Transit

-10

USD

Overhead


CostAccounting

Trade SalesIssue

Trade In-Transit

-40

USD

Prot inInventory

InternalMarkup

The customer returns goods directly to China Ltd.

The following gure illustrates accounting entries for the return ow from US Inc (Sold-to Legal Entity) to China Ltd(Legal Entity).



193


RMA Receipt Dr Inentory MAT $50 Dr Inventory OVH $10 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10

Trade In-Transit Return Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Cr IC COGS MAT $50 Cr IC COGS OVH $10



Trade Receipt Accrual Dr IC Accrual $100 Cr Trade Clearing $100

Trade In-Transit Return Dr Trade Clearing $100 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10 Cr Trade In-Transit GP $40

Trade Sales Return Receipt Dr Trade In-Transit MAT $50 Dr Trade In-Transit OVH $10 Dr Trade In-Transit GP $40 Cr DCOGS MAT $50 Cr DCOGS OVH $10 Cr DCOGS GP $40



IC AP Debit Memo Dr IC Liability $100 Cr IC Accrual $100

Customer AR Credit Memo Dr Revenue $120 Cr Receivable $120

RMA Gain/Loss Recognition Dr Deferred RMA Gain/Loss MAT $50 Dr Deferred RMA Gain/Loss OVH $10 Dr Deferred RMA Gain/Loss GP $40 Cr RMA Gain/Loss MAT $50 Cr RMA Gain/Loss OVH $10 Cr RMA Gain/Loss GP $40

Customer

IC AR Credit Memo Dr IC Revenue $100 Cr IC Receivable $100





FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

100

USD

Not Applicable

Transfer Price



194



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade Clearing

100

USD

Split into threelines (Material,Overhead,and Prot inInventory)

Transfer Price

CostAccounting


Trade In-Transit

-50

USD

Material


CostAccounting


Trade In-Transit

-10

USD

Overhead


CostAccounting


Trade In-Transit

-40

USD

Prot inInventory

InternalMarkup

AccountsPayable



100

USD

Not Applicable

Transfer Price

AccountsPayable


IntercompanyAccrual

-100

USD

Not Applicable

Transfer Price

CostAccounting


Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting



-50

USD

Material




195



FunctionalCurrency


CostAccounting



-10

USD

Overhead


CostAccounting



-40

USD

Prot inInventory

InternalMarkup


The following table describes those accounting entries.



FunctionalCurrency


CostAccounting

RMA Receipt

Inventory*

50

USD

Material

Current Cost

CostAccounting

RMA Receipt

Inventory

10

USD

Overhead

Current Cost

CostAccounting

RMA Receipt

Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting

RMA Receipt

Trade In-Transit

-10

USD

Overhead

Current Cost

CostAccounting


Trade In-Transit

50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting



-50

USD

Material

Current Cost



196



FunctionalCurrency


CostAccounting



-10

USD

Overhead

Current Cost

AccountsReceivable


IntercompanyRevenue

100

USD

Not Applicable

Transfer Price

AccountsReceivable



-100

USD

Not Applicable

Transfer Price


Related Topics• Overview of Global Procurement Trade Accounting• Review Item Cost and Global Procurement Trade Transaction Accounting• Example of Accounting of Global Procurement Trade Transactions into Inventory

Example of Accounting of Interorganization Transfers Within theSame Business UnitAn interorganization transfer is a trade transaction involving the movement of goods or services between organizationsin the supply chain. When the transfer occurs between organizations within the same prot center business unit, thetransfer is always at cost and there is no intercompany invoicing. Oracle Fusion Cost Accounting creates the tradeevents and they do not ow through Oracle Fusion Supply Chain Financial Orchestration.

The following is an example of accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for an interorganization transfer of goods between inventory organizations within the same prot centerbusiness unit.

ScenarioInventory organization M1 makes a transfer of goods to inventory organization M2. Both inventory organizations areunder the prot center business unit US West, which is under the legal entity US Inc.

Interorganization TransferThe cost of goods transferred from M1 to M2 is USD 50 plus overhead of USD 10.

AnalysisReceipt Accounting and Cost Accounting create accounting entries for the transfer of goods.



197

The following gure illustrates those accounting entries.


Trade In-Transit ReceiptDr Trade In-Transit MAT $50Dr Trade In-Transit OVH $10Cr Trade Clearing $60

Interorganization Delivery Dr Inventory MAT $50 Dr Inventory OVH $10 Cr Receiving Inspection $60






Trade In-Transit Issue Dr IO Receivable $60 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10

US Inc (Shipping LE)US West (Shipping Profit

Ctr BU)CO1 (Shipping Cst Org)M1 (Shipping Inv Org)

Accounting EntriesReceipt Accounting generates distributions under business unit US West and inventory organization M1. CostAccounting generates distributions under cost organization CO1 and inventory organization M1.




198



FunctionalCurrency


CostAccounting

In-TransitShipment

Trade In-Transit

50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting

In-TransitShipment

Inventory

-50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Inventory

-10

USD

Overhead

Current Cost

CostAccounting



60

USD

Material +Overhead

Current Cost

CostAccounting


Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

-10

USD

Overhead

Current Cost





FunctionalCurrency


ReceiptAccounting


Trade Clearing

60

USD

Not Applicable


ReceiptAccounting



-60

USD

Not Applicable


CostAccounting


Trade In-Transit

50

USD

Material




199



FunctionalCurrency


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade Clearing

-60

USD

Material +Overhead


ReceiptAccounting


ReceivingInspection

60

USD

Not Applicable


ReceiptAccounting


Trade In-Transit

-60

USD

Not Applicable


CostAccounting


Inventory

50

USD

Material


CostAccounting


Inventory

10

USD

Overhead


CostAccounting


ReceivingInspection

-60

USD

Material +Overhead


Related Topics

• Example of Accounting of Interorganization Transfers Across Business Units


Example of Accounting of Interorganization Transfers AcrossBusiness UnitsThis example illustrates:


• Accounting entries that Receipt Accounting and Cost Accounting generate for the transfer of goods acrossprot center business units.



200

ScenarioChina Ltd. ships the goods to US Inc. The organizations are in two dierent prot center business units.




• Intercompany invoicing is set to No.



• China Ltd. books a prot of USD 40 (USD 100 transfer price - USD 50 acquisition cost - USD 10 overhead).


Accounting Entries



201




Interorganization Delivery Dr Inventory MAT $50 Dr Inventory OVH $10 Dr Inventory GP $40 Cr Receiving Inspection $100






Trade In-Transit Issue Dr IO Receivable $100 Cr Trade In-Transit MAT $50 Cr Trade In-Transit OVH $10 Cr IO Gain/Loss $40




The following table describes the distributions:



202



FunctionalCurrency


CostAccounting

In-TransitShipment

Trade In-Transit

50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Trade In-Transit

10

USD

Overhead

Current Cost

CostAccounting

In-TransitShipment

Inventory

-50

USD

Material

Current Cost

CostAccounting

In-TransitShipment

Inventory

-10

USD

Overhead

Current Cost

CostAccounting



100

USD

Material,Overhead

Transfer Price

CostAccounting


Trade In-Transit

-50

USD

Material

Current Cost

CostAccounting


Trade In-Transit

-10

USD

Not applicable

InternalMarkup(Transfer Priceminus CurrentCost)

CostAccounting


InterorganizationGain/Loss

-40

USD

Not applicable

InternalMarkup





FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

Transfer Price

ReceiptAccounting



-100

USD

Not applicable

Transfer Price



203



FunctionalCurrency


CostAccounting


Trade In-Transit

50

USD

Material


CostAccounting


Trade In-Transit

10

USD

Overhead


CostAccounting


Trade In-Transit

40

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-100

USD


Transfer Price

ReceiptAccounting


ReceivingInspection

100

USD

Not applicable

Transfer Price

ReceiptAccounting


Trade In-Transit

-100

USD

Not applicable

Transfer Price

CostAccounting


Inventory

50

USD

Material


CostAccounting


Inventory

10

USD

Overhead


CostAccounting


Inventory

40

USD

Prot inInventory

InternalMarkup

CostAccounting


ReceivingInspection

-100

USD


Transfer Price

Related Topics

• Example of Accounting of Interorganization Transfers Within the Same Business Unit




204

Example of Consigned Inventory Accounting in a Simple PurchaseOrderWhen an organization receives a shipment of goods under a consignment purchase order, the ownership of the goodsremains with the supplier even after they are in the custody of the buyer. Ownership passes from the supplier to thebuyer when the inventory is consumed.

When the inventory is consumed, two events occur: First there is a transfer of ownership to the buyer and the consignedgoods become owned inventory for a brief period of time, then the owned inventory is depleted.


• The physical and nancial ow of consigned inventory under a consigned purchase order (PO).

• The transaction that ows from Oracle Fusion Inventory Management into Oracle Fusion Cost Accounting andOracle Fusion Receipt Accounting.



ScenarioSupplier Advanced Network Devices (AND-Fresno) ships the goods under a consigned purchase order to inventoryorganization M1-Seale.



205

The following diagram illustrates the ow of consigned inventory:


(AND-Fresno)

Inventory Organization M1-SeattleConsigned Owner = AND-FresnoContingent Owner = M1-Seattle

Inventory Organization M1-SeattleOwner = M1-Seattle

OwnershipChange

Financial Flow

Physical Flow

Transaction from Oracle Fusion Inventory ManagementCost Accounting and Receipt Accounting receive the following transaction from Inventory:






206



• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M1-Seale.


Accounting Entries



207

The following diagram illustrates the accounting entries for the forward ow from supplier AND-Fresno to inventoryorganization M1-Seale.

AND-FresnoSupplier

Physical Flow


M1- SeattleOwner

Ownership Change


Dr Inventory ValuationCr Trade In-Transit

M1:Transfer to Owned IssueDr Consigned Inventory Offset

Cr Consigned Inventory


Cr Accrual

M1:Trade In-Transit ReceiptDr Trade In-TransitCr Trade Clearing



M1:Consigned Receipt ConsumptionDr Consigned AccrualCr Consigned Clearing

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seale for thereceipt of goods.




208


TransactionType


FunctionalCurrency

Basis ofAmount

ReceiptAccounting

PO Receipt

ConsignedClearing

Debit

100

USD

PO Price

ReceiptAccounting

PO Receipt

ConsignedAccrual

Credit

100

USD

PO Price

CostAccounting

PO Delivery

ConsignedInventory

Debit

100

USD

PO Price

CostAccounting

PO Delivery

ConsignedClearing

Credit

100

USD

PO Price

Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seale for thechange of ownership from supplier AND-Fresno to M1-Seale.



TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting



Debit

100

USD

Material

PO Price

CostAccounting


ConsignedInventory

Credit

100

USD

Material

PO Price

ReceiptAccounting


ConsignedAccrual

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting


ConsignedClearing

Credit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReceiptAccrual

TradeClearing

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReceiptAccrual

Accrual

Credit

100

USD

Notapplicable

PO Price



209


TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting


Trade In-Transit

Debit

100

USD

Material

PO Price

CostAccounting


TradeClearing

Credit

100

USD

Material

PO Price

CostAccounting


InventoryValuation

Debit

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

Credit

100

USD

Material

PO Price

Organization M1-Seale returns goods to supplier AND-Fresno.

This gure illustrates the accounting entries for the return ow from M1-Seale to AND-Fresno.



210

AND-FresnoSupplier

Physical Flow


M1- SeattleOwner

Ownership Change

M1:Transfer to Cons (Issue)Dr Trade In-Transit

Cr Inventory Valuation

M1:Transfer to Cons (Recpt)Dr Consigned Inventory

Cr Consigned Inventory Offset

M1:Trade Return AccrualDr Accrual

Cr Trade Clearing

M1:Trade In-Transit ReturnDr Trade ClearingCr Trade In-Transit


M1:PO Return to ReceivingDr Consigned ClearingCr Consigned Inventory

LegendCons = Consigned

Recpt = Receipt

M1:Consigned Recpt Consumption


Receipt Accounting and Cost Accounting generate accounting entries under inventory organization M1-Seale for thechange of ownership from M1-Seale to supplier AND-Fresno.

The following table describes the accounting entries for the change in ownership.



211


TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting


ConsignedInventory

Debit

100

USD

Material

PO Price

CostAccounting



Credit

100

USD

Material

PO Price

ReceiptAccounting


ConsignedClearing

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting


ConsignedAccrual

Credit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReturnAccrual

Accrual

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting

TradeReturnAccrual

TradeClearing

Credit

100

USD

Notapplicable

PO Price

ReceiptAccounting


TradeClearing

Debit

100

USD

Notapplicable

PO Price

ReceiptAccounting


Trade In-Transit

Credit

100

USD

Notapplicable

PO Price

CostAccounting


Trade In-Transit

Debit

100

USD

Material

PO Price

CostAccounting


CostVariance*

Debit

5

USD

Notapplicable

Inventory isreceived atthe currentcost, and thedierencebetweentransferprice andcost isbookedas costvariance.



212


TransactionType


FunctionalCurrency

CostElement

Basis ofAmount

CostAccounting


InventoryValuation

Credit

105

USD

Material

Current Cost


Receipt Accounting generates accounting entries under inventory organization M1-Seale for the return of consignedgoods from M1-Seale to AND-Fresno.




