Inventory Accruals
Inventory and Purchasing provide you with visibility
and control of your accrued liabilities for inventory items. Purchasing
automatically records the accrued liability for your inventory items at the
time of receipt as perpetual accruals. This transaction is automatically
recorded in your general ledger at the time of receipt (unless you specified
otherwise when setting up periodic costing). The inventory expense is recorded
at delivery if you use Standard Delivery and at receipt if you use Direct
Delivery. You have options to determine whether Purchasing and Inventory
reverse encumbrances. The option used is dependent on how you compare
encumbrance to budget balances in inventory for your organization.
Expense Period-End Accruals
Purchasing optionally accrues uninvoiced receipts of
non-inventory items when you close a period. You can choose which uninvoiced
receipts are accrued. At period end, Purchasing automatically creates a
balanced journal entry for each uninvoiced receipt, which will automatically be
reversed at the beginning of the next period. Purchasing creates a reversing
entry for the encumbered amount corresponding to the expense while creating an
accrual entry for the receipt in the general ledger if you are using
encumbrance at your site.
Attention: When using Cash Basis Accounting, you will
not normally run the Receipt Accrual - Period End process. However, you must
use the Purchasing Options window and set the Accrue Expense Items flag to
Period End. See: Receipt Accruals - Period End Process.
Expense Perpetual Accruals
Purchasing optionally provides you with the ability to
accrue non-inventory liabilities at the time of receipt. If you choose at time
of receipt, Purchasing records an accrued liability and charges your receiving
inspection account for each non-inventory receipt. This transaction is
automatically recorded in your general ledger at the time of receipt.
Purchasing creates a reversing entry for the encumbered amount at the time you
deliver the goods to the final inventory or expense destination. When an
invoice is matched to a purchase order and approved in Payables, it is not
necessary for Payables to record an encumbrance for the expense. However,
Payables will record an encumbrance for invoice price variance or exchange rate
variance, if the variance exists.
Purchase Price Variance
Purchasing and Inventory provide you with visibility
and control of your purchase price variances. When you use standard costing,
Purchasing and Inventory automatically calculate and record purchase price
variances as you receive your inventory items into inventory. If desired,
Purchasing and Inventory automatically calculate and record purchase price
variances for your outside processing receipts into work in process. You can
use the Purchase Price Variance Report to review the accuracy of the standard
costs for your purchased items and services. See: Purchase Price Variance
Report.
Invoice Price Variance (IPV) and Exchange Rate Variance
Purchasing and Inventory provide you with visibility
and control of your invoice price and exchange rate variances. When Payables
accounts for invoices, it automatically creates accounting entries for price
and exchange rate variances. You can use the Invoice Price Variance Report to
review the accuracy of your purchase order prices. See: Invoice Price Variance
Report.
Foreign Currencies
If the purchase order uses a foreign currency,
Purchasing converts the purchase order price to the inventory functional
currency. Inventory uses this converted value for receiving accounting
purposes. Payables allows you to record exchange rate invoice variance to
separate accounts.
Nonrecoverable Tax
If you use nonrecoverable or partially recoverable tax,
the nonrecoverable tax amount is included in your period-end or perpetual
accrual accounting. Nonrecoverable tax is also included in the invoice and
exchange rate variances. Changing the exchange rate on the receipt may affect
the nonrecoverable tax amount. See: Tax Defaults in Purchasing. See: Entering
Receipt Lines.
Accrual Reconciliation and Write-Off
Purchasing and Inventory provide you with a complete
reconciliation report of all of your accounts payable accrual transactions. You
can quickly identify any mismatched items and write-off accrual transactions
from your receiving, accounts payable, inventory, and work in process
subledgers. See: Reconciling A/P Accrual Accounts Balance.
Expense Accrual Reporting
You can use the Uninvoiced Receipts Report to analyze
your uninvoiced receipt liabilities for non-inventory purchases when you create
accrual entries for them in your general ledger. You can control the amount of
expenses you accrue by supplier and purchasing category. You can obtain
detailed information about the purchase order receipts you accrued during your
accounting period. See: Uninvoiced Receipts Report.
Period-End Accruals and Encumbrance
For period-end accruals when using encumbrances,
Purchasing creates a reversing entry for the encumbered amount corresponding to
an expense while creating an accrual entry for the receipt in the general
ledger. When you accrue your receipts, Purchasing ensures that you do not
duplicate entries for the period. At the beginning of the following period, you
reverse the accrual entry for the expense and recreate the encumbrance entry
you reversed in the previous period using General Ledger. See: Receipt Accruals
- Period End Process.
If you use nonrecoverable or partially recoverable tax,
the nonrecoverable tax amount is included in your encumbrances.
Inventory and Perpetual Expense Accruals and
Encumbrance
For perpetual expense and inventory accruals,
Purchasing and Inventory create a reversing entry for the encumbered amount at
the time you deliver the goods to the final inventory or expense destination.
When an invoice is matched to a purchase order and approved in Payables, it is
not necessary for Payables to record an encumbrance for the expense. However,
Payables will record an encumbrance for invoice price variance or exchange rate
variance, if the variance exists.
If you use nonrecoverable or partially recoverable tax,
the nonrecoverable tax amount is included in your encumbrances.
