First
you enter the Requisition in PO module. Supplier sends quotation reply of
requisitions or RFQ. You can approve the quotation of a supplier after to
record all information received from your supplier such as terms and
conditions, shipment and price breaks.
Then
you can go ahead for Purchase Agreement. Purchase Agreement has two types:
first Blanket and Contract Purchase Agreement. You cans use blanket purchase
agreement to communicate to those supplier that are negotiating pricing before
actually releasing firm purchases. A blanket purchase agreement must have
detailed information besides the header level information. A blanket purchase
agreement contains lines for specific terms, quantity, promised date,
need-by-date and prices.
You
can create a contract purchase agreement with a supplier to agree on terms and
conditions without entering into agreement for specific items or services. A
contract purchase agreement can support competitive solicitation through the
RFQ process and then through the purchase releases because a contract purchase
agreement has only header level information and no detailed information. Header
level includes terms, currency Supplier and a supplier site. You can enter
Purchase Order for confirms to purchasing services or goods. Purchase order has
four types: Standard, Planned, Blanket and Contract.
Whenever
you get goods or service that time you enter receipts in system. There are five
types of receipts: manual receipts, express receipts, cascade receipts,
unordered item receipts and substitute item receipts. That time accounting
entry should
be debited to Inventory Material Value and credited to Payable Clearing Account.
Whenever
you get the invoice in account department, it enters in the system that time
accounting entries should
be debited Payable Clearing and credited to Payable. Then you make a payment to supplier that time accounting
entries should
be debited Payable liability and credited to cash clearing account. After reconciliations between cash management and bank,
accounting should
be debited to cash clearing account and credited to bank or cash account.
Accrual Accounting -
Perpetual Accrual (On Receipt)
Enter purchase order
(1)
When
you enter a purchase order, accounts are created and stored with the purchase
order distribution. The accounts will eventually be used as a basis for
creating accounting that is sent to the general ledger. Creating a purchase
order in and of itself generates no accounting that is sent to the general
ledger.
Receive (2)
When
you accrue on receipt, processing a receiving transaction automatically sends a
receipt accrual to the general ledger. The Receiving Inventory Account is
debited (quantity x purchase order line unit price) and the Inventory AP
Accrual account (un-invoiced receipts account) is credited the same amount. Run
the Journal Import process with a source of Purchasing to create un-posted
journals in the general ledger.
Deliver and cost (3)
After
delivering to the final destination, the Receiving Inventory Account is cleared
and the Material account is debited. If you use standard costing, the Material
account is debited with the standard cost of the item and any difference is
charged to the Purchase Price Variance account.
Period end accrual
(4)
When
items are accrued on receipt, no period-end accrual is generated by the Receipt
Accruals - Period-End process. The receipt accrual is automatically generated
when the receipt is processed.
Invoice and match (5)
Entering
an invoice and matching creates
a debit to the Inventory AP Accrual account to
clear the liability for the uninvoiced receipt (you now have an invoice). The credit
is to the AP Liability account that defaults from the supplier site
if the invoice unit price is the same as the purchase order line unit price. Any
difference is charged to the Invoice Price Variance account. For items with destination type of Inventory, the Invoice
Price Variance account will be the Invoice Price Variance account specified
when you defined Inventory Information for your inventory organizations in the
Other Accounts tab. The AP Liability account is cleared when the invoice is
paid.
Accounting for Mass
Additions - Periodic Accrual (Period End)
Enter purchase order
(1)
When
you enter a purchase order, accounts are created and stored with the purchase
order distribution. The accounts will eventually be used as a basis for
creating accounting that is sent to the general ledger. Creating a purchase
order in and of itself generates no accounting that is sent to the general
ledger.
Receive (2)
For
most expenses and asset purchases (other than inventory), receipt accruals are
generally processed at period end, so no accounting is transferred to the
general ledger at the time the receipt is processed.
Period end accrual
(3)
If
no invoice is received and matched to the purchase order at period end, the
Receipt Accruals - Period End process will generate an accrual that is
transferred to the GL Interface. Run the Journal Import process to create un-posted
journals in the general ledger.
Reverse accrual (4)
Perpetual
accruals (on receipt accruals) are reversed when the invoice entered in
Payables is matched to the purchase order. Periodic accruals (period end
accruals) are reversed when a reversing journal is created and posted in the
general ledger.