FunctionalCurrency

Basis of Amount

ReceiptAccounting


Consigned Accrual

100

USD

PO Price

ReceiptAccounting


ConsignedClearing

-100

USD

PO Price

ReceiptAccounting


ConsignedClearing

100

USD

PO Price

ReceiptAccounting


ConsignedInventory

-100

USD

PO Price

Related Topics• Cost Proles, Default Cost Proles, and Item Cost Proles• What are the accounting distribution basis options for consigned inventory transactions• Consigned Inventory Lifecycle• Consigned Inventory

Example of Consigned Inventory Accounting in a Global PurchaseOrderMost large enterprises use a global procurement approach to their purchasing needs, where a central buyingorganization buys goods from suppliers on behalf of the internal organizations. This includes trade transactionsinvolving consigned inventory executed under a global purchase order. Oracle Fusion Receipt Accounting and OracleFusion Cost Accounting process these consigned inventory transactions and generate subledger journal entries.






213


• The physical and nancial ow of consigned inventory in a global purchase order.

• Transactions that ow from Oracle Fusion Inventory into Cost Accounting and Receipt Accounting.

• Transactions that ow from Oracle Fusion Supply Chain Financial Orchestration into Cost Accounting andReceipt Accounting.





214

ScenarioThe supplier AND-Fresno ships the goods in consigned status to inventory organization M2-LA, through the purchasingtrade organization M1-Seale.


(AND-Fresno)

Sold-to Legal EntitySold-to Profit Center BU 1

Purchasing Trade Org = M1-Seattle

Profit Center BU 2Inventory Organization M2-LA

Owner = M2-LA

OwnershipChange

FinancialFlow

Profit Center BU 2Ship-To Inventory Org M2-LA

Consigned Owner = AND-FresnoContingent Owner = M2-LAFinancial

Flow

PhysicalFlow

LegendBU = Business UnitOrg = Organization






215

• Sold-to Legal Entity is LE1.

• Ship-to organization is M2-LA which is also the contingent owner. Contingent owner assumes ownership fromthe supplier when inventory is consumed.

• Receipt and put away transactions performed in M2-LA in consigned status.

• Ownership changes from supplier AND-Fresno to M2-LA through M1-Seale when the goods are consumed.

The trade agreement, accounting rule sets, and associated purchase orders are set up in Supply Chain FinancialOrchestration, and the transactions ow into Receipt Accounting and Cost Accounting. The shipment from supplier toinventory organization M2-LA is based on trade agreement GP #123 which has the following terms:







216


Legend Inv = Inventory IC = Intercompany COGS = Cost of Goods Sold Recpt = Receipt MAT = Material GP = Gross Profit

AND-FresnoSupplier



M2-LA

M1-SeattleOwner

Physical Flow



M1:Trade In-Transit Issue

Dr IC COGSCr Trade In-Transit






M2:Trade In-Transit RecptDr Trade In-Transit MATDr Trade In-Transit GP

Cr Trade Clearing

M1:Trade Receipt Accrual

Dr Trade ClearingCr Accrual


Cr IC Accrual

M1:Trade In-Transit Recpt


M2:Consigned Receipt Consignment

Dr Consigned AccrualCr Consigned Clearing

OwnershipChange

OwnershipChange

Receipt Accounting generates distributions under inventory organization M2-LA for the consigned shipment fromsupplier AND-Fresno to M2-LA.



217



FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedInventory

100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedClearing

-100

USD

PO Price




FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

ReceiptAccounting


Trade In-Transit

100

USD

Not applicable

PO Price

ReceiptAccounting


Trade clearing

-100

USD

Not applicable

PO Price

CostAccounting



100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price




218



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


ConsignedInventory

-100

USD

Material

PO Price

ReceiptAccounting


ConsignedAccrual

100

USD

Not applicable

PO Price

ReceiptAccounting


ConsignedClearing

-100

USD

Not applicable

PO Price

ReceiptAccounting


Trade Clearing

120

USD

Not applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-120

USD

Not applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-120

USD

Material

Transfer Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


InventoryValuation

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price



219



FunctionalCurrency


CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

Organization M2-LA returns goods to supplier AND-Fresno. The following are accounting entries for the return ow.



220

Legend Inv = Inventory IC = Intercompany COGS = Cost of Goods Sold Recpt = Receipt Ret = Return MAT = Material GP = Gross Profit OH = Overhead

OwnershipChange


M2:PO Ret to ReceivingDr Consigned ClearingCr Consigned Inventory

M1:Trade In-Transit Return Receipt

Dr Trade In-TransitCr IC COGS

M2:Transfer to Consigned Issue

Dr Inv Valuation MATDr Inv Valuation GPDr Inv Valuation OH

Cr trade In-Transit MATCr Trade In-TransitCr Cost Variance

M2:Transfer to Consigned (Receipt)

Dr Consigned InventoryCr Consigned Inv Offset

M2:Trade In-Transit Ret Dr Trade ClearingCr Trade In-TransitM1:Trade Ret Accrual

Dr AccrualCr Trade Clearing

M2:Trade Ret AccrualDr IC Accrual

Cr Trade Clearing

M1:Trade In-Transit RetDr Trade ClearingCr Trade In-Transit

AND-FresnoSupplier



M2-LA

M1-SeattleOwner

OwnershipChange

PhysicalFlow

M2:Consigned Receipt Consumption


Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for the change ofownership from M2-LA to M1-Seale:



221



FunctionalCurrency


CostAccounting


ConsignedInventory

100

USD

Material

PO Price

CostAccounting



-100

USD

Material

PO Price

ReceiptAccounting

Trade ReturnAccrual

IntercompanyAccrual

120

USD

Not applicable

Transfer Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-120

USD

Not applicable

Transfer Price

CostAccounting


Trade Clearing

120

USD

Material

Transfer Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

CostAccounting


ConsignedClearing

100

USD

Material

PO Price

CostAccounting


ConsignedAccrual

-100

USD

Material

PO Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


InventoryValuation

20

USD

Prot inInventory

InternalMarkup

CostAccounting


InventoryValuation

10

USD

Overhead

Not applicable



222



FunctionalCurrency


CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

CostAccounting


Cost Variance*

-10

USD

Material

Not applicable


Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-LA for the change ofownership from M1-LA to supplier AND-Fresno:



FunctionalCurrency


ReceiptAccounting

Trade ReturnAccrual

Accrual

100

USD

Not applicable

PO Price

ReceiptAccounting

Trade ReturnAccrual

Trade Clearing

-100

USD

Not applicable

PO Price

CostAccounting


Trade Clearing

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting



-100

USD

Material

PO Price



223

Receipt Accounting generates distributions under inventory organization M2-LA for the return shipment from M2-LA tosupplier AND-Fresno:



FunctionalCurrency

Basis of Amount

ReceiptAccounting


Consigned Accrual

100

USD

PO Price

ReceiptAccounting


ConsignedClearing

-100

USD

PO Price

ReceiptAccounting


ConsignedClearing

100

USD

PO Price

ReceiptAccounting


ConsignedInventory

-100

USD

PO Price

Related Topics

• Overview of Global Procurement Trade Accounting

• What are the accounting distribution basis options for consigned inventory transactions



Example of Consigned Inventory Accounting of anInterorganization Transfer Across Business UnitsAn interorganization transfer is a trade transaction involving the movement of goods or services between organizationsin the supply chain. The following is an example of accounting performed by Oracle Fusion Cost Accounting and OracleFusion Receipt Accounting in a simple purchase order with an interorganization transfer of goods across prot centerbusiness units. The goods remain in consigned status until ownership changes in the receiving organization.



• Transactions captured in Oracle Fusion Supply Chain Financial Orchestration and interfaced to Cost Accountingand Receipt Accounting.







224

ScenarioSupplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M1-Seale, who in turn transfers the consigned goods to inventory organization M2-LA. Inventory organizations, M1-Sealeand M2-LA, are in dierent business units.


(AND-Fresno)

Business Unit 1Inventory Organization M1-SeattleConsigned Owner = AND-FresnoContingent Owner = M1-Seattle


Owner = M2-LA

OwnershipChange



Consigned Owner = AND-FresnoContingent Owner = M1-SeattleFinancial Flow

Physical Flow

Interfaced TransactionsOracle Fusion Inventory sends the following transactions to Receipt Accounting and Cost Accounting:




225





• Goods transferred in consigned status from inventory organization M1-Seale to M2-LA.

• When the goods are consumed ownership changes from supplier AND-Fresno to inventory organization M2-LAthrough M1-Seale.

Oracle Fusion Supply Chain Financial Orchestration sets up the trade agreement, accounting rule sets, and associatedpurchase orders, and the information ows into Receipt Accounting and Cost Accounting. The transfer from M1-Sealeto M2-LA is based on trade agreement SFO #123 which has the following terms:







226


M1:Trade In-Transit IssueDr IC COGS

Cr Trade In-Transit







Dr Trade In-Transit MATDr Trade In-Transit GP

Cr Trade Clearing


Cr Accrual


Cr IC Accrual













AND-FresnoSupplier

M2-LAOwner

Physical Flow

Ownership Change


M2-LAConsigned Owner

Physical Flow

Legend Inv = Inventory IC = Intercompany COGS = Cost of Goods Sold MAT = Material GP = Gross Profit Recpt = Receipt

Receipt Accounting generates distributions under inventory organization M1-Seale for the shipment from supplierAND-Fresno to M1-Seale.



227



FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedInventory

100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedClearing

-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M1-Seale for the interorganization transfer fromM1-Seale to M2-LA.



FunctionalCurrency

Basis of Amount

Cost Accounting

In-TransitShipment


100

USD

PO Price

Cost Accounting

In-TransitShipment

ConsignedInventory

-100

USD

PO Price

Cost Accounting


ConsignedReceivable

100

USD

PO Price

Cost Accounting



-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M2-LA for theinterorganization transfer from M1-Seale to M2-LA.



FunctionalCurrency

Basis of Amount

ReceiptAccounting


Trade Clearing

100

USD

PO Price



228



FunctionalCurrency

Basis of Amount

ReceiptAccounting



-100

USD

PO Price

ReceiptAccounting


ConsignedClearing

100

USD

PO Price

ReceiptAccounting

Consigned ReceiptConsumption

Trade Clearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

ConsignedInspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt


-100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInspection

-100

USD

PO Price




FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price



229



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M1-Seale for the changeof ownership from M1-Seale to M2-LA.



FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price

CostAccounting



100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price




230



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


ConsignedInventory

-100

USD

Material

PO Price

ReceiptAccounting


Trade Clearing

120

USD

Not applicable

Transfer Price

ReceiptAccounting


IntercompanyAccrual

-120

USD

Not applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade Clearing

-120

USD

Material

Transfer Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


InventoryValuation

20

USD

Prot inInventory

InternalMarkup

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-20

USD

Prot inInventory

InternalMarkup

Inventory organization M2-LA returns the goods to supplier AND-Fresno. The return of the consignment is executed intwo parts:

• An interorganization transfer from M2-LA to M1-Seale. The accounting is the same as simple purchase orderreturn transactions.



231

• A consignment return from M1-Seale to the supplier. The accounting is the same as regular return to suppliertransactions.

Related Topics

• Example of Consigned Inventory Accounting in a Simple Purchase Order

• Example of Consigned Inventory Accounting of an Interorganization Transfer Within the Same Business Unit

• What are the accounting distribution basis options for consigned inventory transactions



Example of Consigned Inventory Accounting of anInterorganization Transfer Within the Same Business UnitAn intraorganization transfer is a trade transaction involving the movement of goods or services between organizationsin the supply chain. The following is an example of accounting performed by Oracle Fusion Cost Accounting and OracleFusion Receipt Accounting for an interorganization transfer of goods within the same prot center business unit.









232

ScenarioSupplier Advanced Network Devices (AND-Fresno) ships the goods in consigned status to inventory organization M3-NY, who in turn transfers the goods to inventory organization M4-NJ. Inventory organizations, M3-NY and M4-NJ, arewithin the same business unit.


(AND-Fresno)

Inventory Organization M3-NYConsigned Owner = AND-Fresno

Contingent Owner = M3-NY

Inventory Organization M4-NJOwner = M4-NJ

OwnershipChange


Inventory Organization M4-NJConsigned Owner = AND-Fresno

Contingent Owner = M4-NJFinancial Flow

Physical Flow





233


• Ship-to organization is M3-NY which is also the contingent owner. Contingent owner assumes ownership fromthe supplier when inventory is consumed.

• Receipt and put away transactions are performed in M3-NY in consigned status.

• Goods are transferred in consigned status from M3-NY to M4-NJ.

• Ownership changes from supplier to M4-NJ through M3-NY when the goods are consumed.

Cost Accounting generates transactions for:

• Ownership changes from supplier AND-Fresno to inventory organization M3-NY and from M3-NY to M4-NJ.

• Transfer of goods from M3-NY to M4-NJ. The transfer is at cost because the organizations are within the sameprot center business unit.





234

The following diagram lists the accounting entries for the forward ow.

