z accounting entries

Accounting Entries in all modules – Inventory , Purchasing , Payables , OE , Receivables ,Assets and Projects.

Assets Assets

Work-In-Process WIP

Inventory – Standard Costing InventorystandardCosting

Receivables Receivables

Assets

Depreciation:

Dr. Depreciation Expense 200.00Cr. Accumulated Depreciation 200.00

Example: The recoverable cost is $4,000 and the method isstraight–line 4 years.

Current and Prior Period AdditionYou purchase and place the asset into service in Year 1, Quarter 1.(Payables)Dr. Asset Clearing 4,000.00Cr. Accounts Payable Liability 4,000.00

(Fixed Assets)Dr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Cr. Asset Clearing 4,000.00Cr. Accumulated Depreciation 250.00

You place an asset in service in Year 1, Quarter 1, but you do not enterit into Oracle Assets until Year 2, Quarter 2. Your payables systemcreates the same journal entries to asset clearing and accounts payableliability as for a current period addition.

(Oracle Assets – PRIOR PERIOD ADDITION)

Dr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Dr. Depreciation Expense(adjustment) 1250.00Cr. Asset Clearing 4,000.00Cr. Accumulated Depreciation 1500.00

Merge Mass AdditionsWhen you merge two mass additions, Oracle Assets adds the asset cost of the mass addition that you are merging to the asset account of the mass addition you are merging into. Oracle Assets records the merge when you perform the transaction. Oracle Assets does not change the asset clearing account journal entries it creates for each line, so each of the appropriate clearing accounts clears separately.Payables System

Dr. Asset Cost 4,000.00(mass addition #2asset cost account)

Cr. Asset Clearing 3,000.00(mass addition #1 accounts

payables clearing account)

Cr. Asset Clearing 1,000.00(mass addition #2 accountspayables clearing account)

Construction–In–Process (CIP) Addition

You add a CIP asset. (CIP assets do not depreciate)Oracle AssetsDr. CIP Cost 4,000.00Cr. CIP Clearing 4,000.00

Deleted Mass Additions

Oracle Assets creates no journal entries for deleted mass additions and does not clear the asset clearing accounts credited by accounts payable. You clear the accounts by either reversing the invoice in your payables system, or creating manual journal entries in your general ledger.

CapitalizationA capitalization transaction is similar to an addition transaction: you place the asset in service so you can begin depreciating it. When you capitalize an asset in the period you added it, Oracle Assets creates the following journal entries:

Payables SystemDr. CIP Clearing 4,000.00Cr. Accounts Payable Liability 4,000.00

Oracle Assets – CAPITALIZED IN PERIOD ADDED

Dr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Cr. CIP Clearing 4,000.00Cr. Accumulated Depreciation 250.00

Oracle Assets – CAPITALIZED AFTER PERIOD ADDED

Dr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Cr. CIP Cost 4,000.00Cr. Accumulated Depreciation 250.00

Asset Type Adjustments

If you change the asset type from capitalized to CIP, Oracle Assets creates journal entries to debit the CIP cost account and credit the asset clearing account. Oracle Assets does not create capitalization or reverse capitalization journal entries for CIP reverse transactions.

Oracle Assets – CHANGE TYPE FROM CAPITALIZED TO CIP (CURRENT PERIOD)

Dr. CIP Cost 4,000.00

Cr. Asset Clearing 4,000.00

Cost Adjustments to Assets Using a Life–Based Depreciation Method

Example: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000. The life of your asset is 4 years, and you are using straight–line depreciation. In Year 1, Quarter 4, you receive an additional invoice for the asset and change the recoverable cost to $4,800.

Payables System

Dr. Asset Clearing 800.00Cr. Accounts Payable Liability 800.00

Oracle Assets

Dr. Asset Cost 800.00Cr. Asset Clearing 800.00

ExpensedOracle Assets – EXPENSEDDr. Depreciation Expense 300.00Dr. Depreciation Expense 150.00(adjustment)Cr. Accumulated Depreciation 450.00

Amortized

Oracle Assets – AMORTIZED


Cost Adjustments to Assets Using a Flat–Rate Depreciation MethodExample: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000. You are depreciating the asset cost at a 20% flat–rate. In Year 1, Quarter 4, you change the recoverable cost to $4,800.

Payables System


Oracle Assets


ExpensedOracle Assets – EXPENSED

Dr. Depreciation Expense 240.00Dr. Depreciation Expense 120.00(adjustment)Cr. Accumulated Depreciation 360.00

Amortized



Cost Adjustments to Assets Using a Diminishing Value Depreciation MethodExample: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000. You are using a 20% flat–rate that you apply to the beginning of year net book value. In Year 2, Quarter 1, you change the recoverable cost to $4,800.

Payables System


Oracle Assets




AmortizedOracle Assets – AMORTIZED


Cost Adjustments to Assets Depreciating Under a Units of Production Method :

Example: You purchase an oil well for $10,000. You expect to extract 10,000 barrels of oil from this well. Each quarter you extract 2,000 barrels of oil. In Year 1, Quarter 3, you realize that you entered the wrong asset cost. You adjust the recoverable cost to $15,000.

Payables System

Dr. Asset Clearing 5,000.00Cr. Accounts Payable Liability 5,000.00

Oracle Assets

Dr. Asset Cost 5,000.00Cr. Asset Clearing 5,000.00


Dr. Depreciation Expense 3,000.00Dr. Depreciation Expense 2,000.00(adjustment)Cr. Accumulated Depreciation 5,000.00


Dr. Depreciation Expense 3,666.67Cr. Accumulated Depreciation 3,666.67

Cost Adjustments to Capitalized and CIP Source Lines

When you transfer source lines you adjust the recoverable cost of an asset. Because CIP assets do not depreciate, Oracle Assets does not need to reverse depreciation expense when you transfer invoice lines between CIP assets. If you transfer source lines from CIP to capitalizedassets, Oracle Assets takes catchup depreciation as for any cost adjustment transaction. If you transfer source lines from capitalized to CIP assets, Oracle Assets must back out some of the depreciation from the capitalized asset.

Transfer Source Lines Between Assets (Prior Period)Oracle Assets creates the following journal entries for an source line transfer between capitalized assets added in a prior period.

Oracle Assets – TRANSFER LINE FROM ASSET #1 TO ASSET #2

Dr. Asset Cost 400.00(from asset #2 category)Cr. Asset Cost 400.00(from asset #1 category)

Oracle Assets – ADJUST DEPRECIATION ON ASSET #1Dr. Accumulated Depreciation 70.00(from asset #1 category)Cr. Depreciation Expense 70.00

Oracle Assets – ADJUST DEPRECIATION ON ASSET #2

Dr. Depreciation Expense 55.00Dr. Depreciation Expense 70.00s(adjustment)Cr. Accumulated Depreciation 125.00(from asset #2 category)Transfer Source Lines Between Assets (Current Period)Oracle Assets creates the following journal entries for an source line transfer between assets added in the current period:

Oracle Assets – TRANSFER LINE FROM ASSET #1 TO ASSET #2

Dr. Asset Cost 300.00(from asset #2 category)Cr. Asset Clearing (from accounts 300.00payable for asset #1)

Cost Adjustment by Adding a Mass Addition to an Existing AssetIf you add a mass addition to an asset, Oracle Assets creates a journal entry to the asset cost account of the existing asset. Oracle Assets also credits the clearing account you assigned to the invoice distribution line in accounts payable to net it to zero.If you want the existing asset to assume the asset category and description of the mass addition, Oracle Assets creates a journal entry for the new total asset cost to the asset cost account of the mass addition’s category. It also creates journal entries for the clearing account you assigned to the invoice line in accounts payable, and for the clearing or cost account of the original addition category. Oracle Assets creates the following journal entries for a capitalized $2,000 mass addition added to a new, manually added $500 asset, where the asset uses the category of the mass addition:

Oracle Assets – ADD MASS ADDITION TO AN EXISTING ASSET

Dr. Asset Cost 2,500.00(from asset category of massaddition)Cr. Asset Clearing 500.00(from original asset category)Cr. Asset Clearing 2,000.00(from accounts payable)

Depreciation Method AdjustmentsExample: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000, the life is 4 years, and you are using the 200 declining balance depreciation method. In Year 2, Quarter 1, you change the depreciation method to straight–line.

Expensed

Oracle Assets – EXPENSED

Dr. Depreciation Expense 250.00Dr. Accumulated Depreciation 750.00Cr. Depreciation Expense 1,000.00(adjustment)

Amortized



Life Adjustments

Example: You place an asset in service in Year 1, Quarter 1. The asset cost is $4,000, the life is 4 years, and you are using straight–line depreciation. In Year 2, Quarter 2, you change the asset life to 5 years.

Expensed

Oracle Assets – EXPENSED

Dr. Depreciation Expense 200.00Dr. Accumulated Depreciation 50.00Cr. Depreciation Expense 250.00(adjustment)



Rate Adjustments – Flat–Rate Depreciation Method

Example: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000 and you are depreciating the asset cost at a 20% flat–rate. In Year 2, Quarter 3, you change the flat–rate to 25%.



AmortizedOracle Assets – AMORTIZEDDr. Depreciation Expense 250.00Cr. Accumulated Depreciation 250.00

Rate Adjustments – Diminishing Value Depreciation MethodExample: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000 and you are using a 20% flat–rate that you apply to the beginning of year net book value. In Year 2, Quarter 3, you change the flat–rate to 25%.



Amortized



Capacity AdjustmentsExample: You purchase an oil well for $10,000. You expect to extract 10,000 barrels of oil from this well. Each quarter you extract 2,000 barrels of oil. In Year 1, Quarter 4 you discover that you entered the wrong capacity. You increase the production capacity to 50,000 barrels.

ExpensedOracle Assets – EXPENSEDDr. Depreciation Expense 400.00Dr. Accumulated Depreciation 4,400.00Cr. Depreciation Expense 4,800.00(adjustment)

Oracle Assets – AMORTIZEDAmortizedDr. Depreciation Expense 181.82Cr. Accumulated Depreciation 181.82

Journal Entries for Transfers and ReclassificationsExample: You place an asset in service in Year 1, Quarter 1. The recoverable cost is $4,000, the life is 4 years, and you are using straight–line depreciation.