Invoice and match (5)
Entering
an invoice and matching creates a debit to the Inventory AP Accrual account to
clear the liability for the uninvoiced receipt (you now have an invoice). The
credit is to the AP Liability account that defaults from the supplier site if
the invoice unit price is the same as the purchase order line unit price. Any
difference is charged to the Invoice Price Variance account. For items with
destination type of Expense, the Invoice Price Variance account will be the
same as the charge account. In the case of an asset that will be capitalized
and depreciated in assets, the charge account is an asset clearing account
associated with an asset category in Assets. The AP Liability account is
cleared when a payment is processed.
Post asset to Assets
(6)
The
Post Mass Additions process places the asset in service. When the Create
Journal Entries process is run in Assets, the charge account (the clearing
account on the invoice distribution) is relieved and the cost account
associated with the asset category is charged for the cost of the asset.
Enter invoice (1)
A
standard, unmatched invoice entered into Payables will generate a credit to the
AP Liability account and a debit to the charge account specified on the invoice
distribution. For expenses, this will be an income statement account; for
assets that will be capitalized in Assets and depreciated, this account will be
a balance sheet account (asset clearing account); for inventory received, the
account will be the Inventory AP Accrual account.
Procure to Pay
Process
Demand
The
procurement process generates and manages requests for the purchase of goods.
The demand for purchase items may be a one-time event or may recur in either
predictable or random time intervals.
Source
The
procurement sourcing process covers the business activities related to the
search, qualification, and selection of suitable suppliers for requested goods
and services.
Order
The
procurement ordering process includes purchase order placement by the buying
organization and purchase order execution by the supplying organization.
Receive
The
receipt process acknowledges that a purchase order has been duly executed. For orders
of physical goods, it will typically include the receipt, inspection and
delivery of the goods to inventory or to another designated location. For
orders of services, it will typically consist of a notification from the
requester or the approving person that the service has been performed as
agreed.
Invoice
The
invoice process includes entering supplier and employee invoices.
Pay
The
payment process consists of those activities involved in the payment for
ordered goods and services.
Definitions of Purchasing
Document
Blanket Purchase
Agreement: It committed amounts for specific
date range for service or goods.
Contract Purchase
Agreement: It committed amount for certain
period of unspecified goods.
Purchase Order types:
Standard: It
is regular purchases order to represents your order to the supplier.
Planned: It is a purchase order before you actually order the goods
and services.
Blanket: It is entering to against of blanket purchase agreement.
Contract: It is entering to against of contract purchase agreement.
Types of receipts:
Manual: It is for inputting data manually.
Express: It is a quicker method-if you have specified PO then
requires fewer keystrokes.
Cascade: It is assists in the distributions of the quantity of a
receipt from a single supplier to multiple shipments and distributions.
Unordered: When you are missing a PO or if you’re not sure to which
PO the receipt should be matched against, you can enter this type receipt.
Substitute Item: If you do not have any information for the Order
Information alternative region then you enter a receipt for substitute item.
Quotation:
It is used for quotes from the supplier regarding prices, terms and conditions
of items.
RFQ: It is used for soliciting quotes from the supplier
regarding prices, terms and conditions of items.
Purchase Release: It is used for releases against other document types,
there are two subtypes for this: Blanket and Schedule.
Accounting Entries
for Procure to Pay Cycle
A. Inventory Item:
On Receipt
DR Recv Ctl (Source – Inventory – Recvg Controls)
CR Inv AP Accrual Account (Source – Inventory Org Parameters – Other Accounts)
On
Delivery
DR Inventory Account (Source – Sub Inventory)
CR Recv Ctl
On
matching in AP
DR Inv AP Accrual Account
CR Liability Account (Source – Financial Options > Supplier Site)
B. Expense Item – Periodic Accrual
a. On Matching
DR Expense Account (Source – Item Expense)
CR Liability Account
C.
Expense Item – Accrue on Receipt
On Receipt
DR Recv Ctl
CR Expense AP Accrual Account (Source – Purchasing Options)
On
Delivery
DR Charge Account (Source – Item Expense)
CR Recv Ctl
On
matching in AP
DR Exp AP Accrual Account
CR Liability Account
D.
Fixed Asset – Periodic Accrual
On Matching
DR Asset Clearing Account (Source – Item Expense)
CR Liability Account
E.
Fixed Asset – Accrue on Receipt
On Receipt
DR Recv Ctl
CR Exp AP Accrual Account
On
Delivery
DR Asset Clearing Account
CR Recv Ctl
On
matching in AP
DR Exp AP Accrual Account
CR Liability Account