AND-FresnoSupplier

M4-NJOwner

Physical Flow

Ownership Change

M3-NYConsigned Owner

M4-NJConsigned Owner

Physical Flow

M3:Trade In-Transit IssueDr Interorg Receivable

Cr Trade In-Transit


Dr Inv Valuation MATCr Trade In-Transit






Cr Accrual


Cr Interorg Payable













Legend Inv = Inventory Interorg = Interorganization MAT = Material Recpt = Receipt

The following table lists the distributions that Receipt Accounting generates under inventory organization M3-NY forthe shipment from supplier AND-Fresno to M3-NY.



235



FunctionalCurrency

Basis of Amount

ReceiptAccounting

PO Receipt

ConsignedClearing

100

USD

PO Price

ReceiptAccounting

PO Receipt

Consigned Accrual

-100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedInventory

100

USD

PO Price

ReceiptAccounting

PO Delivery

ConsignedClearing

-100

USD

PO Price

The following table lists the distributions generated by Cost Accounting under inventory organization M3-NY for theinterorganization transfer from M3-NY to organization M4-NJ.



FunctionalCurrency

Basis of Amount

Cost Accounting

In-TransitShipment


100

USD

PO Price

Cost Accounting

In-TransitShipment

ConsignedInventory

-100

USD

PO Price

Cost Accounting


ConsignedReceivable

100

USD

PO Price

Cost Accounting



-100

USD

PO Price

Cost Accounting generates distributions under inventory organization M4-NJ for the interorganization transfer fromM3-NY to M4-NJ.



FunctionalCurrency

Basis of Amount

Cost Accounting


ConsignedClearing

100

USD

PO Price



236



FunctionalCurrency

Basis of Amount

Cost Accounting


ConsignedPayable

-100

USD

PO Price

Cost Accounting



100

USD

PO Price

Cost Accounting


ConsignedClearing

-100

USD

PO Price

Cost Accounting

In-Transit Receipt

ConsignedInspection

100

USD

PO Price

Cost Accounting

In-Transit Receipt


-100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInventory

100

USD

PO Price

Cost Accounting

In-Transit Delivery

ConsignedInspection

-100

USD

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M3-NY for the change ofownership from supplier AND-Fresno to M3-NY.



FunctionalCurrency


ReceiptAccounting


Trade Clearing

100

USD

Not applicable

PO Price

ReceiptAccounting


Accrual

-100

USD

Not applicable

PO Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price

CostAccounting



100

USD

Material

PO Price



237



FunctionalCurrency


CostAccounting


Trade In-Transit

-100

USD

Material

PO Price

Receipt Accounting and Cost Accounting generate distributions under inventory organization M4-NJ for the change ofownership from M3-NY to M4-NJ.



FunctionalCurrency


CostAccounting



100

USD

Material

PO Price

CostAccounting


ConsignedInventory

-100

USD

Material

PO Price

ReceiptAccounting


Trade Clearing

100

USD

Not applicable

Transfer Price

ReceiptAccounting



-100

USD

Not applicable

Transfer Price

CostAccounting


Trade In-Transit

100

USD

Material

PO Price

CostAccounting


Trade Clearing

-100

USD

Material

PO Price

CostAccounting


InventoryValuation

100

USD

Material

PO Price

CostAccounting


Trade In-Transit

-100

USD

Material

PO Price



238

Inventory organization M4-NJ returns goods to supplier AND-Fresno. The return of the consignment is executed in twoparts:

• An interorganization transfer from M4-NJ to M3-NY. The accounting is the same as simple purchase orderreturn transactions.

• A consignment return from M3-NY to the supplier. The accounting is the same as regular return to suppliertransactions.

Related Topics• Example of Consigned Inventory Accounting of an Interorganization Transfer Across Business Units• What are the accounting distribution basis options for consigned inventory transactions• Consigned Inventory Lifecycle• Consigned Inventory

Tax Accounting for Receipt TransactionsTo comply with tax regulations, calculate taxes and generate tax distributions for all receipt transactions. You cancapture item prices, inclusive and exclusive taxes on your purchases. Receipt costs are adjusted to account inclusivetaxes that were included in the item purchase price. Inclusive taxes are booked to a tax liability or recovery account.

You congure the tax point basis and tax point date in Oracle Fusion Financials. Based on this conguration, taxes arecalculated either on delivery or invoice generation. For more information about conguring and calculating taxes, seethe Oracle Financials Cloud Using Tax guide available on the Oracle Help Center.

Prerequisites

Congure the following to automatically calculate and account taxes. You must have the Application ImplementationConsultant role to do these tasks.

• In the Oerings work area, enable the Tax Calculation on Receipt Accounting Distributions feature at theFinancials oering level.

• Enable delivery-based tax calculation for invoices:a. In the Setup and Maintenance work area, go to the following:

• Oering: Financials• Functional Area: Transaction Tax• Task: Manage Conguration Owner Tax

b. From the Conguration Owner drop-down list, select the relevant business unit.c. From the Application Name drop-down list, select Payables.d. From the Event Class drop-down list, select Standard Invoices.e. From the Tax Point Basis drop-down list, select Invoice.f. From the Tax Point Date drop-down list, select Receipt Date.

For more information about conguring and calculating taxes, see the Oracle Financials Cloud Using Taxguide available on the Oracle Help Center.

• Congure the application to automatically calculate taxes for trade receipt accrual:a. In the Setup and Maintenance work area, go to the following:

• Oering: Manufacturing and Supply Chain Materials Management





239

• Functional Area: Supply Chain Financial Flows• Task: Manage Supply Chain Financial Orchestration System Options

b. Select Calculate tax for trade receipt accrual.

• Congure the application to automatically calculate and account nonrecoverable taxes on intercompanyinvoices:

a. Navigate to the Financial Orchestration work area.b. In the Tasks pane, click Manage Documentation and Accounting Rules.c. Click the required documentation and accounting rule.d. Under Required Tasks, select Intercompany Invoices.

How Taxes are Calculated and Accounted

Here's how taxes are calculated and accounted for dierent combinations of tax point basis and tax point dates:


Delivery

Receipt Date


Recoverable andnonrecoverable taxesare accounted ongoods receipt

Not Applicable

Invoice

Receipt Date


• Nonrecoverabletaxes areaccounted ongoods receipt

• Recoverabletaxes areaccountedon invoicegeneration

Not Applicable

Invoice

Invoice Date

Taxes are calculated oninvoice generation

Recoverable andnonrecoverable taxesare accounted oninvoice generation

Tax variance iscalculated andaccounted fordierence in the taxesestimated on purchaseorder and nal taxcalculated on invoice

Receipt Accounting receives transactions and related tax determinants from outside sources such as Oracle FusionReceiving, Inventory, and Accounts Payable. The following discusses:

• Import of tax determinants into Receipt Accounting

• Tax distributions created by Receipt Accounting

• Tax distributions by Cost Accounting



240

• Review of tax distributions

Receiving

Accounts PayableInventory

Transactions and Tax

Determinants

Receipt Accounting

Cost Accounting

Create Cost Accounting DistributionsCreate Receipt

Accounting Distributions and Calculate Taxes

Review Receipt Accounting Distributions

and Tax Details

Review Cost Accounting Distributions and

Inventory Valuation

Tax Calculations

Acquisition Cost Processor

Transactions

Import Tax DeterminantsHere's how you can import transactions and related tax determinants from outside sources on the Scheduled Processespage in the Scheduled Processes work area.

• Select the Transfer Transactions from Receiving to Receipt Accounting process to import receipt transactionsinto Receipt Accounting.

• Select the Transfer Costs to Cost Management process to import accounts payable transactions into ReceiptAccounting and Cost Accounting.



241

Tax Distributions by Receipt AccountingThe Receipt Accounting Processor calls the Tax Application Programming Interface to calculate transaction taxes basedon imported tax determinants. The processor also generates tax distributions for receipt transactions.

Run the Receipt Accounting Processor on the Create Receipt Accounting Distributions page in the Receipt Accountingwork area.

Tax Distributions by Cost AccountingThe Cost Accounting Processor uses tax results generated by Receipt Accounting to calculate inventory acquisitioncosts including nonrecoverable taxes.

Run the Cost Accounting Processor on the Create Cost Accounting Distributions page in the Cost Accounting work area.

Review Tax DistributionsOn the Review Receipt Accounting Distributions page in the Receipt Accounting work area view results of the ReceiptAccounting Processor:

• Distributions and journal entries for receipt transactions

• Tax determinants accessed by clicking the links in the Tax Determinants column

• Transaction taxes accessed by clicking the Transaction Unit Cost links in the Cost Information tab

On the Review Cost Accounting Distributions page in the Cost Accounting work area view results of the Cost AccountingProcessor:

• Distributions and journal entries for inventory transactions

• Inventory unit costs including taxes in the Cost Information tab

Related Topics

• Example of Tax Accounting for a Simple Procurement Transaction

• Example of Tax Accounting for a Consigned Inventory Transaction

• Example of Tax Accounting for a Purchase Order Retroactive Price Change

• Example of Tax Accounting for Interorganization Transfers Across Business Units

• Example of Tax Accounting for Internal Drop Shipments

Example of Tax Accounting for a Simple Procurement TransactionThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for a simple procurement transaction that uses a tax point basis of delivery, that is, taxes are accounted atreceipt of the goods.

ScenarioThe supplier makes a shipment to the inventory organization based on a purchase order (PO) for USD 1,000, with thefollowing tax details:





242

Tax Details at Receipt and InvoiceTax details at the time of receipt of goods are:

• Tax A delivery basis = 15%, which is changed from 10% estimated at the time of purchase order. Recoverableand nonrecoverable portions are both 50%, which is equal to USD 75 (that is, USD 1,000 * 15% * 50%).

• Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable andnonrecoverable portions are both 50%, which is equal to USD 125 (that is, USD 1,000 * 25% * 50%).


• Tax A delivery basis = 20%, which is changed from 15% reported and accounted on receipt. Recoverable andnonrecoverable portions are both 50%, however taxes are not recalculated because this transaction uses a taxpoint basis of delivery.

• Tax B invoice basis = 30%, which is changed from 25% estimated on receipt. Recoverable and nonrecoverableportions are both 50%, which is equal to USD 150.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions when the goods are received and when theinvoice is accounted.

Tax Accounting EntriesReceipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt:



FunctionalCurrency


ReceiptAccounting

PO Receipt

ReceivingInspection

1,000

USD

Material

PO Price

ReceiptAccounting

PO Receipt

ReceivingInspection

75

USD

Tax


ReceiptAccounting

PO Receipt

TaxRecoverable

75

USD

Tax


ReceiptAccounting

PO Receipt

ReceivingInspection

125

USD

Tax




243



FunctionalCurrency


ReceiptAccounting

PO Receipt

SupplierAccrual

-1,275

USD

Not applicable

Not applicable

CostAccounting

PO Delivery

InventoryValuation

1,200*

USD

Not applicable

Not applicable

CostAccounting

PO Delivery

ReceivingInspection

-1,200*

USD

Not applicable

Not applicable


Accounts Payable generates the following accounting entries for the supplier when invoice is created:



FunctionalCurrency


AccountsPayable

Invoice

SupplierAccrual

1,275

USD

Not applicable

Not applicable

AccountsPayable

Invoice

TaxRecoverable

150

USD

Tax

Tax B Invoice-BasedRecoverable:USD 1,000 *30% * 50%

AccountsPayable

Invoice

Tax B RateVariance*

25

USD

Not applicable

Dierencebetween taxestimated at25% and actualcalculated at30%

AccountsPayable

Invoice

SupplierLiability

-1,450

USD

Not applicable

Not applicable

*Tax variance due to the dierence between rates at time of delivery versus invoice.




244


Functional Currency

Receipt Accounting

Invoice Price


25

USD

Receipt Accounting



-25

USD

Cost Accounting



25

USD

Cost Accounting



-25

USD



Related Topics• Tax Accounting for Receipt Transactions• What's a tax point basis• What's a tax point date• When are nonrecoverable taxes calculated on Intercompany transactions

Example of Tax Accounting for a Consigned Inventory TransactionThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for a consigned inventory transaction in the supply chain. This transaction uses a tax point basis of delivery,that is, taxes are accounted at receipt of the goods.

ScenarioThe supplier makes a consigned shipment to the inventory organization based on a consigned purchase order (PO) forUSD 1,000 with the following tax details:



Tax Details at Receipt and InvoiceTax details at the consigned receipt of goods are:


• Tax A delivery basis = 15%, which is changed from 10% estimated at the time of PO. Recoverable andnonrecoverable portions are both 50%, or USD 75, that is, USD 1,000 * 15% * 50%.

• Tax B invoice basis = 25%, which is changed from 20% estimated at the time of PO. Recoverable andnonrecoverable portions are both 50%, or USD 125, that is, USD 1,000 * 25% * 50%.



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• Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both both 50%, however taxes arenot recalculated because this transaction uses a tax point basis of delivery.

• Tax B invoice basis = 30%, which is changed from 25% estimated at the time of receipt. Recoverable andnonrecoverable portions are both 50%, or USD 150.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions when the consigned good are received, whenthe status changes from consigned to owned, and when the invoice is accounted.