Current Period Transfer Between Cost Centers: Prior Period Transfer Between Cost Centers: Current Period Transfer Between Balancing SegmentsPrior Period Transfer Between Balancing Segments: Unit Adjustment: Reclassification:

Current Period Transfer Between Cost CentersIn Year 2, Quarter 2, you transfer the asset from cost center 100 to cost center 200 in the current period.Oracle Assets – TRANSFER ASSET / CHARGE DEPRECIATION

Cost Center 100Dr. Accumulated Depreciation 1,250.00Cr. Asset Cost 4,000.00

Cost Center 200

Dr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Cr. Accumulated Depreciation 1,500.00

1

Oracle Assets – TRANSFER ASSET / ADJUST AND CHARGE DEPRECIATION

Cost Center 100Dr. Accumulated Depreciation 2,750.00Cr. Asset Cost 4,000.00Cr. Depreciation Expense 250.00(adjustment)Cost Center 200Dr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Dr. Depreciation Expense 250.00(adjustment)Cr. Accumulated Depreciation 3,000.00

Current Period Transfer Between Balancing SegmentsIn Year 3, Quarter 4, you transfer the asset from the ABC Manufacturing Company to the XYZ Distribution Company.

Oracle Assets – TRANSFER ASSET

ABC ManufacturingDr. Accumulated Depreciation 2,750.00Dr. Intercompany Receivables 1,250.00Cr. Asset Cost 4,000.00XYZ DistributionDr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Cr. Accumulated Depreciation 3,000.00Cr. Intercompany Payables 1,250.00

1Oracle Assets – ADJUST AND CHARGE DEPRECIATION

ABC ManufacturingDr. Accumulated Depreciation 2,750.00Dr. Intercompany Receivables 1,500.00Cr. Asset Cost 4,000.00

Cr. Depreciation Expense 250.00(adjustment)XYZ DistributionDr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Dr. Depreciation Expense 250.00(adjustment)Cr. Accumulated Depreciation 3,000.00Cr. Intercompany Payables 1,500.00

Unit AdjustmentA unit adjustment is similar to a transfer, since you must update assignment information when you change the number of units for an asset. For example, you place the same $4,000 asset in service with two units assigned to cost center 100. In Year 2, Quarter 3, you realize theasset actually has four units, two of which belong to cost center 200.

Oracle Assets – ADJUST UNITSCost Center 100Dr. Accumulated Depreciation 750.00Cr. Asset Cost 2,000.00Cost Center 200Dr. Asset Cost 2,000.00Cr. Accumulated Depreciation 750.00Note: If all units remain in the original cost center, Oracle Assets does not create any journal entries.ReclassificationExample: You reclassify an asset from office equipment to computers in Year 1, Quarter 3. The asset cost is $4,000, the life is 4 years, and you are using straight–line depreciation.When you reclassify an asset in a period after the period you entered it, Oracle Assets creates journal entries to transfer the cost and accumulated depreciation to the asset and accumulated depreciation accounts of the new asset category. This occurs when you create journal entries for your general ledger.. Oracle Assets also changes the depreciation expense account to the default depreciation expense Account for the new category, but does not adjust for prior period expense.

1

Oracle Assets – TRANSFER COST AND ACCUMULATED DEPRECIATION

Office EquipmentDr. Accumulated Depreciation 500.00Cr. Asset Cost 4,000.00

ComputersDr. Asset Cost 4,000.00Dr. Depreciation Expense 250.00Cr. Accumulated Depreciation 750.00

Journal Entries for Retirements and ReinstatementsWhen you retire an asset and create journal entries for that period,Oracle Assets creates journal entries for your general ledger for each component of the gain/loss amount. Oracle Assets creates journal entries for either the gain or the loss accounts for the following components: proceeds of sale, cost of removal, net book value retired, and revaluation reserve retired. Oracle Assets also creates journal entries to clear the proceeds of sale and cost of removal.Oracle Assets creates journal entries for the retirement accounts you set up in the Book Controls form. If you enter distinct gain and loss accounts for each component of the gain/loss amount, Oracle Assets creates multiple journal entries for these accounts. You can enter different sets of retirement accounts for retirements that result in a gain and retirements that result in a loss.

Depreciation for Retirements

The retirement convention, date retired, and depreciation method control how much depreciation Oracle Assets takes when you retire an asset. Oracle Assets reverses the year–to–date depreciation if the asset’s depreciation method does not depreciate it in the year of retirement. Inthis case, when you perform a full retirement, Oracle Assets reverses the year–to–date depreciation of the asset, and computes the gain or loss using the resulting net book value. For partial retirements, Oracle Assets reverses the appropriate fraction of the year–to–datedepreciation and computes the gain or loss using the appropriate fraction of the resulting net book value. If the depreciation method takes depreciation in the year of retirement,Oracle Assets uses your retirement convention to determine whether the asset is eligible for additional depreciation in that year or whether some of that year’s depreciation must be reversed.When you perform a partial retirement, Oracle Assets depreciates the portion of the asset you did not retire based on the method you use. If your depreciation method multiplies a flat–rate by the cost, Oracle Assets depreciates the asset’s cost remaining after a partial retirement. For assets that use a diminishing value method, Oracle Assets depreciates the remaining fraction of the asset’s net book value as of the beginning of the fiscal year.

Depreciation for Reinstatements

The retirement convention, date retired, and period in which you reinstate an asset control how much depreciation Oracle Assets calculates when you reinstate an asset. When you reinstate a retired asset, Oracle Assets usually calculates some additional depreciation expense in the period in which you perform the reinstatement, unless you perform it in the same period that you retired the asset. This additional depreciation is the depreciation that would have been taken if you had not retired the asset. Sometimes, however, a reinstatement results in a reversal ofdepreciation. This occurs if the retirement convention caused some additional depreciation when you retired the asset, and then you reinstate the asset before the retirement prorate date. Then Oracle Assets reverses the extra depreciation that it took at retirement, and waits until the appropriate accounting periods to take it.

Current Period Retirements

Example: You place an asset in service in Year 1, Quarter 1. The asset cost is $4,000, the life is 4 years, and you are using straight–line depreciation. In Year 3, Quarter 3, you sell the asset for $2,000. The cost to remove the asset is $500. The asset uses a retirement convention anddepreciation method which take depreciation in the period of retirement. You retire revaluation reserve in this book.

Receivables System

Dr. Accounts Receivable 2,000.00Cr. Proceeds of Sale Clearing 2,000.00

Payables System

Dr. Cost of Removal Clearing 500.00Cr. Accounts Payable 500.00

Oracle Assets – MULTIPLE GAIN/LOSS ACCOUNTS

Dr. Accumulated Depreciation 2,500.00Dr. Proceeds of Sale Clearing 2,000.00Dr. Cost of Removal Gain 500.00Dr. Revaluation Reserve 600.00Dr. Net Book Value Retired Gain 1,500.00Cr. Asset Cost 4,000.00Cr. Proceeds of Sale Gain 2,000.00Cr. Cost of Removal Clearing 500.00Cr. Revaluation Reserve Retired Gain 600.00

If you enter the same account for each gain and loss account, OracleAssets creates a single journal entry for the net gain or loss.

Book Controls form:Accounts Gain LossProceeds of Sale 1000 1000Cost of Removal 1000 1000Net Book Value Retired 1000 1000Revaluation Reserve Retired 1000 1000

Oracle Assets – SINGLE GAIN/LOSS ACCOUNT

Dr. Accumulated Depreciation 2,500.00Dr. Proceeds of Sale Clearing 2,000.00Dr. Revaluation Reserve 600.00Cr. Asset Cost 4,000.00Cr. Cost of Removal Clearing 500.00Cr. Gain/Loss 600.00

Prior Period RetirementExample: You place an asset in service in Year 1, Quarter 1. The asset cost is $4,000, the life is 4 years, and you are using straight–line depreciation. In Year 3, Quarter 3, you discover that the asset was sold in Year 3, Quarter 1, for $2,000. The removal cost was $500. The assetuses a retirement convention and depreciation method which allow you to take depreciation in the period of retirement.

Receivables System

Dr. Accounts Receivable 2,000.00Cr. Proceeds of Sale Clearing 2,000.00

Payables System

Dr. Cost of Removal Clearing 500.00Cr. Accounts Payable 500.00

Oracle Assets

Dr. Accumulated Depreciation 2,500.00Dr. Proceeds of Sale Clearing 2,000.00Dr. Cost of Removal Loss 500.00Dr. Net Book Value Retired Loss 1,750.00Cr. Proceeds of Sale Loss 2,000.00Cr. Cost of Removal Clearing 500.00Cr. Asset Cost 4,000.00Cr. Depreciation Expense 250.00

Current Period ReinstatementExample: You discover that you retired the wrong asset. Oracle Assets creates journal entries for the reinstatement to debit asset cost, credit accumulated depreciation, and reverse the gain or loss you recognized for the retirement. Oracle Assets reverses the journal entries forproceeds of sale, cost of removal, net book value retired, and revaluation reserve retired. Oracle Assets also reverses the journal entries you made to clear the proceeds of sale and cost of removal. Oracle Assets also creates journal entries to recover the depreciation not charged to the asset and for the current period depreciation

expense.Oracle Assets

Dr. Asset Cost 4,000.00Dr. Cost of Removal Clearing 500.00Dr. Gain / Loss 600.00Dr. Depreciation Expense 250.00Cr. Accumulated Depreciation 2,750.00Cr. Proceeds of Sale Clearing 2,000.00Cr. Revaluation Reserve 600.00

Prior Period ReinstatementExample: You place an asset in service in Year 1, Quarter 1. The asset cost is $4,000, the life is 4 years, and you are using straight–line depreciation. In Year 2, Quarter 1, you retire the asset. In Year 2, Quarter 4, you realize that you retired the wrong asset so you reinstate it.

Oracle Assets

Dr. Asset Cost 4,000.00Dr. Cost of Removal Clearing 500.00Dr. Proceeds of Sale Loss 2,000.00Dr. Depreciation Expense 250.00Dr. Depreciation Expense 500.00(adjustment)Cr. Net Book Value Retired Loss 2,750.00Cr. Cost of Removal Loss 500.00Cr. Proceeds of Sale Clearing 2,000.00Cr. Accumulated Depreciation 2,000.00

Assets Fully Reserved Upon AdditionIf you add an asset with an accumulated depreciation equal to the recoverable cost, it is fully reserved upon addition. When you retire it, Oracle Assets does not back out any depreciation, even if you assigned the asset a depreciation method that backs out all depreciation in theyear of retirement. However, it creates all the other journal entries associated with retiring a capitalized asset.

