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.