Tax Accounting EntriesReceipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of consignedgoods:



FunctionalCurrency


ReceiptAccounting

Consigned POReceipt

ConsignedClearing

1,000

USD

Material

PO Price

ReceiptAccounting

Consigned POReceipt

ConsignedClearing

75

USD

Tax


ReceiptAccounting

Consigned POReceipt

ConsignedClearing

125

USD

Tax


ReceiptAccounting

Consigned POReceipt

ConsignedAccrual

-1,200

USD

Not applicable

Not applicable

CostAccounting


ConsignedInventory*

1,200

USD

Not applicable

Not applicable

ReceiptAccounting


ConsignedClearing

-1,200

USD

Not applicable

Not applicable




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Receipt Accounting and Cost Accounting generate the following accounting entries at the time of change of status fromconsigned to owned stock:



FunctionalCurrency


ReceiptAccounting


ConsignedAccrual

1,000

USD

Material

PO Price

ReceiptAccounting


ConsignedAccrual

75

USD

Not applicable


ReceiptAccounting


ConsignedAccrual

125

USD

Not applicable


ReceiptAccounting


ConsignedClearing

-1,200

USD

Not applicable

Not applicable

CostAccounting



1,000

USD

Material

PO Price

CostAccounting



75

USD

NonrecoverableTax


CostAccounting



125

USD

NonrecoverableTax


CostAccounting


ConsignedInventory

-1,200

USD

Not applicable

PO Price

ReceiptAccounting


Trade Clearing

1,000

USD

Not applicable

PO Price

ReceiptAccounting


Trade Clearing

75

USD

Not applicable




247



FunctionalCurrency


ReceiptAccounting


Trade Clearing

125

USD

Not applicable


ReceiptAccounting


TaxRecoverable*

75

USD

Not applicable

Tax A Delivery-BasedRecoverable

ReceiptAccounting


SupplierAccrual

-1,275

USD

Not applicable

Not applicable

CostAccounting


Trade In-Transit

1,000

USD

Not applicable

PO Price

CostAccounting


Trade In-Transit

75

USD

Not applicable


CostAccounting


Trade In-Transit

125

USD

Not applicable


CostAccounting


Trade Clearing

-1,200

USD

Not applicable

Not applicable

CostAccounting


InventoryValuation

1,000

USD

Material

PO Price

CostAccounting


InventoryValuation

75

USD

NonrecoverableTax


CostAccounting


InventoryValuation

125

USD

NonrecoverableTax


CostAccounting


Trade In-Transit

-1,200

USD

Not applicable

Not applicable

*Delivery-based recoverable tax A is calculated on consigned receipt but will be accounted after ownership changeevent.



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Accounts Payable generates the following accounting entries when the invoice is created:



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

1,275

USD

Not applicable

Accounts Payable

Invoice

Tax B Recovery

150

USD


Accounts Payable

Invoice

Tax B RateVariance*

25

USD

Not applicable

Accounts payable

Invoice

Supplier Liability

-1,450

USD

Not applicable




Functional Currency

Receipt Accounting


Trade Clearing

25

USD

Receipt Accounting



-25

USD

Cost Accounting



25

USD

Cost Accounting


Trade Clearing

-25

USD



Related Topics

• Tax Accounting for Receipt Transactions

• What's a tax point basis

• What's a tax point date



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Example of Tax Accounting for a Purchase Order Retroactive PriceChangeThis example illustrates tax accounting performed by Oracle Fusion Receipt Accounting and Oracle Fusion CostAccounting for a retroactive price change on a purchase order (PO) receipt that is partially invoiced.

ScenarioThe supplier makes a shipment to the inventory organization based on a purchase order for 10 units, at a per unit priceof USD 100. After receipt of the goods, a partial invoice is created for 2 units at USD 100 per unit.

The purchase order price changes retroactively from USD 100 to USD 120. The remaining balance of 8 units is invoicedat USD 120 per unit.

Tax DetailsThis transaction uses a tax point basis of delivery, that is, taxes are accounted at the time of receipt of goods.

Taxes details are the same after the retroactive price change on the PO:

• Tax A delivery basis = 20%. Recoverable and nonrecoverable portions are both 50%.

• Tax B invoice basis = 30%. Recoverable and nonrecoverable portions are both 50%.

AnalysisReceipt Accounting and Cost Accounting create accounting distributions at the time of receipt of goods, after theretroactive purchase order price change, and for the dierential invoice.

Tax Accounting EntriesReceipt Accounting and Cost Accounting generate the following accounting entries at the time of receipt of goods:



FunctionalCurrency


ReceiptAccounting

PO Receipt

ReceivingInspection

1,000

USD

Material

PO Price

ReceiptAccounting

PO Receipt

ReceivingInspection

100

USD

Tax


ReceiptAccounting

PO Receipt


100

USD

Tax




250



FunctionalCurrency


ReceiptAccounting

PO Receipt

ReceivingInspection

150

USD

Tax


ReceiptAccounting

PO Receipt

SupplierAccrual

-1,350

USD

Material

Not applicable

CostAccounting

PO Delivery

InventoryValuation

1,250*

USD

Not applicable

Not applicable

CostAccounting

PO Delivery

ReceivingInspection

-1,250*

USD

Not applicable

Not applicable


Accounts Payable generates the following accounting entries for the supplier when partial invoice is accounted:



FunctionalCurrency


AccountsPayable

Invoice

SupplierAccrual

270*

USD

Not applicable

Item Price plusNonrecoverableTaxes A andB for 2 units =USD 1,350/10* 2

AccountsPayable

Invoice

TaxRecoverable

30

USD

Tax

Tax B Invoice-BasedRecoverable:USD 200 * 30%* 50%

AccountsPayable

Invoice

SupplierLiability

-300

USD

Not applicable

Not applicable

*Accrual is debited to the extent quantity is invoiced, which is 2 units.



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Receipt Accounting and Cost Accounting generate the following accounting entries after the retroactive purchase orderprice change:



FunctionalCurrency


ReceiptAccounting


ReceivingInspection

160*

USD

Material

USD 120 -USD 100 *uninvoicedquantity of 8units

ReceiptAccounting


ReceivingInspection

16

USD

Tax

Tax A Delivery-BasedNonrecoverable:USD 160 * 20%* 50%

ReceiptAccounting



16

USD

Tax

Tax A Delivery-BasedRecoverable:USD 160 * 20%* 50%

ReceiptAccounting


ReceivingInspection

24

USD

Tax

Tax B Invoice-BasedNonrecoverable:USD 160 * 20%* 50%

ReceiptAccounting


SupplierAccrual

-216

USD

Material

Not applicable

CostAccounting


InventoryValuation

200**

USD

Not applicable

Not applicable

CostAccounting


ReceivingInspection

-200

USD

Not applicable

Not applicable

*Retroactive price adjustment accounted only for the uninvoiced quantity, that is, 10 units received minus 2 unitsinvoiced = 8 units uninvoiced.

** Retroactive PO price change plus nonrecoverable taxes A and B.

Accounts Payable generates the following accounting entries for the balance of 8 units:



252



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Supplier Accrual

960

USD

Item Price USD 120* 8

Accounts Payable

Invoice

Supplier Accrual

96

USD

Tax A Delivery-BasedNonrecoverable:USD 120 * 8 * 20%* 50%

Accounts Payable

Invoice

Supplier Accrual

96

USD

Tax A Delivery-BasedRecoverable: USD120 * 8 * 20% *50%

Accounts Payable

Invoice

Supplier Accrual

144

USD

Tax B Invoice-BasedNonrecoverable:USD 120 * 8 * 30%* 50%

Accounts Payable

Invoice

Recoverable Tax B

144

USD

Tax B Invoice-BasedRecoverable: USD120 * 8 * 30% *50%

Accounts Payable

Invoice

Supplier Liability

-1,440

USD

Not applicable

Accounts Payable generates the following accounting entries for the original invoice quantity of 2 units at the revisedPO price:



FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Invoice PriceVariance

40

USD

Dierence in POItem Price USD 20* 2

Accounts Payable

Invoice

Tax Invoice PriceVariance Tax A

4

USD




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FunctionalCurrency

Basis of Amount

Accounts Payable

Invoice

Tax Invoice PriceVariance Tax B

6

USD


Accounts Payable

Invoice

Recoverable Tax A

4

USD

Tax A Delivery-Based Recoverable

Accounts Payable

Invoice

Recoverable Tax B

6

USD


Accounts Payable

Invoice

Supplier Liability

-60

USD

Not applicable

Cost Accounting and Receipt Accounting generate the following accounting entries for the dierential invoice:


Functional Currency

Receipt Accounting



50

USD

Receipt Accounting



-40

USD

Receipt Accounting


Tax Invoice PriceAdjustment

-10*

USD

Cost Accounting


Inventory Valuation

50**

USD

Cost Accounting



-50

USD

*Nonrecoverable taxes A and B on the dierential invoice price.

**Dierence between invoice price and nonrecoverable taxes A and B.

Related Topics

• Tax Accounting for Receipt Transactions

• What's a tax point basis

• What's a tax point date



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Oracle Project Portfolio Management Cloud IntegrationOracle Project Portfolio Management (PPM) Cloud oers an integrated project management suite that is designed toautomate, streamline, and control project nancial and project execution management processes end-to-end.

You can view PPM integration aributes on the Review Cost Accounting Distributions page. The following are examplesof the project aributes that are captured:

• Project name

• Task name

• Expenditure type

• Expenditure item date

• Expenditure organization

Capture Expenditure Information in Project Costing for InventoryShipments of MaterialYou can capture expenditure information in Project Costing for shipments of material from Inventory. You will continueto bill your customers from Project Portfolio Management Cloud (Project Billing). The Sales Order Issue Inventorytransaction is processed and accounted in Costing. The accounting line type Project Clearing is used for sending thecost details to the Project Costing system, where the project is charged for the items shipped.

The following accounting distributions are created for Sales Order Issue and Project Costing integration.

Event Type Accounting Line Type Transaction Type

Sales Order Issue

Project Clearing

Debit

Sales Order Issue

Inventory

Credit

Capture Expenditure Information in Project Costing from an ExpenseDestination Transfer OrderYou can capture project aributes on expense destination transfer orders, and fulll these transfer orders from acommon or pooled inventory to track costs against a project. You can capture expenditure information for shipmentof material from inventory to a project location. You can view project details associated with the transfer order on theReview Cost Accounting Distributions page. The following are examples of the accounting distributions created fortransfer order and Project Costing integration.



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Event Type Accounting Line Type Transaction Type

Transfer Order Deliver to Expense

Inventory

Debit

Transfer Order Deliver to Expense

Trade in Transit

Credit

Overview of Reports and Analytics for Cost AccountingYou can use the Reports and Analytics work area to access predened reports and analytics that are related to your role,and to modify existing reports and analytics.

The following list includes some of the reports that are available for Cost Accounting.

• Costing Account Balances Report

• COGS and Revenue Matching Report

• Gross Margin Report

• In-Transit Valuation Report

• Inventory Valuation Report

• Layer Inventory Valuation Report

• Work in Process Inventory Valuation Report

The following list includes some of the real time analytics available for Cost Planning.

• Costed Bill of Materials

• Costed Bill of Materials with Cost Element

• Cost Scenario Exceptions

• Cost Comparison

• Where Used Analysis for Components and Resources

The following list includes some of the real time analytics available for Cost Accounting.

• Cost Accounting Real Time

• COGS and Gross Margin Real Time

• Inventory Valuation Real Time

• Item Cost Real Time

• Work Order Costs Real Time

• Cost Accounting Period Close Real Time

• Resource Rates Real Time

• Overhead Rates Real Time

• Landed Costs Real Time

For more information on accessing and modifying reports and analytics, refer to the guide Creating and AdministeringAnalytics and Reports.



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For descriptions of the reports and analyses, and information on accessing them, see the topic Oracle Supply ChainManagement Cloud: View Supply Chain Management Reports and Analyses.

Related Topics• Overview of Creating and Administering SCM Analytics and Reports• Oracle Supply Chain Management Cloud: View Supply Chain Management Reports and Analyses• Reports and Analytics Work Area and Panel Tab• Business Intelligence Catalog• SCM Subject Areas in Oracle Transactional Business Intelligence

Analyze Inventory ValuationYou can set up costs iteratively in Cost Accounting, and check the impact on inventory valuation on the ReviewInventory Valuation page. You can view the inventory value details at cost organization level, cost book level, or for aparticular date.

To analyze inventory valuation, complete the following steps.

1. From the Navigator menu, select Cost Accounting.2. From the Tasks panel, select Review Inventory Valuation.3. Query the inventory valuation by Cost Organization, Cost Book, or Valuation Date. The inventory valuation

information includes the elds described in the following table.

Field Description

Costed Value

Inventory value in Cost Accounting at the valuation unit level.

Unaccounted Value

Value of transactions with no journal entries in the subledger.