Non–Depreciated Capitalized/Construction–In–Process (CIP) AssetsA non–depreciated capitalized asset or a CIP asset has no accumulated depreciation. Therefore, Oracle Assets does not create journal entries to catch up depreciation to the retirement prorate date, and does not remove the accumulated depreciation. However, Oracle Assets createsall other journal entries associated with retiring a capitalized asset.

Reinstatement TransactionsPENDING Asset RetirementWhen you reinstate an asset retired in the current accounting period that the calculate gains and losses program has not yet processed, the retirement transaction is deleted, and the asset is immediately reinstated. No journal entries are created.

PROCESSED Asset RetirementWhen you reinstate an asset retired in a previous accounting period or already processed in the current period, the existing retirement transaction gets a new Status REINSTATE, and the asset is reinstated when you process retirements. Oracle Assets creates journal entries to catch up any missed depreciation expense.

Journal Entries for RevaluationsThe following examples illustrate the effect on your assets and your accounts when you specify different revaluation rules.

Revalue Accumulated Depreciation

Example 1: You place an asset in service in Year 1, Quarter 1. The asset cost is $10,000, the life is 5 years, and you are using straight–line depreciation.

In Year 2, Quarter 1 you revalue the asset using a revaluation rate of 5%. Then in Year 4, Quarter 1 you revalue the asset again using a revaluation rate of –10%.

Revaluation Rules:

Revalue Accumulated Depreciation = YesAmortize Revaluation Reserve = NoRetire Revaluation Reserve = No

Oracle Assets bases the new depreciation expense on the revalued remaining net book value.In Year 5, Quarter 4, at the end of the asset’s life, you retire the asset with no proceeds of sale or cost of removal.

REVALUATION 1Year 2, Quarter 1, 5% revaluation

*Accumulated Depreciation =Existing Accumulated Depreciation +

[Existing Accumulated Depreciation x (Revaluation Rate / 100)]2,000 + [2,000 X (5/100)] = 2,100

**Revaluation Reserve =Existing Revaluation Reserve + Change in Net Book Value

0 + (8,400 – 8,000) = 400

Oracle Assets – REVALUATION

Dr. Asset Cost 500.00Cr. Revaluation Reserve 400.00Cr. Accumulated Depreciation 100.00

REVALUATION 2–10% revaluation in Year 4, Quarter 1:


Dr. Revaluation Reserve 420.00Dr. Accumulated Depreciation 630.00Cr. Asset Cost 1,050.00

Retirement in Year 5, Quarter 4:

Oracle Assets – RETIREMENT

Dr. Accumulated Depreciation 9,450.00Cr. Asset Cost 9,450.00

Accumulated Depreciation Not Revalued

Example 2: You place an asset in service in Year 1, Quarter 1. The asset cost is $10,000, the life is 5 years, and you are using straight–line depreciation. In Year 2, Quarter 1 you revalue the asset using a revaluation rate of 5%. Then in Year 4, Quarter 1 you revalue the asset again using a revaluation rate of –10%.

Revaluation Rules:

Revalue Accumulated Depreciation = NoAmortize Revaluation Reserve = NoRetire Revaluation Reserve = Yes

For the first revaluation, the asset’s new revalued cost is $10,500. Since you do not revalue the accumulated depreciation, Oracle Assets transfers the balance to the revaluation reserve in addition to the change in cost. Since you are also not amortizing the revaluation reserve, this amount remains in the revaluation reserve account until you retire the asset, when Oracle Assets transfers it to the appropriate revaluation reserve retired account. Oracle Assets bases the new depreciation expense on the revalued net book value. For the second revaluation, the asset’s revalued cost is $9,450. Again, since you do not revalue the accumulated depreciation, Oracle Assets transfers the balance to the revaluation reserve along with the change in cost.You retire the asset in Year 5, Quarter 4, with no proceeds of sale or cost of removal.

REVALUATION 15% revaluation in Year 2, Quarter 1:


Dr. Asset Cost 500.00Dr. Accumulated Depreciation 2,000.00Cr. Revaluation Reserve 2,500.00

REVALUATION 2–10% revaluation in Year 4, Quarter 1:


Dr. Accumulated Depreciation 5,250.00Cr. Asset Cost 1,050.00Cr. Revaluation Reserve 4,200.00

Retirement in Year 5, Quarter 4:


Dr. Accumulated Depreciation 9,450.00Dr. Revaluation Reserve 6,700.00Cr. Revaluation Reserve Retired Gain 6,700.00Cr. Asset Cost 9,450.00

Amortizing Revaluation ReserveExample 3: You place an asset in service in Year 1, Quarter 1. The asset cost is $10,000, the life is 5 years, and you are using straight–line depreciation.In Year 2, Quarter 1 you revalue the asset using a rate of 5%. Then in Year 4, Quarter 1 you revalue the asset again using a rate of –10%.

Revaluation Rules:Revalue Accumulated Depreciation = NoAmortize Revaluation Reserve = Yes

For the first revaluation, the asset’s new revalued cost is $10,500. Since you do not revalue the accumulated depreciation, Oracle Assets transfers the entire amount to the revaluation reserve. Since you are amortizing the revaluation reserve, Oracle Assets calculates the revaluation amortization amount for each period using the asset’s depreciation method. Oracle Assets also bases the new depreciation expense on the revalued net book value.For the second revaluation, the asset’s revalued cost is $9,450. Again, since you do not revalue the accumulated depreciation, Oracle Assets transfers the entire amount to the revaluation reserve.

The effects of the revaluations are illustrated in the following table:

1

REVALUATION 1Year 2, quarter 1, 5% revaluation



Oracle Assets creates the following journal entries each period to amortize the revaluation reserve:


Dr. Revaluation Reserve 156.25Cr. Revaluation Amortization 156.25

REVALUATION 2Year 4, quarter 1, –10% revaluation


Dr. Accumulated Depreciation 5,250.00Cr. Asset Cost 1,050.00Cr. Revaluation Reserve 4,200.00

Oracle Assets creates the following journal entries each period to amortize the revaluation reserve:



Revaluation of a Fully Reserved AssetExample 4: You place an asset in service in Year 1, Quarter 1. The asset cost is $10,000, the life is 5 years, and you are using straight–line depreciation. The asset’s life extension factor is 2 and the maximum fully reserved revaluations allowed for this book is 3.In year 5, quarter 4 the asset is fully reserved. In Year 9, Quarter 1 you want to revalue the asset with a revaluation rate of 5%.

Revaluation Rules:

Revalue Accumulated Depreciation = YesAmortize Revaluation Reserve = No

First, Oracle Assets checks whether this fully reserved asset has been previously revalued as fully reserved, and that the maximum number of times is not exceeded by this revaluation. Since this asset has not been previously revalued as fully reserved, this revaluation is allowed.The asset’s new revalued cost is $10,500. The life extension factor for this asset is 2, so the asset’s new life is 2 _ 5 years = 10 years. Oracle Assets calculates depreciation expense over its new life of 10 years.

Oracle Assets calculates the depreciation adjustment of $2,000 using the new 10 year asset life. It transfers the change in net book value to the revaluation reserve account.

Oracle Assets revalues the accumulated depreciation using the 5% revaluation rate. The change in net book value is transferred to the revaluation reserve account. Since you do not amortize the revaluation reserve, the amount remains in the revaluation reserve account.

1



Revaluation with Life Extension Ceiling

Example 5: You place an asset in service in Year 1, Quarter 1. The asset cost is $10,000, the life is 5 years, and you are using straight–line depreciation. The asset’s life extension factor is 3.0 and its life extension ceiling is 2.

In Year 5, Quarter 4 the asset is fully reserved. In year 9, quarter 1 you want to revalue the asset with a revaluation rate of 5%.

Revaluation Rules:Revalue Accumulated Depreciation = YesAmortize Revaluation Reserve = No

To determine the depreciation adjustment, Oracle Assets uses the smaller of the life extension factor and the life extension ceiling. Since the life extension ceiling is smaller than the life extension factor, Oracle Assets uses the ceiling to calculate the depreciation adjustment. Thenew life used to calculate the depreciation adjustment is 2 _ 5 years = 10 years, the life extension ceiling of 2 multiplied by the original 5 year life of the asset.

Oracle Assets calculates the asset’s depreciation expense under the new life of 10 years up to the revaluation period, and moves the difference between this value and the existing accumulated depreciation from accumulated depreciation to revaluation reserve.

Oracle Assets then determines the new asset cost using the revaluation rate of 5% and revalues the accumulated depreciation with the same rate. Oracle Assets calculates the asset’s new life by multiplying the current life by the life extension factor. The asset’s new life is 3 _ 5 years = 15 years. Oracle Assets bases the new depreciation expense on the revalued net book value and the new 15 year life.

1Depreciation Adjustment (calculated using life extension ceiling)=2,000



Revaluation with a Revaluation CeilingExample 6: You own an asset which has been damaged during its life.You placed the asset in service in Year 1, quarter 1. The asset cost is $10,000, the life is 5 years, and you are using straight–line depreciation. You entered a revaluation ceiling of $10,300 for the asset. In year 3, quarter 3 you revalue the asset’s category with a revaluationrate of 5%.

Revaluation Rules:

Revalue Accumulated Depreciation = NoAmortize Revaluation Reserve = Yes

If Oracle Assets applied the new revaluation rate of 5%, the asset’s new cost would be higher than the revaluation ceiling for this asset, so instead Oracle Assets uses the ceiling as the new cost. The ceiling creates the same effect as revaluing the asset at a rate of 3%. OracleAssets bases the asset’s new depreciation expense on the revalued asset cost.

1



Oracle Assets creates the following journal entries each period toamortize the revaluation reserve:



Journal Entries for Tax Accumulated Depreciation Adjustments

Example: You place an asset in service in Year 1, Quarter 1. The asset cost is $4,000, the life is 4 years, and you are using straight–line depreciation. In Year 4, Quarter 1, your tax authority requests that you change the depreciation taken in Year 2 from $1000 to $800.

Oracle Assets creates the following journal entries for the reserve adjustment:

Oracle Assets

Dr. Accumulated Depreciation 200.00Cr. Depreciation Adjustment 200.00

Home

Work in Process Accounting Transactions

The following are the basic accounting transactions carried out in WIP1. Relieve Inventory and charge WIP at standard Cost.2. Move Assemblies on the shop floor and charge Resources3. Earn Resources and Overheads into Jobs and Schedules4. Relieve WIP and Charge Inventory at Standard Cost.

Example

Given below is an example of what transaction and which stage they are generated in Oracle Application.The following table details the costs that are used for the accounting flows.

