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Monday, February 15, 2016
Slide 3 - Oracle Financials Cloud
Release 9
Slide notes
Hello, my name is Cynthia. Welcome to the Release 9 Training for Oracle Financials Cloud. In this session, we’ll cover the Encumbrance Accounting
enhancements we have made in this release.
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Slide 4 - Agenda
Slide notes
For the enhancements covered in this training, we’ll give an overview, followed by more detail to explain how you can use them, and what business value
they bring. Then we’ll walk you through a demonstration.
Next we’ll explain what you need to consider before enabling these features in your business, and what you need to know to set them up.
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Slide 5 - Enhancements Overview
Slide notes
Oracle Fusion Financials now supports encumbrance accounting to help public sector organizations gain better visibility of commitments, obligations and
expenditures to manage costs. Using encumbrance accounting, encumbrance journals are created throughout the procure to pay process, during
requisitioning and purchasing—well in advance of the actual expenditure to forecast potential overspending. The encumbrance journals reclassify the
transaction as it moves through the procure to pay process. In addition, you can manually enter encumbrance journal entries to record upcoming
expenditures and adjustments.
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Slide 6 - Encumbrance Accounting in Subledgers
Slide notes
A new accounting method called ‘Accrual with Encumbrance Accounting’ is now available to you. This accounting method creates accounting for
requisitions and purchase orders and the rest of the Procure to pay flow. Whereas the Standard Accrual accounting method creates journal entries for
Invoices ONLY.
When using the Accrual with Encumbrance Accounting Method, the following accounting will be created for a transaction:
- When a requisition is approved and accounted, an encumbrance journal is created for the commitment.
- When a requisition is converted to a purchase order and the purchase order is approved/opened and accounted, an encumbrance journal is created. The
obligation for the purchase order is created and the commitment entry for the requisition is reversed.
When an invoice is matched to the purchase order and the validated invoice is accounted, an encumbrance journal is created to reverse the obligation for
the matched quantity of the purchase order. A journal entry for the invoice’s actual expense is also recorded which is the same accounting that would be
created from the Standard Accrual Accounting Method.
The journal entry for the payment of the invoice is also the same as the Standard Accrual Accounting Method.
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Slide 7 - Encumbrance Subledger Journal - Requisition
Slide notes
The Create Accounting program creates commitment encumbrance journals for requisitions. The journals are created with the journal source of Purchasing
and journal category of Requisition. The following types of requisition events will trigger accounting entries:
Approval,
Withdraw or cancel by the requestor
and rejection by the buyer.
The Approval event creates the commitment encumbrance.
When a requestor withdraws or cancels the requisition or the buyer rejects the requisition, the commitment encumbrance created during the approval of the
requisition is reversed.
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Slide 8 - Encumbrance Subledger Journal - Purchase Order and Change Order
Slide notes
The Create Accounting program creates obligation encumbrance journals for purchase orders and change orders. Change orders are modifications to an
implemented purchase order. The journals are created with the journal source of Purchasing and journal category of Purchase Order. The following types of
Purchase order and change order events will trigger accounting entries:
Approval
Withdraw or cancel by the buyer
rejection by supplier
finally closing a purchase order or reopening the finally closed purchase order
The Approval event creates the obligation encumbrance. If this purchase order was created from a requisition the commitment encumbrance is reclassified
as an obligation encumbrance by reversing the commitment encumbrance. A change order creates an adjustment to the obligation encumbrance
depending on the modification to the implemented purchase order.
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When a buyer withdraws or cancels or the supplier rejects the purchase document, the obligation encumbrance created during the approval is reversed.
The commitment encumbrance for the requisition is reestablished if the Purchase order has been approved but not implemented.
When a purchase order is finally closed, the obligation encumbrance is reversed for the quantity of the purchase order that is still open. Reopening the
finally closed purchase order reestablishes the obligation encumbrance amount from the final close.
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Slide 9 - Encumbrance Subledger Journal - Purchase Order Reversal
Slide notes
The Create Accounting program creates two journals when a standard invoice is matched to a purchase order. An encumbrance journal reverses the
obligation encumbrance for the matched quantity of the purchase order. in addition, a journal is created for the invoice’s actual expense. Along with
standard invoices, credit memos, debit memos and prepayment invoices will also create encumbrance journals related to the obligation. The journals are
created with the journal source of Payables and journal category of Purchase Invoices., Credit Memos or Debit Memos depending on the type of Invoice
transaction.
When the process is run for uninvoiced receipt accruals two journals are also created. An encumbrance journal reverses the obligation encumbrance for
the received quantity of the purchase order that has not been invoiced. An expense accrual for the quantity received is also created. The journals are
created with the journal source of Receipt Accounting and the journal Category of period end accrual.
The following types of events create encumbrance journals when an invoice is matched to a purchase order:
validation, cancel and final match
The Validation event creates the reversal of the obligation encumbrance for a standard invoice. When an invoice is cancelled, the obligation encumbrance
is reinstated. When an invoice is marked as a final match to a purchase order, a final close of the purchase order is completed. The obligation
encumbrance is reversed for the quantity of the purchase order that is still open.
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Slide 10 - Create Accounting
Slide notes
Run the Create Accounting process in General Ledger to create accounting for requisitions and purchase orders using Purchasing’s Subledger Accounting
process category of purchase requisition and purchase order, respectively. To create accounting for Payables invoices, run the Create Accounting process
from either the Create Invoices page or the Create Accounting task available in the Invoicing workarea using the invoices process category.
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Slide 11 - Encumbrance Subledger Journals - Adjustments
Slide notes
Encumbrance adjustment journals can be manually created outside of the procurement process in General Ledger or in the Payables subledger. When
creating the journal, you can classify the encumbrance balance by specifying the encumbrance type.
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Slide 12 - Encumbrance Accounting in Subledgers
Slide notes
Oracle Fusion Financials now supports encumbrance accounting to help public sector organizations gain better visibility of commitments, obligations and
expenditures to manage costs. Using encumbrance accounting, you can record encumbrance journals throughout your procure to pay process, such as
during requisitioning and purchasing—well in advance of the actual expenditure to forecast potential overspending. General Ledger and Subledger
Accounting fully support encumbrance journals in various processes as well as in inquiry, reporting and year end carry forward.
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Slide 18 - Summary of Enhancement Capabilities
Slide notes
Here is the summary of the features I have talked about today.
The Create Accounting process creates encumbrance journals during requisitioning and purchasing, which reclassifies the transaction through out the
procure to pay flow. This allows your organizations gain better visibility of commitments, obligations and expenditures to manage costs. You also can
manually enter encumbrance journal entries to record upcoming expenditures and adjustments.
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Slide 19 - Implementation Advice
Slide notes
So that concludes the audio portion of this presentation, thank you for listening. There is no audio in the implementation advice section. You can easily
pause and rewind any of these slides if you require additional time to take in the detail.
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Slide 20 - Feature Impact Guidelines
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Slide 21 - Setup Summary
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Slide 22 - Manage Encumbrance Accounting
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Slide 23 - Subledger Accounting Method – Payables
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Slide 24 - Subledger Accounting Method – Purchasing
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Slide 25 - Subledger Accounting Method – Receipt Accounting
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Slide 26 - Specify Ledger
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Slide 27 - Manage Encumbrance Types
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Slide 28 - Job Roles & Associated Duty Roles
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Slide 29 - Associated Release Training
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