Related Topics• How Cost Organizations, Inventory Organizations, and Cost Books Fit Together• Example of Accounting of Global Procurement Trade Transactions into Inventory

FAQs for Cost Accounting

When should I run the Period End Validation report for CostAccounting?You should run the Period End Validation report for Cost Accounting and Receipt Accounting at regular intervals, andwell in advance of period close, so that any errors and exceptions in the reports can be resolved before period close. Youcan access these reports in the Reports and Analytics work area.


http://www.oracle.com/webfolder/technetwork/docs/reports/r13/Supply-Chain-Management-Reports-R13.xls

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=9A62A917307E0F67E040D30A68812E70

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=318F0DA9965247C3E05362C3F00A370F

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=0CC2A963F21A6685E05362C3F00A319B




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What happens if an item in a cost organization book has botha perpetual average item cost adjustment and a receipt costadjustment pending?The perpetual average item cost adjustment is always processed after the receipt cost adjustment, regardless of theorder in which you create the adjustments.

What happens if the cost processors are running transactionsfor several cost organization books involving interorganizationtransfers?The cost processor can run the transactions for several cost organization books concurrently and iteratively, until alldependencies caused by interorganization transfers are resolved.

For example, assume that there is an interorganization transfer from cost organization book B to cost organization bookA. The cost processor runs the transactions for cost organization book B rst, and cost organization book A second.This process is reiterated until all interorganization transfers are accounted for.

How can I post cost distributions and journal entries to the generalledger?First run the cost distribution processor to generate distributions for inventory transactions on the Create CostAccounting Distributions page. Then create the related subledger journal entries on the Create Entries for CostAccounting page.

Execute these processes one at a time, or set them up to execute automatically on a prescheduled basis.

What happens during cost processing when an inventoryorganization is missing setup information?If the setup information is incomplete for an inventory organization that is directly tied to the cost organization in theprocess run, the missing information is agged as an error on the Review Cost Accounting Processes page, and theprocess fails.

If the setup information is incomplete for an inventory organization that is not directly tied to the cost organization inthe process run, the missing information is agged as a warning, but the process is completed.

Examples of setup information that may be missing are the association of the inventory organization with a costorganization, the assignment of a cost book to the cost organization, the assignment of a cost prole to the item, or theassignment of a valuation unit to the cost organization.



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How can I diagnose problems with item cost data that is missingor incorrect?After interfacing the inventory transaction data, you can run the Item Cost Data Collection Test from the Help >Supportability menu.

What are the accounting distribution basis options for consignedinventory transactions?You can perform cost accounting of consigned inventory transactions using zero value or actual cost. Typically, thevaluation on the balance sheet for supplier-owned consigned inventory is zero. But you may sometimes want toperform accounting using actual cost. In either case, the inventory valuation reports always display the pro forma valueof consigned goods.

Select the accounting distribution basis for consigned inventory on the Manage Cost Proles page in the Setup andMaintenance work area.

Can I revise a cost adjustment?You can modify a cost adjustment that has not yet been processed by the cost processor. If you need to make changesafter a cost adjustment has been processed, you can create another adjustment for the additional changes.

What's a tax point basis?A point in the receipt transaction process where taxes are accounted and reported to the tax authorities. These can beclassied into two categories: delivery-based and invoice-based tax points.

Delivery-based taxes are accounted and reported on the receipt transaction. Invoice-based taxes are accounted andreported when the supplier invoice is created, accounted, or paid.

What's the dierence between inclusive basis and exclusive basisin tax calculations?Inclusive taxes are included in the assessable value or purchase price. For example:


• Inclusive tax rate: 10%

• Tax: 100/1.10 = USD 9.09 (distribution amount divided by (1 + tax rate))

Exclusive taxes are added to the purchase price or assessable value. For example:




259

• Exclusive tax rate: 10%

• Tax: 100*0.10 = USD 10.00 (distribution amount multiplied by tax rate)

Is the accounting date of a transaction always the same as thecosting date?The accounting date of a transaction is generally the same as the costing date, but there may be exceptions; forexample, if the costing period is already closed, then the distribution processor sets the accounting date to the nextopen period.The accounting transaction is submied to the general ledger application through the subledger accounting application.If the general ledger period for the accounting date is closed when the accounting transaction is submied, then thetransaction is rejected and returned with an error. The cost processor then automatically proposes a new accountingdate in the next open period, and resubmits the revised accounting transaction to the general ledger through subledgeraccounting.

What cost method can I use for drop ship sales orders?You can use the Standard and Actual cost methods for drop ship sales orders.

How does cost accounting handle the input costs for amaintenance work order?Material and resource costs are accounted for as an expense as they are incurred. The expense account rules formaintenance work order costs are dened using the work order type, subtype, and the maintenance expenseaccounting class.



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Chapter 5Landed Cost Management

261

5 Landed Cost Management

Overview of Landed Cost ManagementOracle Fusion Landed Cost Management gives your organization nancial visibility into your supply chain costs,including transportation and handling fees, insurance, duties, and taxes. These types of charges can compose asignicant portion of the cost of an item. Landed Cost Management enables you to incorporate the charges accuratelyinto overall nancial processes and decision-making activities. Landed Cost Management initially estimates thesecosts and later updates them with actual amounts as they become known, allocating them to shipments, orders, andproducts. This enables you to maximize prots, improve visibility into outstanding liabilities, enhance competitiveness,and ensure that complex trade activities are compliant with regulatory mandates.Landed Cost Management performs three main tasks:

• Capture Charges: Landed Cost Management provides the capability to capture charges such as freight,insurance, and so on. These charges are captured and grouped under an entity called trade operation. A tradeoperation is a logical entity that denotes a single instance of a business transaction or process in which youwould like to capture all the charges. An example of this is a single shipment or container.

• Perform Allocations: Material PO schedules are associated to charges. This denotes the PO schedules thatare part of the trade operation or that are impacted by this trade operation. After the PO schedules arereferenced to charges on the trade operation, the charge amount is distributed and allocated to the respectivePO schedules and further on to the receipts that are performed on those schedules.

• Create Accounting: The nal step is to account for all the charges that were incurred. This is done bytransferring all the charge information to Receipt Accounting and Cost Accounting.

Landed Cost Management interfaces with the following applications:

• Oracle Fusion Purchasing: Landed Cost Management receives the material purchase order (PO) information.The trade operation charges are associated with the PO schedules and allocated proportionately to the POschedules and receipts.

• Oracle Fusion Receipt Accounting: Tasks performed when managing landed costs use data from ReceiptAccounting, and Receipt Accounting will create the accounting entries to accrue landed cost charges.

• Oracle Fusion Cost Management: Charges from Landed Cost Management are absorbed as part of the itemcost in Cost Management. After the goods are delivered to inventory, the landed cost charges are absorbed intoinventory valuation.

• Oracle Fusion Tax: Taxes may be applicable on the charges coming from Landed Cost Management. Thecharges are dened in Landed Cost Management. Taxes are automatically calculated, when applicable, bycalling the Tax application.

• Oracle Fusion Payables: In most cases, suppliers send invoices for the services they provide (particularly forfreight). When these invoices relate to charges dened in a landed cost Trade Operation, it is possible toautomatically associate an invoice amount to a landed cost charge applied to a receipt. For example, when areceipt of items is performed, the bill of lading number from the freight supplier is specied in the receipt. Thenwhen the freight supplier invoice is processed, the invoice line references that bill of lading number. When thefreight supplier invoice is interfaced to the landed cost application, the bill of lading number that is common tothe receipt and invoice lines is automatically associated. As a result, the landed cost application compares theestimated amount of freight charge in the receipt to the actual amount of freight charge billed in the invoice,and adjusts the cost of the receipt for any calculated cost variance.



262

Implementing Oracle Fusion Receipt Accounting is a prerequisite for Landed Cost Management. Implementing OracleFusion Cost Accounting is optional. If you implement Cost Accounting, the landed cost charges are also visible in CostAccounting. Several options are available for implementing Landed Cost Management, based on the source of theselanded cost charges. You can implement a combination of one or more of these options where the source of the landedcost charges can be:

• A payable invoice from a service provider or supplier

• A supplier purchase order for the service

• An estimate provided by a supplier or any other source

Landed Cost Management TasksThe following table describes the tasks and processes to support landed cost management. You can access these tasksand processes in the Receipt Accounting work area.

Task Description

Manage Trade Operations

Create and edit trade operations to capture landed cost charges associated with purchaseorder receipts of material.

Review Purchase Orders for LandedCost

View material purchase orders from Purchasing and associated charges, and create tradeoperations for the purchase orders.

Manage Charge Invoice Associations

View invoices that are automatically associated with trade operation charge lines, identify andcorrect mismatched invoices, create trade operations, and associate them with invoices.

Manage Landed Cost Processes

Schedule the processes to associate and allocate third-party charges to trade operations.

Review Landed Cost Processes

Review landed cost processing details, parameters, and errors.

Manage Trade Operation Templates

Create and edit templates of trade operations and the associated charges.

Reconcile Landed Cost Charges

View PO schedules and receipts where the related third-party charges are over or under-allocated and absorbed, and run the process to adjust the discrepancies.

View Item Landed Cost

Review purchase order receipts of goods, related third-party charges, total landed costs, andthe variances between estimated and actual landed costs.

Analyze Landed Cost Charges

Compare and evaluate landed cost trends, including material costs and third-party charges,across business units, inventory organizations, and routes.



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Trade OperationsCreate trade operations to capture landed cost charges associated with purchase order receipts of material. A tradeoperation is an entity that is used to group landed cost charges expected to be incurred for material shipments. You cancreate a trade operation for an upcoming shipment to capture the landed cost charges incurred for that shipment. Youcan also create the trade operation after the actual shipment. Trade operations are created in the Landed Costs workarea on the Manage Trade Operations page.

Create a Trade Operation Template to pre-populate the main elds in Trade Operations for repeat purchases.Templates dene the structure for the trade operation, such as charges, reference types, routes, currency, and taxes.Both inclusive and exclusive taxes are supported for landed costs.

To create a trade operation, perform the following steps.

1. From the Navigator menu, select Receipt Accounting.2. From the Landed Costs task list, select Manage Trade Operations.3. Click Create Trade Operation and complete the required elds. The elds are described in the following table.

Field Description

Charge BU

The requisitioning business unit for the charge.

Charge Basis The level where the charge is captured. The charge basis options are as follows:

• Aggregate. If the charge is the total amount, use Allocation Basis to specify allocation.• Per Unit. Fixed rate per unit of items. The charge is entered in the Rate eld.• Percentage of Item Price. A percentage of the full item price. The charge is entered in

the Rate eld.• Percentage of Other Charges. Percentage of another charge in the Trade Operation.

This is a good way to model tax applying to another charge. The charge is entered onthe Related Charges lines as follows:

-Item Value of the source charge

-Percentage of charge amount• Variable Per Unit. Similar to Per Unit but specied against a specic purchase order line

schedule. There may be dierent rates in a charge for dierent schedules. The Rate isdened directly at the purchase order schedule level associated with the charge line.

• Variable Percentage of Item Price. Similar to Percentage of Item Price but speciedagainst a specic purchase order line schedule. There may be dierent percentagesin a charge for dierent schedules. The Rate is dened directly at the purchase orderschedule level associated with the charge line.

Allocation Basis The basis used to allocate the charge to purchase order schedules. The allocation basis options

are as follows:

• Equally. The aggregate charge value is allocated equally across purchase orderschedules associated with a charge line.

• Quantity. The aggregate charge value is allocated in the ratio of quantities present oneach of the purchase order schedules.

• Volume. The aggregate charge value is allocated in the ratio of volumes (represented interms of the Base UOM) present on each of the purchase order schedules.



264

Field Description

• Weight. The aggregate charge value is allocated in the ratio of weights (represented interms of the Base UOM) present on each of the purchase order schedules.

• Item Value. The aggregate charge is allocated in the ratio of item value (purchase orderprice multiplied by quantity) present on purchase order schedules.

• Manual Allocation Factor. The aggregate charge is allocated to the purchase orderschedules based on the manual factor provided by the user at purchase order schedulelevel on the charge line.

Value

Identication of associated charge reference, such as bill of lading.

Landed Cost ChargesA trade operation charge is an estimated or actual landed cost charge for allocation to purchase order schedules, andsubsequently to receipts. Landed cost charges are additional material supplier charges and third party charges thatare incurred in the process of receiving material into ownership or possession. The details regarding the allocation ofcharges are captured in the charge line Status eld. The charge line Status values are described in the following table.

Charge Line Status Description

New

This is the initial status assigned to a new charge line.

Pending PO Schedule Association

The charge line has been successfully saved, but no purchase order schedules have beenassociated with the charge.

Ready for Allocation The charge line has been successfully saved and the following conditions have been met:

• The purchase order schedules have been associated with the charge line.• Any applicable per unit and percentage values have been entered in the Rate eld.

A warning message will be displayed if the applicable per unit and percentage values have notbeen entered on a charge line.

Trade Operation TemplatesYou can create a trade operation from a trade operation template to streamline the process. Trade operation templatescan be used for repeat purchases. Create a template if you need to create a similar trade operation multiple times.This helps to ensure consistency. Trade operation templates contain information about the supplier, charge lines,reference types, routes, and other related information. Whenever a trade operation is created by using a template,all this information is copied to the trade operation. The user can modify the copied information where required.Trade operation templates are managed in the Landed Cost Management work area on the Manage Trade OperationTemplates page.