Item Cost – At start of ProductionMaterial Material

OverheadResource OSP Overhead Total

This Level 0 20 65 32 120 237Previous Level

150 15 45 0 40 250

Total 150 35 110 32 160 487Previous Level

CostsMaterial Material

OverheadResource OSP Overhead Total

Component 1

100 10 45 0 40 195

Component 2

30 3 33

Component 3

20 2 22

Total 150 15 45 0 40 250

This Level Costs

Cost Element

Operation Units Incurred cost per unit

Standard Cost /unit

Resource RS1

10 10 50 40

Overhead 10 * 125 (250% of Rs 50) 100Resource Rs2

20 5 30 25

Overhead 20 10 20 20OSP OS1 30 10 25 20OSP OS2 40 10 10 12Material O/H # 10 20 20Total 280 237

* Overhead for operation 10 is applied at 250% of the resource value earned at the operation # Material overhead is earned when an assembly is completed from a discrete job or

repetitive schedule into inventory. Material Overhead is never earned in the job or schedule.

Transactions

1. Material Transactions , Issue all material Transaction : Push all components at standard cost into the job 10 units at 250 =2500

Dr. WIP Accounts 2500Cr. Subinventory Accounts 2500

2. Material Transactions, Return specific component : Return 2 defective units of component 2 to inventory 2 units at 33 = 66

Dr. Subinventory Accounts 66Cr. WIP Accounts 66

3. Material Transactions , Issue Specific Component : Replace defective components with substitute items 2 units at 40 = 80

Dr. WIP Accounts 80Cr. Subinventory Accounts 80

Resource charged at Actual Cost and no variance accounted

4. Shop Transaction, Resource w/o rate variance : Charge resource RS1 at actual for operation 10. 11 units at 50 = 550

Dr. WIP Accounts 550Cr. Resource Absorption Account 550

5. Shop Floor Transaction, Reverse resource charge : Reverse Overcharge1 unit at 50 = 50

Dr. Resource Absorption Account 50Cr. WIP Accounts 50

Resource Charged at Standard Cost and variance accounted

6. Shop Floor Transaction, Resource with rate variance : Charge resource RS2 at standard for operation 20 5 units at 25 = 125

Dr. WIP Accounts 125Cr. Resource Absorption Account 150 ( Incurred cost of 30 for 5 units = 150 )

Dr. Rate Variance 25

7. Shop Floor Transaction, OSP resource w/o rate variance : Charge OSP OS1 at actual for operation 30 Receive 11 units at 25 = 275

On pushing the quantity to outside processing operation

Dr. WIP Accounts 275Cr. Receiving Inspection Account 275

On receiving the material after being processed

Dr. Receiving Inspection Account 275Cr. Inventory AP Accrual Account 275

8. Shop Floor Transaction, Reverse OSP overcharge : Reverse Overcharge 1 unit at 25 = 25

Dr. Inventory AP Accrual Account 25Cr. Receiving Inspection Account 25

Dr. Receiving Inspection Account 25Cr. WIP Accounts 25

9. Shop Floor Transactions, OSP resource with rate variance : Charge OSP OSP2 at standard for operation 20. Receive 10 units at 12 = 120

Dr. WIP Accounts 120Cr. Receiving Inspection Account 120

Dr. Receiving Inspection Account 120Cr. Inventory AP Accrual Account 100

Cr. Purchase Price Variance 20

10. Shop Floor Transactions, Resource based O/H : Charge 250% on the resource charged in step 4 550 * 250 % = 1375

Dr. WIP Accounts 1375 Cr. Overhead Absorption Accounts 1375

11. Shop Floor Transaction , Reverse resource based O/H : Reverse overhead for resource reversed in step 5 50 * 250 % = 125

Dr. Overhead Absorption Accounts 125Cr. WIP Accounts 125

12. Shop Floor Transactions, Item based O/H : Move through operation 20 and charge item based overhead 10 units at 20 = 200

Dr. WIP Accounts 200Cr. Overhead Absorption Accounts 200

Summary of Transactions

The table below gives a summary of all the transactions at this point.

Work in Process ValueCost Incurred Cost Relieved Balance

Cost Element This Level

Previous Level

This Level

Previous Level

This Level

Previous Level

Material 1514 1514Material OH 150 150Resource 625 450 625 450

OSP 370 0 370 0Overhead 1450 400 1450 400

Total 2445 2514 2445 2514

Costs are relieved from Work in Process when assemblies are completed to inventory or scrapped at an operation. Costs are always relieved from Jobs and Schedules at Standard.

13. Shop Floor Transaction : Scrap 2 assemblies at operation 40. 2 units at 495.90 = 934

Dr. Scrap Account 991.80Cr. WIP Accounts 991.80

14. Shop Floor Transaction : Return repaired unit from scrap. 1 unit at 495.90 = 495.90

Dr. WIP Accounts 495.90Cr. Scrap Account 495.90

15. WIP Completion Transaction : Complete 9 assemblies from WIP to inventory. 9 units at 495.90 = 4959+ 9 units at 20 for Material Overhead.

Dr. Subinventory Accounts 5139Cr. WIP Accounts 4959Cr. Material O/H Abs Account 180

The table below gives a summary of all the transactions at this point.

Work in Process ValueCost Incurred Cost Relieved Balance

Cost Element This Level

Previous Level

This Level

Previous Level

This Level

Previous Level

Material 1514 (1500) 14Material OH 150 (150) 0Resource 625 450 (525) (450) 100 0

OSP 370 0 (320) 50 0Overhead 1450 400 (1200) (400) 250 0

Total 2445 2514 (2045) (2500) 400 14

Variances are recognised when you close your jobs and schedules.16. Close Job or Schedule : Recognise this and previous level variances.

Dr. Variance Accounts 414Cr. WIP Accounts 414

Cost Update in WIP

The Cost update revalues your discrete and asset non-standard jobs.

ExampleCarrying from the previous example

Update Previous level Costs

1. Material cost increases by 50.2. Material overhead rate remains at 10% but the cost increases by 5 due to increase in material

cost.3. Resource cost decreases by 15.4. Overhead rate increases from 100% to 150% of resource cost./5. Overhead cost remains at 45 due to decrease in resource costs6. Quantity in job = 10

Bill of Material Cost

Material Material OH

Resource OSP Overhead Total

Old Cost 150 15 45 0 45 255New Cost 200 20 30 0 45 295Increase/ Decrease

50 5 (15) 0 0 40

Update this Level Costs

1. Resource RS1 amount decreases by 52. Outside processing OSP1 amount per item increases by 20.3. Overhead rate increases from 200% of RS1 value to 400% of RS1 value.4. 10 hours of RS1 charged to the job.5. 10 units received for OSP1


Resource OSP Overhead TotalOld Cost 35 100 70 205New Cost 30 120 120 270Increase/ Decrease (5) 20 50 65

Adjusting Accounting Entries

Dr. Material 500Dr. Material OH 50Dr. OSP 200Dr. Overhead 500

Cr. Resource 200Cr. Standard Cost Variance Account 1050

Adjustment Recorded in the Job


Material Material OH

Resource OSP Overhead Total

This Level (50) 200 500 650Previous Level 500 50 (150) 0 0 400Increase/ Decrease

500 50 (200) 200 500 1050

Purchase Orders and Releases

PO Accrual Account GeneratorPO Budget Account GeneratorPO Charge Account GeneratorPO Variance Account Generator

Requisitions

PO Requisition Accrual Account GeneratorPO Requisition Budget Account GeneratorPO Requisition Charge Account GeneratorPO Requisition Variance Account Generator

PO Accrual Account Generator andPO Requisition Accrual Account Generator

Accrual Account for Expense ItemAccrual Account from OrganizationPO Project–Related? (You can customize this function if youwant to build project–related accounts using your own rules andif Oracle Projects is installed.)Purchase Order FlexBuilder UpgradeWork Item Destination TypePO Budget Account Generator andPO Requisition Budget Account GeneratorBuild Inventory Charge AccountGet Budget Account from Item/SubGet Charge AccountGet Item Level Budget AccountGet Org Level Budget AccountItem Pre–Defined?PO Project–Related? (You can customize this function if youwant to build project–related accounts using your own rules andif Oracle Projects is installed.)Purchase Order FlexBuilder Upgrade

PO Charge Account Generator andPO Requisition Charge Account Generator

Build Inventory Charge AccountExpense AccountJob WIP AccountPO Project–Related? (You can customize this function if youwant to build project–related accounts using your own rules andif Oracle Projects is installed.)Purchase Order FlexBuilder UpgradeSchedule AccountType of WIPWork Item Destination TypePO Variance Account Generator andPO Requisition Variance Account GeneratorGet Charge AccountPO Project–Related? (You can customize this function if youwant to build project–related accounts using your own rules and

if Oracle Projects is installed.)Purchase Order FlexBuilder UpgradeVariance Account from OrganizationWork Item Destination Type

Inventory - Standard Costing

Prerequisites Define Organization Parameters

Costing Method is set to Standard Transfer Detail to GL is appropriately set Default Material Sub–Element account (Required)

Define cost types are defined. Define activities and activity costs are defined. Define material overhead defaults are defined Define item, item costs, and establish item cost controls. Launch transaction managers are launched

Inventory Standard Cost TransactionsThe following transctions can be performed in distributionorganizations.

Purchase Order Receipt To Receiving Inspection: Delivery From Receiving Inspection To Inventory: Purchase Order Receipt To Inventory: Return To Supplier From Receiving: Return To Supplier From Inventory: Sales Order Shipments: RMA Receipts: RMA Return: Miscellaneous Transactions: Inter–Organization Transfers: Subinventory Transfers: Internal Requisitions: Cycle Count and Physical Inventory:

Purchasing related transactions with inventory destinations are also discussed, but not those with expense destinations such as office supplies and non–inventory purchases.

Purchase Order Receipt to Receiving InspectionYou can use the Receipts window in Oracle Purchasing to receive material from a supplier into a receiving location. You can also use this window to receive material directly to inventory. Please note that this section addresses Inventory destinations only.

When you receive material or outside processing items from a supplier into receiving inspection, the Receiving Inspection account is debited and the Inventory A/P Accrual account is credited based on the quantity received and the purchase order price.

Account Debit Credit

Receiving Inspection account @ PO price XX

Inventory A/P Accrual account @ PO price XX

Delivery From Receiving Inspection to Inventory

You can use the Receiving Transactions window to move material from receiving inspection to inventory. The system uses the quantity and the purchase order price of the delivered item to update the receiving inspection account and quantity. The system uses the standard cost of the delivered item to update the subinventory balances.


