Oracle Purchasing – Receipt Accounting

Oracle Purchasing – Receipt Accounting (Accrue On Receipt and Accrue at Period End)

Inventory Accruals:

Inventory and Purchasing provides visibility and control of accrued liabilities for inventory items. Purchasing automatically records the accrued liability for the inventory items at the time of receipt. This transaction is automatically recorded in the general ledger at the time of receipt. The inventory expense is recorded at delivery if Standard Delivery is used and at receipt if Direct Delivery used.

Expense Accruals:

Purchasing optionally accrues un-invoiced receipts of non-inventory items when a period is closed. Purchasing automatically creates a balanced journal entry for each receipt un-invoiced at period end which can be reversed at the beginning of the next period.

Navigation:

India Local Purchasing > Oracle Purchasing > Setup > Organizations > Purchasing Options

Difference between 'Accrue On Receipt' and 'Accrue at Period End'

Accrue On Receipt means that when a receipt is saved, accrual transactions are immediately recorded and sent to the general ledger interface. This is also known as "online" accruals. Accrue at Period End means that when a receipt is saved, the accrual transactions are not immediately recorded and sent to the general ledger; instead, the accounting entries are generated and sent at the end of the month by running the Receipt Accruals - Period-End Process.

All items with a destination type of either Inventory or Outside Processing are accrued on receipt. For items with a destination type of Expense, there is an option for accruing on receipt or at period end.

 

In Purchase Order - Shipments - Accrue at Receipt is disabled for the expense item:

In Purchase Order - Shipments - Accrue at Receipt is enabled for the inventory item:

Why expense items are typically accrued at period-end, and why are inventory items are accrued at receipt?
One should accrue on receipt if perpetual inventory is adopted to facilitate reconciliation between inventory valuation reports and accounting entries. Expense items typically are not accounted for on daily basis and most companies find it easier to account for and reconcile these expenses at month-end rather than at the time each individual expense is incurred.

The following problems may be encountered, if both inventory and expense items are accrued on receipt:
1. Receiving inspection balances will include both inventory assets and expenses, so at the end of the month, they will need to be manually reclassified.
2. The number of entries needed to research and reconcile the perpetual A/P Accrual Account becomes significantly increased. Since the expense receipts could double the number of accrual accounting entries to process, the Accrual Reconciliation Report could take twice as long to run. The amount of time required to research any discrepancies would also increase.