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Create Estimate Landed CostsYou can use a Trade Operation to simulate and estimate landed cost charges associated with purchase order receiptsof material. You can create a trade operation for an upcoming shipment to capture the landed cost charges incurred forthat shipment. The landed cost features provide nancial visibility into the supply chain costs, including transportationand handling fees, insurance, duties, and taxes. A signicant portion of an item's cost can be comprised of landed costs,and it is important to accurately incorporate them into nancial processes and decision making. Trade operations arecreated in the Landed Costs work area on the Manage Trade Operations page. You can associate a purchase order to aTrade Operation based on various identiers, including purchase order number or advance shipment notice (ASN).

To create estimate landed costs, complete the following steps.

1. From the Navigator menu, select Receipt Accounting.2. From the Tasks panel, select Manage Landed Cost Processes.3. Query for and run the process Prepare Material Purchase Order Data. This process updates the list of approved

purchase orders that can be selected for landed costs.4. From the Tasks panel, select Manage Trade Operation Templates.5. Search for the required template and click the Create from Template buon. Enter the Trade Operation Name

and save the Trade Operation.6. (Optional). Enable the Tentative option for any charge lines that you do not want to be included in receipt

accounting distributions. This option is only applicable for estimate costs.7. Click on the Associate Default Material Purchase Orders buon.8. Click on the Select and Add buon and search for and select the required purchase order. You can associate

a purchase order to a Trade Operation based on various identiers, including the Purchase Order number orthe Shipment Number (ASN). This associates all of the Trade Operation charges to the material Purchase Orderspecied in the Trade Operation header.

9. Click Save. When the application has associated the purchase order to the Trade Operation charge lines, theCharge Line Status displays a Ready for Allocation message when you hover over it.

10. Click on a charge. The Charge Details area of the page shows the purchase order line schedules associated withthe charge.

11. From the Actions menu in the Trade Operation header, select Allocate Charges. The Charge line status isautomatically updated, and the message Successfully Allocated is displayed when you hover over the icon. Thetotal amount of each charge is displayed in the Landed Cost Charges area. This is the estimated charge amountthat is anticipated to be applied when the items in a Purchase Order are fully received.

12. From the Actions menu in the Trade Operation header, select Update Status.13. Set the Trade Operation status to Open. This informs Receipt Accounting that the charges in this Trade

Operation are to be added to the material cost of the items received against the Purchase Orders referenced inthe Trade Operation. Create and submit the receipt in the Receiving application.

14. From the Navigator menu, select Tools, then Scheduled Processes, then run the Transfer Transactions fromReceiving to Costing process.

15. In the Landed Costs work area navigate to the Manage Landed Cost Processes page from the Tasks menu.Select the Allocate Landed Cost Charges process and set the Apply Charges to Receipts option to Yes in theDene Parameters region. Submit the process.

16. (Optional). From the Navigator menu, select Receipt Accounting. From the Tasks menu select Create ReceiptAccounting Distributions.

17. Select View Item Landed Cost from the Tasks menu. Select the PO number and receipt. The item landed costsdisplayed include the material and landed cost charges.



266

How You Enable an Invoice for Landed Cost ProcessingReference Types are used for automatically matching the landed cost charge invoices to the trade operation charges.These are typically the document names that would be used in the business process, and are visible both on the Invoiceand in landed cost management, for example, Bill of lading or Shipment number.

Invoices are designated for landed cost processing in the Payables work area. To designate an invoice line as a landedcost, enable the Landed Cost option in the Invoice lines section on the Create or Edit Invoice pages. You can then enterthe charge details on the Charge References dialog box. After the invoice lines are accounted, submit the TransferCosts to Cost Management process to transfer the invoice distributions form Payables to Cost Management for furtherprocessing.

Create Actual Landed CostsYou can use a Trade Operation to create landed cost charges associated with purchase order receipts of material. Youcan create a trade operation for an upcoming shipment to capture the landed cost charges incurred for that shipment.Trade operations are created in the Landed Costs work area on the Manage Trade Operations page. You can associatea purchase order to a Trade Operation based on various identiers, including purchase order number or advanceshipment notice (ASN).

To create actual landed costs, complete the following steps.

1. Navigate to the Payables work area and create an invoice. Enable an invoice line for landed cost processing byselecting the Enable option on the Landed Costs tab.

2. Select the References plus icon and add the Charge Name, Reference Type, and Reference Value. These eldswill be used to match the invoice line to the Trade Operation charge line. Save the changes.

3. Select Validate from the Invoice Actions menu. Ensure that the Validation status updates to Validated on theInvoice Summary tab.

4. Select Post to Ledger from the Invoice Actions menu. Ensure that the Accounting status updates to Accountedon the Invoice Summary tab. Save and close the invoice.

5. From the Navigator menu, select Tools, and then Scheduled Processes. Search for and select the Transfer Coststo Cost Management process and set the required parameters. The Cuto Date must be greater than or equalto Invoice creation date. Submit the process.

6. From the Navigator menu, select Receipt Accounting.7. From the Tasks panel, select Manage Trade Operations. Create a Trade Operation and complete the required

elds. Save your changes.8. Add a charge line to the Trade Operation and complete the Charge References elds. Enable the Automatically

Associate on Match option.

The Charge References information will be used to automatically associate an invoice that has matchingreference data.

9. Select the Enable Automatic Tax Calculation option if you want to use the Tax application to automaticallycalculate the tax.

10. Click on the Associate Default Material Purchase Orders buon.11. Click on the Select and Add buon and search for and select the required purchase order. You can associate

a purchase order to a Trade Operation based on various identiers, including the Purchase Order number orthe Shipment Number (ASN). This associates all of the Trade Operation charges to the material Purchase Orderspecied in the Trade Operation header.



267

12. Click Save. When the application has associated the purchase order to the Trade Operation charge lines, theCharge Line Status displays a Ready for Allocation message when you hover over it.

13. Click on a charge. The Charge Details area of the page shows the purchase order line schedules associated withthe charge.

14. From the Actions menu in the Trade Operation header, select Update Status, and set the status to Open.This informs Receipt Accounting that the charges in this Trade Operation are to be added to the material costof the items received against the Purchase Orders referenced in the Trade Operation. Create and submit thereceipt in the Receiving application.

15. From the Actions menu in the Trade Operation header, select Allocate Charges. The Charge line status isupdated and displays Successfully Allocated when you hover over the icon. The total amount of each chargeis displayed in the Landed Cost Charges area. This is the estimated charge amount that is anticipated to beapplied when the items in a Purchase Order are fully received.

16. In the Landed Costs work area navigate to the Manage Landed Cost Processes page from the Tasks menu.Select and run the Prepare Invoice Data process.

17. On the Manage Landed Cost Processes page select and run the Associate Invoices to Trade Operation Chargesprocess.

18. In the Landed Costs work area navigate to the Manage Charge Invoice Associations page from the Tasks menu,and select the required invoice. Set the Association Status to All. The invoice association status is displayed inthe Association Details region, including the association aributes, charge line details, corresponding invoiceline details, and match status for each charge line.

19. In the Landed Costs work area navigate to the Manage Trade Operations page. Search for and open therequired Trade Operation for editing. The Charge Line Status will be set to Requires Reallocation.

20. Click on the Allocate Charges buon. The actual charges are added to the Trade Operation.

Charge Invoice Association StatusWhen you run the Associate Invoices to Trade Operation Charges process from the Manage Landed Cost Processespage, the Manage Charge Invoice Associations page is updated. The details regarding charge invoice associations arecaptured in the Association Status eld. The Association Status values are described in the following table.

Association Status Description

New

This is the initial default status.

Associated

The invoice line has been automatically associated to the Trade Operation Charge line.

Manually Associated

The invoice line has been manually associated to the Trade Operation Charge line.

Needs Review

The invoice line has a matching Trade Operation charge line, but you need to review andconrm the association.

Good Match

There are multiple matches between the Trade Operation charge line and the invoice line. Theuser needs to select the correct match and conrm the association.

Potential Match

Only the Procurement BU, Supplier, and Supplier Site on the Trade Operation Charge line andinvoice line match. There are no matches found using the charge references.



268

Association Status Description

No Match

The Associate Invoices to Trade Operation Charges process has been run on the invoice linebut a match has not been found.

Canceled

The invoice line has been canceled in Accounts Payable.

Upload Trade Operation Charges in a SpreadsheetYou can use a spreadsheet for bulk data updates to an existing Trade Operation. Add, edit, and delete operations can beperformed to update the charge information. You can use a spreadsheet to complete bulk updates for the following:

• Landed cost charges

• Landed cost charge references

• Landed cost related charges

The ADF Desktop Integrator is a prerequisite for capturing charges in a spreadsheet, and can be installed from the Toolssection of the Navigator menu.

To capture Trade Operation charges in a spreadsheet, complete the following steps.

1. From the Navigator menu, select Receipt Accounting.2. From the Landed Costs tasks list, select Capture Trade Operation Charges in Spreadsheet.3. Download the Capture Charges spreadsheet.4. Open the spreadsheet. A pop-up message asks if you want to connect to an application. Click Yes, and enter

your sign-on credentials.5. Search on the Capture Charges tab for the Trade Operation to be updated. The spreadsheet is populated with

the charge lines and corresponding Trade Operation data from the result set.6. Perform the required edit, add, or delete operations. The Changed column is automatically updated with a

change indicator icon to conrm which rows have been modied.7. Click Upload to apply your changes.8. Repeat the above steps for any changes required on the Capture Charge References tab and the Capture

Related Charges tab.

Analyze Landed CostsCompare and evaluate landed cost trends and variances, including material costs and third-party charges, acrossbusiness units, inventory organizations, and routes. You can view landed cost variances and charge analyses in theLanded Cost Management work area on the Analyze Landed Cost Charges page and on the Analyze Landed CostVariances page. You can analyze landed cost charges and variances based on key dimensions, such as the following:

• Item Category

• Item Name

• Charge Name



269

• Supplier

To analyze landed cost variances, complete the following steps.

1. From the Navigator menu, select Receipt Accounting.2. From the Tasks panel, select Manage Landed Cost Processes.3. Run the process Summarize Landed Cost Data.

This process prepares landed cost data for multidimensional analysis.4. From the Tasks panel, select Analyze Landed Cost Variances, and complete the required search elds.5. In the View Landed Cost Charges By list select Business Unit.

The page displays the landed cost charge data, including the accounted amount, estimate amount, and actualamount in an expandable tree table.

6. Click on the Trends icon to display the data in graph format.

Related Topics• Set Up Landed Cost Management• Considerations for Seing Up Landed Cost Management

FAQs for Landed Cost Management

What are landed costs?Landed costs are the sum of the material costs and the additional landed cost charges associated with the purchasingand receipt of material.

What's a landed cost charge?Landed cost charges are additional material supplier charges and third party charges that are incurred in the processof receiving material into ownership or possession, including consigned scenarios where custody may be with anotherparty.

What's a trade operation?A trade operation is an entity that is used to group landed cost charges expected to be incurred for material shipments.You can create a trade operation for an upcoming shipment to capture the landed cost charges incurred for thatshipment. You can also create the trade operation after the actual shipment.

What's a landed cost reference type?Reference types are business documents, such as bills of lading, that are associated with landed cost charges in tradeoperations to provide an audit trail of the charges. Reference types are also matched with invoices to capture actualcharge amounts.

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=26E3D2A0941D2789E05362C3F00A5115

http://www.oracle.com/pls/topic/lookup?ctx=fa19d&id=267F198AD22546A3E05362C3F00A5627



270

Can I create a trade operation with multiple charge amounts inmultiple currencies?Yes, a trade operation can contain charges from one or more service providers in multiple currencies.

What are the criteria to enable a charge invoice for the AssociateCharge Invoice task?The following criteria apply to enable a Charge Invoice for the Associate Charge Invoice task:

• The invoice line type must be Item, Freight, or Miscellaneous.

• The Enable option must be selected on the Landed Cost section of the invoice line.

• Complete the Validate and Post to Ledger invoice actions. The invoice status must be Validated and Accounted.

• Run the following process from the Tools > Scheduled Processes page: Transfer Costs to Cost Management.This will make the invoices available for processing in Landed Cost Management.

• Run the following process from the Manage Landed Cost Processes page: Prepare Invoice Data.

• Run the following process from the Manage Landed Cost Processes page: Associate Invoices to TradeOperation Charges.


Chapter 6Appendix: Events and Cost Accounting Distributions

271

6 Appendix: Events and Cost AccountingDistributions

Overview of Cost Accounting DistributionsFor every inventory and manufacturing transaction, there is an accounting entry in cost accounting. This appendixexplains the transaction events and their corresponding accounting entries in detail.

Note: You will notice either a single asterisk (*) or double asterisks (**) for some entries in the tables.• Single asterisk (*): You can track inventory in an asset subinventory location or in an expense subinventory

location. An asterisk (*) in the table indicates that the accounting line type diers depending on whetheryou track the inventory as an asset or expense. When you track inventory as an asset, you must dene aninventory valuation account in your accounting rules. Similarly, when you track inventory as an expense, youmust dene an expense account in your accounting rules.

• Two asterisks (**): Indicates accounting distributions that are applicable only to standard cost.

Inventory Transaction Events

Miscellaneous Transaction EventsThe following transaction event types follow the paern shown in the table.