Subinventory accounts @ standard cost XX


Debit/Credit Purchase Price Variance

If your item has material overhead associated with it, the subinventory account is debited for the amount of the material overhead and the material overhead absorption account(s) are credited.

Purchase Price Variance (PPV)Purchase price variances (PPV) occur when there are differences between the standard cost and the purchase order cost of an item.

Expense Subinventories and Expense ItemsWhen you receive inventory expense items into expense subinventory locations, the following accounting entry is generated:

Account Debit CreditSubinventory Expense account @ PO price XX


When you receive an expense (non–asset) inventory item, or into an expense subinventory, the subinventory expense account instead of the valuation account is debited. Because the expense account is debited at the purchase order price, there is no purchase price variance.

Purchase Order Receipt to InventoryWhen you receive material from a supplier directly to inventory, the receipt and delivery transactions are performed in one step.

First, the Receiving Inspection account is debited and the Inventory A/P Accrual account credited based on quantity received and the purchase order price.




Next, the Subinventory and Receiving Inspection accounts are, respectively, debited and credited based on the transaction quantity and standard cost of the received item.




Debit/Credit Purchase Price Variance

If your item has material overhead(s), the subinventory entry is debited for the material overhead and the material overhead absorption account(s) is credited.


Subinventory accounts XXMaterial Overhead Absorption account XX

Attention: If the subinventory account is combined with the above entry, the material overhead absorption account adds one additional entry.

Return To Supplier From Inventory

When you do not use receiving inspection, the return to supplier transaction updates the same accounts as the direct receipt to inventory, with reverse transaction amounts. The Inventory A/PAccrual account is debited and the Receiving Inspection account is credited based on quantity received and the purchase order price.

Foreign Currencies

As with the purchase order receipt to inventory transaction, the system converts the purchase order price to the functional currency and uses this converted value for the return to supplier accounting entries.

Sales Order ShipmentsShip material on a sales order using Order Entry/Shipping. The accounting entries generated by a sales order shipment are:

Account Debit CreditCost of Goods Sold account XXSubinventory accounts @ standard cost XX

Based on the rules you define in Order Entry/Shipping, the Account Generator dynamically creates the cost of goods sold account.

Attention: You do not create any accounting information when you ship from an expense subinventory or ship an expense inventory item.

RMA ReceiptsYou can receive items back from a customer using the RMA (return material authorization) Receipts window.

Account Debit CreditSubinventory accounts @ standard cost XX

Cost of Goods Sold Account XX

This uses the same account as the original cost of goods sold transaction. Attention: You do not create any accounting entries when you receive material for an RMA

for an expense item or expense subinventory.

+

RMA Returns

You can return items received into inventory through an RMA back to the customer using RMA Returns window.For example, you can send back — “return” — an item that was returned by the customer to youfor repair.This transaction reverses an RMA receipt. It also mimics a sales order shipment and updates the same accounts as a sales order shipment.

Account Debit CreditCost of Goods Sold Account XXSubinventory accounts @ standard cost XX

Attention: Do not create any accounting entries when you return material for an RMA for an expense item or expense subinventory.

Miscellaneous TransactionsUsing the Miscellaneous Transaction window, you can issue material from a subinventory to a general ledger account (or account alias) or receive material to a subinventory from an account or alias. An account alias identifies another name for a general ledger account.

Suggestion: Use account aliases for account numbers you use frequently. For example, use the alias SCRAP for your general ledger scrap account. Issuing material from a subinventory to a general ledger account or alias generates the following accounting entries:

Account Debit CreditEntered General Ledger Account @ standard cost XXSubinventory accounts @ standard cost XX

Receiving material to a subinventory from an account or an alias generates the following accounting entries:

Account Debit CreditSubinventory accounts @ standard cost XXEntered General Ledger Account @ standard cost XX

Expense Subinventories and Expense Items When you receive into an expense location or receive an expense item, you have expensed the material. If you use the miscellaneoustransaction to issue from an expense location, You can issue to an account or to an asset subinventory of the INV:Allow Expense to Asset Transfer profile option in Oracle Inventory is set to Yes. If issued to an account the system assumes the material is consumed at the expenselocation and moves the quantity without any associated value. If transferred to an asset subinventory, the material moves at its current cost.When you perform a miscellaneous transaction to receive an expense item to either an asset or expense subinventory, no accounting occurs. Since the account balance could involve different costs over time, The system assumes that the cost of the expense item is unknown.

Inter–Organization TransfersYou can transfer material from one inventory organization to another either directly or through intransit inventory. Intransit inventory represents material that has not yet arrived at the receivingorganization. Using Intransit Inventory You can move material from the shipping organization to intransitinventory using the Transfer Subinventories window. You can use the Receipts window to move material from intransit invenotry to the receiving organization.

Issue Transaction

Depending upon the Freight On Board (FOB) point defined in the inventory organization relationship, the shipment to intransit inventory creates the following accounting entries:

FOB Point is set to Receiving:

Account Organization Debit CreditIntransit inventory account Sending XX

Subinventory accounts Sending XX

FOB Point is set to Shipment:

Account Organization Debit Credit

Inter–Organization Receivable Sending XX


Intransit Inventory account Receiving XX

Inter–Organization Payable Receiving XX

Receipt TransactionDepending upon the FOB point defined in the organization relationship, the receipt from intransit inventory creates the following accounting entries:

FOB Point is set to Receiving:



Intransit Inventory account Sending XX

Subinventory accounts Receiving XX


FOB Point is set to Shipment:Account Organization Debit CreditSubinventory accounts Receiving XX


In addition to accounting for the movement of the material, these transactions also update the inter–organization receivable and payable accounts. These inter–organization clearing accounts represent inter–organization receivables and payables for the respective shipping and receiving organizations.

Direct Inter–Organization TransferWhen your organization relationship is set to directly transfer material, Inventory performs both the issue and the receipt transaction at the time of the issue. Any difference between the cost of items in the two organizations is recognized as variance in the receiving organization.

The accounting entries created are as follows:




Subinventory accounts Receiving XX


Use the Transfer Subinventories window for direct transfers. Material Overhead and Inter–Organization Transfers If your item has material overhead(s), you earn material overhead oninter–organization transfers. The subinventory entry is increased for the material overhead with a credit to the material overhead absorption account(s) in the receiving organization.


Subinventory accounts XXMaterial Overhead Absorption account XX

Attention: The subinventory account is combined with the above entry. The material overhead absorption transaction adds one additional account to the entry.

The FOB Point changes the accounting for freight. With FOB receiving, freight is accrued on the receipt transaction by the sending organization. With FOB shipment, freight is accrued on the shipment transaction by the receiving organization. For direct transfers, the receipt and shipment transaction occur at the same time. When the FOB Point is set to Receiving, the transfer creates the following freight and transfer charge entries at time of receipt:

Account Organization Debit CreditInter–Organization Receivable Sending XX

Freight Expense account Sending XX


Inter–Org. Transfer Credit Sending XX

Org. Material account Receiving XX


For the receiving organization, the inter–organization payable account is increased for freight and transfer charges. These charges are included in the comparison to the standard cost.

When the FOB Point is set to Shipment, the transfer creates the following freight and transfer charge entries at shipment:

Account Organization Debit CreditInter–Organization Receivable Sending XX

Inter–Org. Transfer Credit Sending XX


Freight Expense account Receiving XX


Intransit inventory includes both freight and transfer charges. The inter–organization payable is only increased for transfer charges.

Expense Subinventories and Expense Items:

When you receive an inter–organization transfer into an expense subinventory or receive an expense inventory item, you have expensed the material and cannot directly issue it. The system assumes the material cost is consumed at the expense location. Using the direct or intransit method, you can receive material to an expense subinventory or receive an expense inventory item. When you receive to expense locations or receive expense inventory items, the subinventory expense account is debited for the receiving organization,instead of the valuation accounts. The subinventory expense account is charged the total transaction value from the other organization. Inter–Organization Transfers and Sets of Books

The Inter–Organization Direct Transfer transaction also supports transfers from any set of books, even if the currency is different. However, you cannot use the Inter–Organization Intransit withmultiple sets of books. These transactions use receiving functions from Purchasing, which only supports one set of books. To perform an inter–organization intransit transfer from one set of books to another, you need to perform a combination of two transactions: a directtransfer and an intransit transfer.

Subinventory TransfersThis transaction increases the accounts of the To Subinventory and decreases the From Subinventory, but has no net effect on overall inventory value.If you specify the same subinventory as the From and To Subinventory, you can move material between locators within a subinventory.Account Subinventory Debit CreditSubinventory accounts To XX

Subinventory accounts From XX

Expense Subinventories and Expense Items

You can issue from an asset to an expense subinventory, and you can issue from an expense subinventory if the Oracle Inventory INV:Allow Expense to Asset Transfer profile option is set to Yes. The system assumes the material is consumed at the expense location.

Internal Requisitions :You can use the internal requisitions to replenish inventory. You can source material from a supplier, a subinventory within your organization, or from another organization. Depending upon the source you choose, the accounting entries are similar to one of the proceeding scenarios. However, unlike inter–organization transfers, internal requisitions do not support freight charges.

Cycle Count and Physical Inventory :

Use cycle counting and physical inventory to correct inventory on–hand balances. A cycle count updates the accounts of the affected subinventory and offsets the adjustment account you specify.

If you physically count more than your on–hand balance, the accounting sentries are:

Account Debit CreditSubinventory accounts @ standard cost XX

Adjustment account @ standard cost XX

If you count less than your on–hand balance, the accounting entries are:


Adjustment account @ standard cost XX


Like a cycle count, a physical inventory adjustment also updates the accounts of the affected subinventories and the physical inventory adjustment account you specify.

Suggestion: Since the standard cost is not stored as you freeze the physical quantities, you should not perform a standard cost update until you have adjusted your physical inventory.

Expense Subinventories and Expense ItemsThe system does not record accounting entries for expense subinventories or expense items for either physical inventory or cycle count adjustments. However, the on–hand balance of an expense subinventory is corrected if you track the quantities.

Work in Process Standard Cost TransactionsThe following cost transactions can occur when Oracle Work in Process is installed:

Component Issue and Return Transactions: Move Transactions: Resource Charges: Outside Processing Charges: Overhead Charges: Assembly Scrap Transactions: Assembly Completion Transactions: Job Close Transactions: Period Close Transactions: Work in Process Cost Update Transactions:

Component Issue and Return TransactionsComponent issue and return transactions can be launched in a variety of ways. See: Component Issue and Return Transaction Options, Oracle Work in Process User’s Guide and Backflush Transactions, Oracle Work in Process User’s Guide.

Costing Issue and Return Transactions

Issue transactions increase the work in process valuation and decrease the inventory valuation. The accounting entries for issue transactions are:

Account Debit CreditWIP accounting class valuation accounts XX

Subinventory elemental accounts XX

The accounting entries for return transactions are:Account Debit Credit


WIP accounting class valuation accounts XX

Subinventory accounts are defined in the Define Subinventories window in Oracle Inventory. WIP elemental accounts are defined in the WIP Accounting Classes window in Work in Process. See: Defining Subinventories, Oracle Inventory User’s Guide, Subinventory General Ledger Account Fields, Oracle Inventory User’s Guide, and WIP Accounting Classes, Oracle Work in Process User’s Guide.

Move Transactions

A move transaction moves assemblies within an operation, such as from Queue to Run, or from one operation to the next. Move transactions can automatically launch operation completionbackflushing and charge resources and overheads. You can perform move transactions using the Move Transactions window, Open Move Transaction Interface window, or the Enter Receipts window in Purchasing.

Backflush Material Transactions

With backflushing, you issue component material used in an assembly or subassembly by exploding the bills of material, and then multiplying by the number of assemblies produced.Move transactions can create operation pull backflush material transactions that issue component material from designated WIP supply subinventories and locators to a job or repetitive schedule. For backflush components under lot or serial number control, you assign the lot or serial numbers during the move transaction. When you move backward in a routing, Work in Process automatically reverses operation pull backflush transactions. The accounting entries for move transactions are:

Account Debit CreditWIP accounting class valuation accounts XX


The accounting entries for return transactions are:Account Debit CreditSubinventory elemental accounts XX


Moved Based Resource Charging

As the assemblies you build pass through the operations on their routings, move transactions charge all pre–assigned resources with an auto–charge type of WIP Move at their standard rate.You can charge resources based upon a fixed amount per item moved in an operation (Item basis) or based upon a fixed lot charge per item moved in an operation (Lot basis). For resources with a basis of Lot, Work in Process automatically charges the lot cost upon completion ofthe first assembly in the operation. You can also enter manual resource transactions associated with a move, or independent of any moves. You can manually charge resources to a job and repetitive schedule provided the job andrepetitive schedule has a routing. You can also transact resources through the Open Resource Transaction Interface.

Resource ChargesWork in Process supports four resource autocharging methods:Manual, WIP Move, PO Move, and PO Receipt. You can charge resources at an actual rate.You can also charge resource overheads automatically as you charge resources.WIP Move Resource Charges You can automatically charge resources at their standard rate to a job or repetitive schedule when you perform a move transaction using either the Move Transactions window or the Open Move Transaction Interface. When you move assemblies from the Queue or Run intra operation steps forward to the To move, Reject, or Scrap intraoperation steps, or to the next operation, Work in Process charges all pre–assigned resources with an charge type of WIP Move at their standard rate. For resources with a basis of Item, Work in Process automatically charges the resource’s usage rate or amount multiplied by theresource’s standard cost upon completion of each assembly in the operation. For resources with a basis of Lot, Work in Process automatically charges the resource’s usage rate or amount multiplied by the resource’s standard cost upon completion of the first assembly in the operation.

You can undo the WIP Move resource charges automatically by moving the assemblies from Queue or Run of your current operation to Queue or Run of any prior operation, or by moving the assemblies from the To move, Reject, or Scrap intraoperation steps backward to the Queue orRun intraoperation steps of the same operation, or to any intraoperation step of any prior operation. Work in Process applies WIP Move resource transactions to multiple repetitive schedules on a line based on how the assemblies being moved are allocated. Work in Process allocates moves across multiple repetitive schedules based on a first in–first out basis.

Manual Resource ChargesYou can charge manual resources associated with a move transaction or independent of any moves. Manual resource transactions require you to enter the actual resource units applied rather than autocharging the resource’s usage rate or amount based on the move quantity. You cancharge resources using that resource’s unit of measure or any valid alternate. You can manually charge resources to a job or repetitive schedule provided the job or repetitive schedule has a routing. If you use the Move Transactions window to perform moves and manual resource transactions at the same time, Work in Process displays all pre–assigned manual resources with an charge type of Manual assigned to the operations completed in the move. If the resource is a person–type resource, you can enter an employee number. In addition to the resources displayed, you can manually charge any resource to a job or repetitive schedule, even if you have not previously assigned the resource to an operation in the job or repetitive schedule.You can also manually charge resources to an operation added ad hoc by entering any resource defined for the department associated with the operation. Work in Process applies Manual resource transactions to the first open repetitive schedule on the line. You can correct or undo manual resource transactions by entering negative resource units worked.

Costing Resource Charges at Resource StandardResource charges increase work in process valuation. The accounting entries for resource transactions are:

Account Debit CreditWIP accounting class resource valuation account XX

Resource absorption account XX

If Autocharge is set to WIP Move, work in process and labor are charged at standard. There are no resource rate or efficiency variances.

The accounting entries for negative Manual resource transactions and backward moves for WIP Move resources are:



WIP accounting class resource valuationaccount XX

Costing Labor Charges at ActualYou can charge labor charges at actual in two ways. You can enter an actual rate for the employee using the Open Resource Transaction Interface or when you define employee rates. For labor charges using an actual or employee rate for a resource for which charge standardrate is turned off, the accounting entries are:

Account Debit CreditWIP accounting class resource valuation account XXResource absorption account XX

Any difference between the total labor charged at actual and the standard labor amount is recognized as an efficiency variance at period close.If the Standard Rates check box is checked and you enter an actual rate for a resource, the system charges the job or repetitive schedule at standard. If Autocharge is set to Manual and actual rates and quantities are recorded, a rate variance is recognized immediately forany rate difference. Any quantity difference is recognized as an efficiency variance at period close. The accounting entries for the actual labor charges are:

Account Debit CreditWIP accounting class resource valuation account XX

Resource rate variance account (Debit when actual XX XXrate is greater than the standard rate. Credit whenthe actual rate is less than the standard rate.)


PO Receipt and PO Move TransactionsYou can receive purchased items associated with outside resources from an outside processing operation back into work in process in Oracle Purchasing. For these items, Work in Process creates resource transactions at the standard or actual rate for all outside resources withan autocharge type of PO receipt or PO move. For outside resources with an autocharge type of PO move, Work in Process also moves the assemblies from the Queue or Run intraoperation step of the outside processing operation into the Queue intraoperation step of the nextoperation or into the To move intraoperation step if the outside processing operation is the last operation on the routing.

If you assigned internal resources to an outside operation with an autocharge type of Manual, charge the resources using the Resource Transactions window or the Open Resource Transaction Interface.

If you return assemblies to the supplier using the Enter Returns and Adjustments window in Oracle Purchasing, Oracle Purchasing automatically reverses the charges to all automatic resources associated with the operation. You must manually reverse all manual resource charges using the Resource Transactions window. For outside resources with an autocharge type of PO move, Oracle Purchasing automatically moves the assemblies from the Queue intraoperation step of the operation immediately following the outside processing operation into the Queue intraoperation step of your outside processing operation.

If the outside processing operation is the last operation on the routing, the assemblies automatically move from the To move intraoperation step to the Queue intraoperation step. PO move resource transactions are applied to multiple repetitive schedules on a line based on how the assemblies being moved are allocated. Moves are allocated across multiple repetitive schedules on a first in–first out basis. PO receipt resource transactions are allocated across schedules on a first in first (FIFO) out basis.

Outside Processing Charges

Work in Process automatically creates resource transactions at the standard or actual rate for all outside processing resources with an charge type of PO Receipt or PO Move when you receive assemblies from an outside processing operation back into work in process, using the Enter Receipts window in Purchasing. For outside processing resources with an charge type of PO Move, Work in Process also performs a move of the assemblies from the Queue or Runintraoperation step of your outside processing operation into the Queue intraoperation step of your next operation or into the To move intraoperation step if the outside processing operation is the last operation on your routing.

If you assigned internal resources to an outside operation with an charge type of Manual, you use the Move Transactions window or the Open Resource Transaction Interface to charges these resources.

If you return assemblies to the supplier, Work in Process automatically reverses the charges to all automatic resources associated with the operation. You must manually reverse all manual resource charges using the Move Transactions window. For outside processing resourceswith an charge type of PO Move, Work in Process automatically moves the assemblies from the Queue intraoperation step of the operation immediately following the outside processing operation into the Queue intraoperation step of your outside processing operation.

If the outside processing operation is the last operation on your routing, Work in Process automatically moves the assemblies from the To move intraoperation step to the Queue intraoperation step. Work in Process applies PO Move resource transactions to multiple repetitiveschedules on a line based on how the assemblies being moved are allocated. Work in Process allocates moves across multiple repetitive schedules based on a first in–first out basis. Work in Process applies PO Receipt resource transactions to the first open repetitive scheduleon the line.

Costing Outside Processing Charges at StandardWhen you receive the assembly from the supplier, Purchasing sends the resource charges to Work in Process at either standard cost or actual purchase order price, depending upon how you specified the standard rate for the outside processing resource.If the Standard Rates option is enabled for the outside processing resource being charged, the system charges Work in Process at the standard rate and creates a purchase price variance for the difference between the standard rate and the purchase order price. The accounting entries for outside processing items are as follows:


WIP accounting class outside processing valuationaccount XX

Purchase price variance account (Debit when the XX XXactual rate is greater than the standard rate. Creditwhen the actual rate is less than the standard rate.)

Organization Receiving account XX

Any quantity or usage difference is recognized as an outside processing efficiency variance at period close.

The accounting entries for return to supplier for outside processing are:Account Debit CreditOrganization Receiving account XX

Purchase price variance account (Debit when XX XXactual rate is less than the standard rate. Creditwhen the actual rate is greater than the standardrate. WIP accounting class outside processing valuation account XX

Costing Outside Processing Charges at Actual Purchase Order PriceIf the Standard Rates option is disabled for the outside processing resource being charged, the system charges Work in Process the purchase order price and does not create a purchase price variance.

The accounting transactions for outside processing charges at purchase order price are as follows:

Account Debit CreditWIP accounting class outside processing valuation XXaccount

Organization Receiving account XX

Any difference from the standard is recognized as a resource efficiencyvariance at period close.