• Account Alias Issue

• Account Issue

• Miscellaneous Issue

• Move Order Issue

• Cycle Count Adjustment for a Negative Adjustment

• Physical Inventory Adjustment for a Negative Adjustment


Oset

Debit

Inventory Valuation or Expense *

Credit

Expense

Debit

Material Overhead Absorption

Credit



272


Oset

Debit

Miscellaneous Issue Variance **

Credit

Oset

Debit

Cost Variance

Credit

Intraorganization Transfer EventsThe following transaction event types follow the paern shown in the table.

• Cycle Count Transfer for Issue (that is, a material issued out of the inventory)

• Lot Grade Change for Issue

• Movement Request Transfer for Issue

• Physical Inventory Transfer for Issue

• Planning Transfer for Issue

• Sales Order Pick for Issue

• Subinventory Transfer for Issue

The following table lists the accounting line types and their accounting entries.


Valuation Unit Transfer Gain Loss

Debit


Credit

Expense

Debit


Credit

The following transaction event types follow the paern shown in the table below.

• Cycle Count Transfer for Receipt (that is, a material received into inventory)

• Lot Grade Change for Receipt

• Movement Request Transfer for Receipt

• Physical Inventory Transfer for Receipt



273

• Planning Transfer for Receipt

• Sales Order Pick for Receipt

• Subinventory Transfer for Receipt

The following table lists the accounting line types and their accounting entries.



Debit


Credit


Debit


Credit

Valuation Unit Transfer Variance **

Debit


Credit

Direct Organization Transfer EventsThe following table lists the direct organization events and their accounting entries.

Event Type Name Accounting Line Type Transaction Type

Shipment

Trade In-Transit Valuation

Debit

Shipment


Credit

Shipment

Expense

Debit

Shipment


Credit

Shipment

Oset

Debit

Shipment

Cost Variance

Credit

Trade In-Transit Issue (IntercompanyInvoicing Option = Y)

Inter Company Cost of Goods Sold

Debit



274




Credit


Expense

Debit


Overhead Absorption

Credit

Trade In-Transit Issue (IntercompanyInvoicing Option = N)

Interorganization Receivables

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit


Interorganization Gain or Loss

Credit

Trade In-Transit Issue (IntercompanyInvoicing Option = Y or N)


Debit


Trade Clearing

Credit


Trade In-Transit Valuation or Expense *

Debit


Overhead Absorption

Credit



Debit



275



Trade Clearing

Credit

Receipt


Debit

Receipt


Credit

Receipt


Debit

Receipt


Credit

Receipt

Transfer Price Variance **

Debit

Receipt


Credit

Trade In-Transit Return (IntercompanyInvoicing Option = Y or N)

Trade Clearing

Debit



Credit


Expense

Debit


Overhead Absorption

Credit


Trade Clearing

Debit



Credit

Trade In-Transit Return Receipt(Intercompany Invoicing Option = Y)


Debit


Inter Company COGS

Credit



Debit



276



Overhead Absorption

Credit

Trade In-Transit Return Receipt(Intercompany Invoicing Option = N)


Debit



Credit



Debit


Overhead Absorption

Credit


Interorganization Gain Loss

Debit



Credit

Interorganization Transfer EventsThe following table lists the interorganization transfer events and the corresponding accounting entries.


Shipment to In-Transit


Debit



Credit


Expense

Debit



Credit


Oset

Debit


Cost Variance

Credit



277



Intercompany Cost of Goods Sold

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit

Trade In-Transit Receipt (IntercompanyInvoicing Option = Y or N)


Debit


Trade Clearing

Credit



Debit


Overhead Absorption

Credit



Debit



278



Trade Clearing

Credit

Receipt from In-Transit


Debit



Credit



Debit



Credit



Debit



Credit


Trade Clearing

Debit



Credit


Expense

Debit


Overhead Absorption

Credit


Trade Clearing

Debit



Credit



Debit


Intercompany COGS

Credit



Debit



279



Overhead Absorption

Credit



Debit



Credit



Debit


Overhead Absorption

Credit



Debit



Credit

Subinventory Transfer Order EventsThe following table lists the subinventory transfer events and the corresponding accounting entries.


Transfer Order Intraorganization TransferShipment


Debit



Credit


Expense

Debit



Credit



280


Transfer Order Intraorganization TransferReceipt


Debit



Credit



Debit



Credit



Debit



Credit

Transfer Order Subinventory TransferIssue


Debit



Credit


Expense

Debit



Credit



Debit

Transfer Order Subinventory TransferReceipt

Valuation Unit Transfer Gain or Loss

Credit


Inventory Valuation Expense *

Debit



Credit



Debit



281




Credit



Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit



Debit


Overhead Absorption

Credit

Transfer Order Pick Issue


Debit



Credit


Expense

Debit



Credit

Transfer Order Pick Receipt


Debit



Credit



Debit



Credit



Debit

Transfer Order Pick Receipt Valuation Unit Transfer Gain or Loss Credit



282


Transfer Order Return Pick Issue


Debit



Credit


Expense

Debit



Credit

Transfer Order Return Pick Receipt


Debit



Credit



Debit



Credit



Debit



Credit

Direct Organization Transfer Order EventsThe following table lists the direct organization transfer events and the corresponding accounting entries.


Transfer Order Trade In-Transit Issue(Intercompany Invoicing Option = Y)


Debit



Credit


Expense

Debit


Overhead Absorption

Credit



283


Transfer Order Trade In-Transit Issue(Intercompany Invoicing Option = N)


Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit

Transfer Order Trade In-TransitReceipt(Intercompany Invoicing Option =Y or N)


Debit


Trade Clearing

Credit



Debit


Overhead Absorption

Credit



Debit


Trade Clearing

Credit

Transfer Order Trade In-Transit Return(Intercompany Invoicing Option = Y or N)

Trade Clearing

Debit



284




Credit


Expense

Debit


Overhead Absorption

Credit


Trade Clearing

Debit



Credit

Transfer Order Trade In-Transit ReturnReceipt (Intercompany Invoicing Option =Y)


Debit


Intercompany COGS

Credit



Debit


Overhead Absorption

Credit

Transfer Order Trade In-Transit ReturnReceipt (Intercompany Invoicing Option =N)


Debit



Credit



Debit


Overhead Absorption

Credit



285




Debit



Credit

Transfer Order Transfer Shipment


Debit



Credit


Expense

Debit



Credit


Oset

Debit


Cost Variance

Credit

Transfer Order Transfer Receipt


Debit



Credit



Debit



Credit



Debit



Credit


Expense

Debit


Intercompany COGS

Credit



286


Transfer Order Return with scrap ow

Expense

Debit


Overhead Absorption

Credit


Expense

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit


Expense

Credit

Interorganization Transfer Order EventsThe following table lists the transfer order events and their accounting entries.


Transfer Order Shipment to In-Transit


Debit



Credit


Expense

Debit



Credit


Oset

Debit


Cost Variance

Credit



287




Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit

Transfer Order Trade In-Transit Issue(Intercompany Invoicing Option = Y or N)


Debit


Trade Clearing

Credit



Debit


Overhead Absorption

Credit



Debit



288



Trade Clearing

Credit

Transfer Order Receipt from In-Transit


Debit



Credit



Debit



Credit



Debit



Credit

Transfer Order Issue


Debit

Transfer Order Receipt Issue


Credit


Expense

Debit



Credit


Oset

Debit


Cost Variance

Credit

Transfer Order Return Shipment


Debit



Credit


Expense

Debit



Credit



Debit

Transfer Order Return Shipment Transfer Price Variance ** Credit



289




Debit


Cost Variance

Credit


Trade Clearing

Debit



Credit


Expense

Debit


Overhead Absorption

Credit


Trade Clearing

Debit



Credit



Debit


Intercompany COGS

Credit



Debit


Overhead Absorption

Credit



Debit



Credit



Debit



290



Overhead Absorption

Credit



Debit



Credit

Internal Drop Ship Transfer EventsThe following table lists the internal drop ship transfer events and the corresponding accounting entries.


Physical Sales Order Issue


Debit



Credit


Expense

Debit



Credit


Oset

Debit


Cost Variance

Credit

Drop Shipment Trade In-Transit Issue(Intercompany Invoicing Option = Y)

Intercompany COGS

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



291


Drop Shipment Trade In-Transit Issue(Intercompany Invoicing Option = N)


Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit

Drop Shipment Trade In-Transit Receipt(Intercompany Invoicing Option = Y or N)


Debit


Trade Clearing

Credit



Debit


Overhead Absorption

Credit



Debit


Trade Clearing

Credit

Drop Shipment Trade Sales Issue(Intercompany Invoicing Option = Y or N)

Deferred Cost of Goods Sold

Debit



Credit



292



Expense

Debit


Overhead Absorption

Credit



Debit



Credit

Physical RMA Receipt


Debit



Credit



Debit



Credit

Trade Sales Return (IntercompanyInvoicing Option = Y or N)


Debit


Deferred RMA Gain or Loss

Credit



Debit


Overhead Absorption

Credit


Trade Clearing

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



293



Trade Clearing

Debit



Credit



Debit


Intercompany COGS

Credit



Debit


Overhead Absorption

Credit



Debit



Credit



Debit


Overhead Absorption

Credit



Debit



Credit

Purchasing Events



294

Receipt, Return, and Adjustment EventsThe following table lists the receipts, returns, and adjustments events and the corresponding accounting entries.


PO Receipt into Inventory


Debit



Credit



Debit



Credit


Purchase Price Variance **

Debit



Credit

Return to Supplier: Return to ReceivingInspection


Debit



Credit


Expense

Debit



Credit



Debit



Credit



Debit


Cost Variance

Credit

PO Receipt Adjustment: Negative Receiving Inspection Debit



295


PO Receipt Adjustment: Negative


Credit


Expense

Debit



Credit



Debit



Credit



Debit


Cost Variance

Credit

PO Receipt Adjustment: Positive


Debit



Credit



Debit



Credit



Debit



Credit

PO Receipt Adjustment: Acquisition CostAdjustment - Positive


Debit



Credit



Debit



Credit



296




Debit



Credit

PO Receipt Adjustment: Acquisition CostAdjustment - Negative


Debit



Credit


Expense

Debit



Credit



Debit



Credit

PO Receipt Adjustment: Acquisition CostWrite O - Positive

Inventory Write O

Debit



Credit


Inventory Write O or Expense *

Debit



Credit

PO Receipt Adjustment: Acquisition CostWrite O - Negative


Debit


Inventory Write O

Credit

PO Receipt: Acquisition Cost Adjustment


Debit



297




Credit



Debit



Credit



Debit



Credit

PO Receipt: Acquisition Cost AdjustmentWrite-o

Inventory Write O

Debit



Credit



Debit



Credit

Return to Supplier: Acquisition CostAdjustment


Debit



Credit


Expense

Debit



Credit



Debit



Credit

Return to Supplier: Acquisition Cost Write-o


Debit



298



Inventory Write-O

Credit


Expense

Debit



Credit

Global Procurement EventsThe following table lists the global procurement events and the corresponding accounting entries.




Debit


Trade Clearing

Credit



Debit


Overhead Absorption

Credit



Debit


Trade Clearing

Credit



Debit



Credit


Expense

Debit



299



Overhead Absorption

Credit


Interorganization Receivable

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



Credit

PO Delivery into Inventory


Debit



Credit



Debit



Credit



Debit



Credit



Debit



Credit



Debit

PO Receipt Adjustment: Positive Material Overhead Absorption Credit



300




Debit



Credit



Debit



Credit



Debit



Credit



Debit



Credit



Debit


Cost Variance

Credit

PO Receipt Adjustment: Transfer (Issue)


Debit



Credit



Debit



Credit



Debit



Credit



Debit


Cost Variance

Credit

Return to Supplier: Return to Inspection -Negative


Debit



301




Credit


Expense

Debit



Credit



Debit



Credit



Debit


Cost Variance

Credit

Return to Supplier (Return to Inspection):Transfer


Debit



Credit


Inventory Write o or Expense *

Debit



Credit



Debit



Credit



Debit



302



Cost Variance

Credit

Trade In-Transit Return (IntercompanyInvoicing Option = N)

Trade Clearing

Debit



Credit


Expense

Debit


Overhead Absorption

Credit


Trade Clearing

Debit



Credit



Debit


Intercompany COGS

Credit



Debit


Overhead Absorption

Credit



Debit



Credit



Debit


Overhead Absorption

Credit



303




Debit



Credit

Trade In-Transit Receipt: Acquisition CostAdjustment (Intercompany InvoicingOption = Y or N)


Debit


Trade Clearing

Credit



Debit


Overhead Absorption

Credit



Debit



Credit



Debit



Credit



Debit



Credit

PO Receipt: Acquisition Cost Write-o

Inventory Write O

Debit



Credit



Debit

PO Receipt: Acquisition Cost Write-o Material Overhead Absorption Credit



304




Debit



Credit


Expense

Debit



Credit



Debit



Credit



Debit


Inventory Write-O

Credit


Expense

Debit



Credit



Debit



Credit



Debit



Credit



305




Debit



Credit



Debit



Credit


Expense

Debit



Credit



Debit



Credit


Inventory Write O

Debit



Credit


Inventory Write O

Debit



Credit



Debit


Inventory Write O

Credit


Expense

Debit



306




Credit

Outside Processing EventsThe following table lists the outside processing events and the corresponding accounting entries.