Overhead ChargesMove Based Overhead ChargingWork in Process automatically charges appropriate overhead costs as you move assemblies through the shop floor. You can charge overheads directly based on move transactions or based on resource charges. For overheads charged based on move transactions with a basis of Item, Work in Process automatically charges overheads upon completion of each assembly in the operation. Work in Process automatically reverse these charges during a backward movetransaction.

For overheads based on move transactions with a basis of Lot, Work in Process automatically charges overheads upon completion of the first assembly in the operation. Work in Process automatically reverses these charges during a backward move transaction if it results in zeronet assemblies completed in the operation.

Resource Based Overhead ChargingWork in Process automatically charges appropriate overhead costs as you charge resources. You can charge overheads based on resource units or value. Work in Process automatically reverses overhead charges when you reverse the underlying resource charge.Costing Overhead ChargesOverhead charges increase work in process valuation. The accounting entries for overhead charges are:

Account Debit CreditWIP accounting class overhead account XXOverhead absorption account XX

You can reverse overhead charges by entering negative Manual resource charges or performing backward moves for WIP Move resources. The accounting entries for reverse overhead charges are:

Account Debit CreditOverhead absorption account XX

WIP accounting class overhead account XX

Assembly Scrap TransactionsYou can move partially completed assemblies that you consider unrecoverable to the Scrap intraoperation step of that operation. (If necessary, you can recover assemblies from scrap by moving them to another intraoperation step.) By moving into the Scrap intraoperation step, you can effectively isolate good assemblies from bad. Work in Process considers a move into the Scrap intraoperation step from the Queue or Run of the same operation as an operation completion, and thus updates operation completion information, backflushes components, and charges resource and overhead costsaccording to the elemental cost setup.You can also move assemblies back to the Scrap intraoperation step of the previous operation for Queue or Run if no work has been completed at the current operation.

Costing Assembly Scrap Transactions

When you define Work in Process parameters, you can specify whether moves into the Scrap intraoperation step require a scrap account. If you enter a scrap account or alias when you move assemblies into Scrap, the scrap account is debited and the job or repetitive schedule elemental accounts for the standard cost of the assembly through the scrap operation are credited. This removes the cost of the scrapped assemblies from the job or repetitive schedule. If you do not enter a scrap account or select an alias, the cost of the scrap remains in the job Or schedule until job or period close. If you recover assemblies from scrap, the scrap account is credited and the job or repetitive schedule elemental accounts for the standard cost of this assembly through thisoperation are debited. The accounting entries for scrap transactions are:Account Debit CreditScrap account XX

WIP accounting class valuation XXaccounts@standard

The accounting entries for reverse scrap transactions are:Account Debit Credit

WIP accounting class valuation accounts@standard XX

Scrap account XX

Assembly Completion TransactionsUse the Completion Transactions window, Move Transactions window, and Inventory Transaction Interface to move completed assemblies from work in process into subinventories. Completion transactions relieve the valuation account of the accounting class and charge the subinventory accounts (for example, finished goods) based upon the assembly’s elemental cost structure.Costing Assembly Completion Transactions Completions decrease work in process valuation and increase inventory valuation at standard costs.

The accounting entries for completion transactions are:Account Debit CreditSubinventory elemental accounts XX


Earning Assembly Material Overhead on CompletionYou can assign overheads based on Item, Lot or Total Value basis. For standard discrete jobs and repetitive schedules, you can earn these overheads as you complete assemblies from work in process to inventory.

The accounting entries for material overhead on completion transactions for standard discrete jobs and repetitive schedules are:

Account Debit CreditSubinventory material overhead account XX

Inventory material overhead absorption XXAccount

Use non–standard expense jobs for such activities as repair and maintenance. Use non–standard asset jobs to upgrade assemblies, for teardown, and to prototype production. Non–standard discrete jobs do not earn overhead on completion. Since you have already earned overhead to produce the assemblies as you are repairing or reworking, Work in Process prevents you from double earning material overhead on these assemblies.

The accounting entries for material overhead on completion transactions for non–standard expense and non–standard asset jobs are:Account Debit Credit

Subinventory material overhead account XXWIP accounting class material overhead account XX

Job Close TransactionsUntil you close a job, or change the status of the job to Complete – No Charges, you can make material, resource, and scrap charges to the job. Closing a discrete job prevents any further activity on the job. Costing Job Close TransactionsWork in Process recognizes variances when you close a job. The actual close date you specify determines the accounting period Work in Process uses to recognize variances. You can back date the close to a prior open period if desired. The close process writes off the balances remaining in the WIP elemental valuation accounts to the elemental variance accounts youdefined by accounting class, leaving a zero balance remaining in the closed job.

If there is a positive balance in the job at the end of the close, the accounting entries for a job close are:Account Debit CreditWIP accounting class variance accounts XX


Period Close TransactionsThe period close process in Inventory recognizes variances for non–standard expense jobs and repetitive schedules. It also transfers the work in process period costs to the general ledger.

Costing Non–Standard Expense Job Period Close Transactions

You can close discrete jobs and recognize variances for non–standard expense jobs at any time. In addition, the period close process automatically recognizes variances on all non–standard expense job charges incurred during the period. Therefore, open non–standard expense jobs have zero WIP accounting balances at the start of a new period.

If there is a positive balance in the job at the end of the period, the accounting entries for non–standard expense jobs at period close are:

Account Debit CreditWIP accounting class variance accounts XX


Costing Repetitive Schedule Period Close Transactions

You do not close a repetitive schedule. However, you do recognize variances on a period basis that result in zero WIP accounting balances at the start of the new period. You should check your transactions and balances using the Repetitive Value Report before you close a period.When you define Work in Process parameters, you can specify which repetitive schedule variances you recognize when you close an accounting period. You can either recognize variances for all repetitive schedules when you close an accounting period, or recognize variances for those repetitive schedules with statuses of either Complete – No Charges or Cancelled.

Assuming positive balances in the repetitive schedules at the end of the period, the accounting entries for repetitive schedules at period close are:Account Debit Credit

WIP accounting class variance accounts XX


Work in Process Standard Cost Update TransactionsThe standard cost update process revalues standard and non–standard asset discrete jobs and updates pending costs to frozen standard costs. Repetitive schedules and non–standard expense jobs do not get revalued by the cost update.The cost update creates accounting transactions by job and cost element valuation account. Each standard and non–standard asset discrete job is updated using the following formula:

Standard cost update adjustment = [new costs in (material, resource, outside processing, and overhead charges)- new costs out (scrap and assembly completion charges)] - [old costs in (material, resource, outside processing, and overhead charges) - old costs out (scrap and assembly completion charges)]

If the result of the cost update is an increase in the standard cost of the job, the accounting entries for a cost update transaction are:



WIP Standard cost adjustment account XX

If the result of the cost update is a decrease in the standard cost of the job, the accounting entries for a cost update transaction are:

Account Debit CreditWIP Standard cost adjustment account XX


When the cost update occurs for open jobs, standards and WIP balances are revalued according to the new standard, thus retaining relief variances incurred up to the date of the update.

Standard Cost Valuation

Inventory and Work in Process continually update inventory value with each transaction. Work in Process balances are updated with each related accounting transaction. Inventory subinventory values may be reported when the quantity movement occurs.

Value by Cost Element

Inventory or work in process value is maintained and reported on by distinct cost element (such as material, material overhead, and so on), even if you assign the same general ledger valuation account to each cost element. You can also report work in process value by cost element within specific WIP accounting classes.

Standard Costing

Under standard costing, the value of inventory is determined using the material and material overhead standard costs of each inventory item. If you use Bills of Material, Inventory maintains the standard cost by cost element (material, material overhead, resource, outside processing,and overhead).

Unlimited Cost Types

You can define an unlimited number of cost types and use them with any inventory valuation and margin analysis reports. This allows you to see the potential effects of a cost rollup/update. You can also update your standard costs from any of the cost types you have defined. When you use Bills of Material with Inventory, you can specify the cost type in explosion reports and report these costs for simulation purposes

Inventory and Work in Process Standard Cost Variances

This section describes Inventory standard cost variances and Work in Process standard cost variances.

Inventory Standard Cost Variances

In general, Inventory records purchase price variance (PPV) and recognizes cycle count and physical inventory adjustments as variances.

Purchase Price Variance (PPV)During a purchase order receipt, Inventory calculates purchase price variance. In general, this is the difference between what you pay the supplier and the item’s standard cost. Inventory calculates this value as follows:PPV = (PO unit price – standard unit cost) - quantity received.

Inventory updates the purchase price variance account with the PPV value. If the purchase order price is in a foreign currency, Inventory converts it into the functional currency of the inventory organization and calculates the purchase price variance. Purchasing reports PPV using the Purchase Price Variance Report. You distribute this variance to the general ledger when you perform the general ledger transfer, or period close.

Invoice Price Variance (IPV)In general, invoice price variance is the difference between the purchase price and the invoice price paid for a purchase order receipt. Purchasing reports invoice variance. Upon invoice approval, Payables automatically records Invoice Price Variance, to both invoice pricevariance and exchange rate variance accounts.

Cycle Count and Physical InventoryInventory considers cycle count and physical inventory adjustments as variance. You distribute these variances to the general ledger when you perform the general ledger transfer or period close.

Work in Process Standard Cost VariancesWork in Process provides usage, efficiency, and standard cost adjustment variances.Usage and Efficiency Variances

Usage and efficiency variances result when the total costs charged to a job or schedule do not equal the total costs relieved from a job or schedule at standard. Charges occur from issues and returns, resource and overhead charges, and outside processing receipts. Cost relief occurs from assembly completions, scrap transactions, and close transactions.

You can view these variances in the Discrete Job Value report, the Repetitive Value report, and by using the WIP Value Summary window.

Work in Process reports usage and efficiency variances as you incur them, but does not update the appropriate variance accounts until you close a job or period. Work in Process updates the standard cost adjustment variance account at cost update.

Usage and efficiency variances are primarily quantity variances. They identify the difference between the amount of material, resources, outside processing, and overheads required at standard, and the actual amounts you use to manufacture an assembly. Efficiency variance can

also include rate variance as well as quantity variance if you charged resources or outside processing at actual.

You can calculate and report usage and efficiency variances based on planned start quantity or the actual quantity completed. You can use the planned start quantity to check potential variances during the job or repetitive schedule. You can use the actual quantity completed tocheck the variances before the job or period close. Your choice of planned start quantity or actual quantity completed determines the standard requirements. These standard requirements are compared to the actual material issues, resource, outside processing, and overhead charges to determine the reported variance.