Purchase Order Receipt Into Work Order

Work in Process

Debit



Credit



Debit



Credit



Debit



Credit

Sales EventsThe following table lists the sales events and the corresponding accounting entries.


Sales Order Issue


Debit

Sales Order Issue


Credit

Sales Order Issue

Expense

Debit

Sales Order Issue Material Overhead Absorption Credit



307


Sales Order Issue

Oset

Debit

Sales Order Issue

Cost Variance

Credit

RMA Receipt


Debit

RMA Receipt

Deferred RMA Gain Loss

Credit

RMA Receipt

Inventory Valuation

Debit

RMA Receipt


Credit

Work in Process Events

Work in Process EventsThe following table lists the work in process events and the corresponding accounting entries.


Material Issue

WIP Valuation

Debit

Material Issue


Credit

Material Issue

Expense

Debit

Material Issue


Credit

Material Issue

WIP Valuation

Debit

Material Issue

Cost Variance

Credit

Resource Charging

WIP Valuation

Debit

Resource Charging Resource Absorption Credit



308


Resource Charge Reversal

Resource Absorption

Debit

Resource Charge Reversal

WIP Valuation

Credit

Product Completion


Debit

Product Completion

WIP Valuation

Credit

Product Completion

Expense

Debit

Product Completion


Credit

Scrap

Scrap Expense

Debit

Scrap

WIP Valuation

Credit

Scrap Return

WIP Valuation

Debit

Scrap Return

Scrap Expense

Credit

Material Return


Debit

Material Return

WIP Valuation

Credit

Material Return

Expense

Debit

Material Return


Credit

Material Return

WIP Return Price Variance **

Debit

Material Return

WIP Valuation

Credit

Product Return

WIP Valuation

Debit

Product Return


Credit

Product Return Expense Debit



309


Product Return


Credit

Job Close Variance - Negative

WIP Valuation

Debit


Batch Size Variance

Credit


Component Sub Variance

Credit


Eciency Variance

Credit


Job Close Variance

Credit


Material Rate Variance

Credit


Resource Rate Variance

Credit


Resource Sub Variance

Credit


Usage Variance

Credit

Job Close Variance - Positive

Batch Size Variance

Debit


Component Sub Variance

Debit


Eciency Variance

Debit


Job Close Variance

Debit


Material Rate Variance

Debit


Resource Rate Variance

Debit


Resource Sub Variance

Debit


Usage Variance

Debit

Job Close Variance - Positive WIP Valuation Credit



310


Note: If there is a negative balance in the work in process valuation, the Debit or Credit signs are switchedduring the job closure.

Maintenance Work Order EventsThe following table lists the maintenance work order events and the corresponding accounting entries.


Maintenance Material Issue

Maintenance Expense

Debit


Inventory or Expense

Credit


Maintenance Expense

Debit


Material Overhead Account

Credit

Maintenance Material Return


Debit


Maintenance Expense

Credit



Debit


Maintenance Expense

Credit

Maintenance Resource Absorption

Maintenance Expense

Debit

Maintenance Resource Absorption

Resource Absorption

Credit

Maintenance Resource Reversals

Resource Absorption

Debit

Maintenance Resource Reversals

Maintenance Expense

Credit



311

Rework or Transform Work Order EventsThe following table lists the rework or transform events and the corresponding accounting entries.


WIP Negative Material Issue

Inventory

Debit


WIP Valuation

Credit



Debit


Maintenance Expense

Credit

WIP Negative Material Return


Debit

WIP Negative Material Return

Maintenance Expense

Credit

Cost Adjustment EventsThe following table lists the cost adjustment events and the corresponding accounting entries.


Standard Cost Adjustment - Positive


Debit


Standard Cost Adjustment **

Credit


Expense

Debit


Material Overhead Absorption **

Credit

Standard Cost Adjustment - Negative

Standard Cost Adjustment **

Debit



Credit

Standard Cost Adjustment - Negative Expense Debit



312




Credit

Layer Cost Adjustment - Positive


Debit


Oset

Credit



Debit



Credit

Layer Cost Adjustment - Negative

Oset

Debit



Credit


Expense

Debit



Credit

Manual Cost Adjustment - Positive


Debit


Oset

Credit



Debit



Credit

Manual Cost Adjustment - Negative

Oset

Debit



Credit


Expense

Debit



Credit

Manual Receipt Cost Adjustment -Positive


Debit

Manual Receipt Cost Adjustment -Positive Oset Credit



313



Inventory Valuation

Debit



Credit


Receipt Cost Adjustment Variance orExpense *

Debit


Oset

Credit



Debit


Oset

Credit

Manual Receipt Cost Adjustment -Negative

Oset

Debit



Credit


Expense

Debit



Credit


Oset

Debit



Credit


Oset

Debit


Receipt Cost Adjustment Variance orExpense*

Credit

Manual Receipt Cost Write-o- Positive

Inventory Write O

Debit

Manual Receipt Cost Write-o- Positive Oset Credit



314


Manual Receipt Cost Write-o- Negative

Oset

Debit

Manual Receipt Cost Write-o- Negative

Inventory Write O

Credit

Consigned Material Events

Purchasing EventsThe following table lists the purchasing events and the corresponding accounting entries.


PO Delivery

Consigned Inventory

Debit

PO Delivery

Consigned Clearing

Credit

Return to Supplier

Consigned Clearing

Debit

Return to Supplier

Consigned Inventory

Credit

Transfer to Consigned

Consigned Inventory

Debit


Consigned Inventory Oset

Credit

Transfer to Owned

Consigned Inventory Oset

Debit

Transfer to Owned

Consigned Inventory

Credit


Consigned Inventory

Debit


Consigned Clearing

Credit


Consigned Clearing

Debit

PO Receipt Adjustment: Negative Consigned Inventory Credit



315


PO Delivery Cost Adjustment

Consigned Inventory

Debit

PO Delivery Cost Adjustment

Consigned Clearing

Credit

Cycle Count EventsThe following table lists the cycle count events and the corresponding accounting entries.


Cycle Count Transfer - Receipt

Consigned Inventory

Debit

Cycle Count Transfer - Receipt

Consigned Valuation Unit Gain Loss

Credit

Cycle Count Transfer - Issue

Consigned Valuation Unit Gain Loss

Debit

Cycle Count Transfer - Issue

Consigned Inventory

Credit

Direct Organization Transfer EventsThe following table lists the direct organization transfer events and the corresponding accounting entries.


Shipment


Debit

Shipment

Consigned Inventory

Credit


Consigned Receivables

Debit



Credit



316



Expense

Debit


Overhead Absorption

Credit



Debit


Consigned Clearing

Credit



Debit


Overhead Absorption

Credit

Receipt

Consigned Inventory

Debit

Receipt

Consigned Inspection

Credit

Transfer to Owned

Inventory Valuation

Debit

Transfer to Owned


Credit

Transfer to Owned


Debit

Transfer to Owned


Credit

Transfer to Owned


Debit

Transfer to Owned


Credit



Debit


Inventory Valuation

Credit


Expense

Debit

Transfer to Consigned Material Overhead Absorption Credit



317


Interorganization Transfer EventsThe following table lists the interorganization events and the corresponding accounting entries.


In-transit Shipment


Debit

In-transit Shipment

Consigned Inventory

Credit



Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit


Consigned Clearing

Credit



Debit


Overhead Absorption

Credit

Receipt

Consigned Inventory

Debit

Receipt

Consigned Inspection

Credit

Transfer to Owned Inventory Valuation Debit



318


Transfer to Owned


Credit

Transfer to Owned

Inventory Valuation or Expense

Debit

Transfer to Owned


Credit

Transfer to Owned


Debit

Transfer to Owned


Credit



Debit


Inventory Valuation

Credit


Expense

Debit



Credit

Direct Organization Transfer Order EventsThe following table lists the direct organization transfer events and the corresponding accounting entries.




Debit



Credit


Expense

Debit


Overhead Absorption

Credit

Transfer to Consigned Trade In-Transit Valuation Debit



319



Inventory Valuation

Credit


Expense

Debit



Credit

Transfer to Owned

Inventory Valuation

Debit

Transfer to Owned


Credit

Transfer to Owned


Debit

Transfer to Owned


Credit

Transfer to Owned


Debit

Transfer to Owned


Credit

Interorganization Transfer EventsThe following table lists the interorganization transfer events and the corresponding accounting entries.




Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit



320



Consigned Clearing

Credit


Trade In-Transit Valuation or Expense

Debit


Overhead Absorption

Credit

Global Procurement EventsThe following table lists the global procurement events and the corresponding accounting entries.




Debit


Consigned Clearing

Credit



Debit


Overhead Absorption

Credit



Debit



Credit


Expense

Debit


Overhead Absorption

Credit

Consigned PO Delivery Consigned Inventory Debit



321


Consigned PO Delivery

Consigned Clearing

Credit

Consigned PO Delivery Adjustment -Positive

Consigned Inventory

Debit

Consigned PO Delivery Adjustment -Positive

Consigned Clearing

Credit

Consigned PO Delivery Adjustment -Negative

Consigned Clearing

Debit

Consigned PO Delivery Adjustment -Negative

Consigned Inventory

Credit

Trade In-Transit Return (IntercompanyInvoicing Option = Y)

Consigned Clearing

Debit



Credit


Expense

Debit


Overhead Absorption

Credit



Debit


Consigned Clearing

Credit


Expense

Debit


Overhead Absorption

Credit

Trade In-Transit Receipt Cost Adjustment(Intercompany Invoicing Option = Y or N)

Consigned Inventory

Debit


Consigned Clearing

Credit



322



Consigned Inventory

Debit


Consigned Clearing

Credit



Debit


Overhead Absorption

Credit


Glossary

323

Glossary

actual cost

A cost method that tracks the actual cost of each receipt into inventory. When depleting inventory, the processorlogically identifies the receipts that are consumed to satisfy the depletion, and assigns the associated receipt costs tothe depletion.

analysis group

Contains analysis code classifications for particular reporting purposes, for example fixed and variable costs analysisgroup.

cost book

A view or method of cost accounting for inventory transactions. You can create multiple cost books and assign them toa cost organization for different financial and management reporting purposes.

cost element

A cost that you can associate with an item so that you can monitor the cost through the inventory and accounting lifecycle. For example, you can monitor the material cost, overhead cost, and tax cost of an item. You can monitor each ofthese costs as a separate cost element.

cost organization

A grouping of inventory organizations that indicates legal and financial ownership of inventory, and which establishescommon costing and accounting policies.

cost organization book

Designates which cost book a cost organization uses for different costing and reporting purposes. For example, theCanada cost organization may use a perpetual average cost book and a primary cost book. In this case, there are twocost organization books: Canada-Perpetual Average, and Canada-Primary.

cost profile

Defines the cost accounting policies for items, such as the cost method and valuation structure.

DCOGS

Abbreviation for deferred cost of goods sold. Portion of cost of goods sold not recognized on the income statement,and deferred to a future accounting period, when matching revenue is recognized.

ERV

Abbreviation for exchange rate variance. The difference between the exchange rate used for receipt accrual and theexchange rate used for reversing the accrual.


Glossary

324

FIFO

Abbreviation for first in, first out. A material control technique of rotating inventory stock so that the earliest inventoryunits received or produced are the first units used or shipped. The ending inventory therefore consists of the mostrecently acquired goods.

inventory organization

A logical or physical entity in the enterprise that tracks inventory transactions and balances, stores definitions of items,and manufactures or distributes products.

IPV

Abbreviation for invoice price variance. The difference between the invoice price and the purchase order price.

layer inventory cost

Inventory valuation that is based on the receipt layer cost, including overhead absorption and cost adjustments.

perpetual average cost

The average cost of an item, derived by continually averaging its valuation after each incoming transaction. Theaverage cost of an item is the sum of the debits and credits in the inventory general ledger balance, divided by the on-hand quantity.

PO

Abbreviation for purchase order.

purchase price variance

Difference between the purchase price and the standard cost of an item.

receipt cost

The transaction cost of a purchase order receipt or a miscellaneous receipt, including additional acquisition cost orother cost adjustment.

receipt layer

Unique identification of delivery or put away of an item into inventory.

RMA

Abbreviation for return material authorization.

standard cost

An inventory valuation method in which inventory is valued at a predetermined standard value. You track variances forthe difference between the standard cost and the actual transaction cost, and you periodically update the standard costto bring it in line with actual costs.


Glossary

325

TERV

Abbreviation for tax exchange rate variance. Tax component of exchange rate variance (ERV).

TIPV

Abbreviation for tax invoice price variance. Tax component of invoice price variance (IPV).

transfer price variance

Difference between the price used for transfer of items and the standard cost of the sending organization.

TRV

Abbreviation for tax rate variance. Difference between tax rates in purchase order document and invoice document.

valuation structure

Defines inventory control attributes that are used to calculate the cost of an item. For example, the valuation structureof an item can be inventory organization and subinventory, or lot, or grade.

valuation unit

Defines the set of values for the control attributes that are used to calculate the cost of an item. For example, valuationunit V1 is defined by cost organization A, item I1, and lot L1.


Glossary

326

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