Work in Process calculates, reports, and recognizes the following quantity variances:

Material Usage VarianceThe material usage variance is the difference between the actual material issued and the standard material required to build a given assembly, calculated as follows:

standard material cost - (quantity issued - quantity required)

This variance occurs when you over or under issue components or use an alternate bill.

Resource and Outside Processing Efficiency Variance

The resource and outside processing efficiency variances is the difference between the resources and outside processing charges incurred and the standard resource and outside processing charges required to build a given assembly, calculated as follows:

(applied resource units X standard or actual rate) - (standard resource units at standard resource rate)This variance occurs when you use an alternate routing, add new operations to a standard routing during production, assign costed resources to No – direct charge operations skipped by shop floor moves, overcharge or undercharge a resource, or charge a resource atactual.

Move Based Overhead Efficiency VarianceMove based overhead efficiency variance is the difference between overhead charges incurred for move based overheads (overhead basis of Item or Lot) and standard move based overheads required to build a given assembly, calculated as follows:

applied move based overheads - standard move based overheads

This variance occurs when you use an alternate routing, add operations to a standard routing during production, or do not complete all the move transactions associated with the assembly quantity being built.

Resource Based Overhead Efficiency VarianceResource based overhead efficiency variance is the difference between overhead charges incurred for resource based overheads (overhead basis of Resource units or Resource value) and standard resource based overheads required to build a given assembly, calculated as follows:

applied resource based overheads - standard resource based overheads

This variance occurs when you use an alternate routing, add new operations to a standard routing during production, assign costed resources to No – direct charge operations skipped by shop floor moves, overcharge or undercharge a resource, or charge a resource at actual.

Standard Cost Adjustment VarianceStandard cost adjustment variance is the difference between costs at the previous standards and costs at the new standards created by cost update transactions.

Standard and Average Costing ComparedCost Management offers two costing methods: standard costing and average costing.Average costing is used primarily for distribution and other industries where the product cost fluctuates rapidly, or when dictated by regulation and other industry conventions.

Average costing allows you to: value inventory at a moving average cost track inventory and manufacturing costs without the requirement of having predefined

standards determine profit margin based on an “actual” cost method measure the organization’s performance against historical costs include all direct costs of manufacturing an item in that item’s inventory cost Use standard costing for performance measurement and cost control. Standard costing

allows you to: value inventory at a predetermined cost determine profit margin based on projected costs record variances against expected costs update standard costs from any cost type evaluate production costs relative to standard costs measure the organization’s performance based on predefined product costs evaluate product costs to assist management decisions

1

Under average costing, you cannot share costs. Average costs are maintained separately in each organization. Under standard costing if you use Inventory without Work in Process,you can define your item costs in the organization that controls your costs and share those costs across organizations. If you share standard costs across multiple organizations, all reports, inquiries, and processes use those costs. You are not required to enter duplicate costs.

Note: The organization that controls your costs can be a manufacturing organization that uses Work in Process or Bills of Material. Organizations that share costs with the organization that controls your costs cannot use Bills of Material.

Valuation Accounts and Cost Elements with Average CostingThe system maintains the average unit cost at the organization level; it does not use any subinventory valuation accounts. If you had separate valuation accounts by subinventory, total inventories would balance, but account balances by subinventory would not match the inventoryvaluation reports. Note: Cost Management enforces the same account number for organization level material and intransit accounts. Otherwise the balances of inventory valuation reports do notequal the sum of accounting transactions.

Changing from Standard to Average CostingOnce transactions have been performed you cannot change the costing method of an organization in the Organization Parameters window in Oracle Inventory.

Home

Receivables

Accounting for TransactionsThis essay describes the accounting entries created when you enter transactions in Receivables using the Accrual method of accounting. InvoicesWhen you enter a regular invoice through the Transaction window, Receivables creates the following journal entry:

DR ReceivablesCR RevenueCR Tax (If you charge tax)CR Freight (If you charge freight)

If you enter an invoice with a Bill in Arrears invoicing rule, Receivables creates the following journal entry:

In the first period of Rule:

DR Unbilled ReceivablesCR Revenue

In all periods of Rule:

DR ReceivablesCR Unbilled ReceivablesCR Tax (If you charge tax)CR Freight (If you charge freight)

If you enter an invoice with a Bill in Advance invoicing rule, Receivables creates the following journal entries:

DR ReceivablesCR Unearned RevenueCR Tax (If you charge tax)CR Freight (If you charge freight)

DR Unearned RevenueCR Revenue

Receivables uses the Freight, Receivable, Revenue, Suspense, Tax, Unbilled Receivable, and Unearned Revenue accounts that you specified in your AutoAccounting structure.

Credit MemosWhen you credit an invoice, debit memo, or chargeback through the Credit Memos window, Receivables creates the following journal entry:

DR RevenueDR Tax (if you credit tax)DR Freight (if you credit freight)

CR Receivables

When you credit a commitment, Receivables creates the following journal entries:

DR RevenueCR Receivables

When you enter a credit memo against an installment, Receivables lets you choose between the following methods: LIFO, FIFO, and Prorate. When you enter a credit memo against an invoice with invoicing and accounting rules, Receivables lets you choose between the following methods: LIFO, Prorate, and Unit.

If the profile option Use Invoice Accounting for Credit Memos is set to Yes, Receivables credits the accounts of the original transaction. If this profile option is set to No, Receivables uses AutoAccounting to determine the Freight, Receivables Revenue, and Tax accounts.

Receivables uses the account information for on–account credits thatyou specified in your AutoAccounting structure. Receivables let you update accounting information for your creditmemo after it has posted to your general ledger.Receivables keeps the original accounting information as an audit trail while it creates an offsetting entry and the new entry.

CommitmentsDepositsWhen you enter a deposit, Receivables creates the following journal entry:

DR Receivables (Deposit)CR Unearned Revenue

These accounts come from the deposit’s transaction type. When you enter an invoice against this deposit, Receivables creates the following journal entries:

DR Receivables (Invoice)CR RevenueCR Tax (If you charge tax)CR Freight (If you charge freight)

DR Unearned RevenueCR Receivables (Invoice)

When you apply an invoice to a deposit, Receivables creates a receivable adjustment against the invoice. Receivables uses the account information you specified in your AutoAccounting structure. When cash is received against this deposit, Receivables creates thefollowing journal entry:

DR CashCR Receivables (Deposit)

GuaranteesWhen you enter a guarantee, Receivables creates the following journal entry:

DR Unbilled Receivables CR Unearned Revenue

These accounts come from the guarantee’s transaction type.When you enter an invoice against this guarantee, Receivables creates the following journal entry:

DR Receivables (Invoice)CR RevenueCR Tax (If you charge tax)CR Freight (If you charge freight)

DR Unearned RevenueCR Unbilled Receivables

When you apply an invoice to a guarantee, Receivables creates a receivable adjustment against the guarantee. These accounts come from your guarantee’s transaction type.When cash is received against this guarantee, Receivables creates the following journal entry:

DR CashCR Receivables (Invoice)

ReceiptsWhen you enter a receipt and fully apply this receipt to an invoice, Receivables creates the following journal entry:

DR CashCR Receivables

When you enter an unapplied receipt, Receivables creates the following journal entry:

DR CashCR Unapplied

When you enter an unidentified receipt, Receivables creates the following journal entry:

DR CashCR Unidentified

When you enter an on–account receipt, Receivables creates the following journal entry:

DR CashCR On–Account

When your receipt includes a discount, Receivables creates the following journal entry:DR Receivables

CR Revenue

DR CashCR Receivables

DR Earned/Unearned DiscountCR Receivables

Receivables uses the default Cash, Unapplied, Unidentified, On–Account, Unearned, and Earned accounts that you specified in the Remittance Banks window for this receipt class. When you enter a receipt and combine it with an on–account credit, Receivables creates the following journal entry:


DR On–AccountCR Receivables (Invoice)

When you enter a receipt and combine it with a negative adjustment, Receivables creates the following journal entries:


DR Write–OffCR Receivables (Invoice)

You set up a Write – Off account when defining your Receivables Activity.When you enter a receipt and combine it with a positive adjustment, Receivables creates the following journal entries:


DR Receivables (Invoice)CR Write–Off

When you enter a receipt and combine it with a Chargeback, Receivables creates the following journal entries:


DR Receivables (Chargeback)CR Receivables (Invoice)

DR ChargebackCR Receivables (Chargeback)

You set up a Chargeback account when defining your Receivables Activity.

RemittancesWhen you create a receipt that requires remittance to your bank, Receivables debits the Confirmation account instead of Cash. An example of a receipt requiring remittance would be a check before it was cashed. Receivables creates the following journal entry when you enter such a receipt:

DR ConfirmationCR Receivables

You can then remit the receipt to your remittance bank using one of the two remittance methods: Standard or Factoring. If you remit your receipt using the standard method of remittance, Receivables creates the following journal entry:

DR RemittanceCR Confirmation

When you clear the receipt, Receivables creates the following journal entry:

DR CashDR Bank Charges

CR RemittanceIf you remit your receipt using the factoring remittance method, Receivables creates the following journal entry:

DR FactorCR Confirmation

When you clear the receipt, Receivables creates a short term liability for receipts which mature at a future date. The factoring process let you receive cash before the maturity date, and assumes that you are liable for the receipt amount until the customer pays the balance on maturitydate. When you receive payment, Receivables creates the following journal entry:

DR cashDR Bank Charges

CR Short Term Debt

On the maturity date, Receivables reverses the short term liability and creates the following journal entry:

DR Short Term DebtCR Factor

AdjustmentsWhen you enter a negative adjustment against an invoice, Receivables creates the following journal entry:

DR Write–Off CR Receivables (Invoice)

When you enter a positive adjustment against an invoice, Receivables creates the following journal entry:

DR Receivables (Invoice)CR Write–Off

Debit Memos

When you enter a debit memo in the Transaction window, Receivables creates the following journal entries:

DR ReceivablesCR Revenue (If you enter line amounts)CR Tax (If you charge tax)CR Freight (If you charge freight)

DR ReceivablesCR Finance Charges

On–Account CreditsWhen you enter an on–account credit in the Credit Memo or the Transaction window, Receivables creates the following journal entry:

DR Revenue (If you credit line amounts)DR Tax (If you credit tax)DR Freight (If you credit freight)

CR Receivables

Receivables use the Freight, Receivable, Revenue, and Tax accounts that you specified in your AutoAccounting structure.

Home

z accounting entries

Documents