Sunday, October 26, 2008

Purchasing Setup: Encumbrance Accounting

This is the note taken from metalink. I will add more notes on encumbrance accounting.

Purchasing Setup: Encumbrance Accounting
(reference:Doc ID: Note:121860.1)


PURPOSE
-------

To assist viewers of this document in verifying the common setup steps related
to this topic. Please consider all steps or guidelines mentioned below prior
to logging an iTAR with support.


SCOPE & APPLICATION
-------------------

This document is intended for all users, consultants and support analysts of
the Oracle Purchasing application. The setup steps listed below are not
necessarily in the proper order, but are simply provided as a tool for the
user to verify their work.


Purchasing Setup: Encumbrance Accounting
----------------------------------------

Setting up encumbrance accounting actually has very few actions that need to be
performed in Oracle Purchasing module. The primary level of effort required for
encumbrance accounting setup is in the General Ledger module. There is one
action that can be taken by PO and it deals with the AP form Financial Options.

Here are some quick setup steps for encumbrance accounting. The setup details
may differ depending on your business needs. There are very minor differences
between Release 10.7 and Release 11; the steps included here are for Release 11.

NOTE: Any navigation paths specified in this document can be performed using
the Purchasing Super User and General Ledger Super User responsibilities, unless
noted otherwise. Also, any and all profile options discussed in this document
can be defined from the following responsibility and navigation within Oracle
Applications:

Responsibility: System Administrator
Navigation: Profiles -> System


1) Define the Encumbrance Account
1.1. Navigation in GL: Setup -> Financials -> Flexfields -> Key -> Values
Navigation in PO: Setup -> Financials -> Flexfields _> Key -> Values
1.2. Perform a find by entering the following criteria:
Application: Oracle General Ledger
Title: Accounting Flexfield
Structure:
Segment: Account
1.3. Click the Find button.
1.4. Add a new segment value.
Value: (enter your own)
Description: Reserve For Encumbrance
Qualifiers:
Allow Budgeting: Yes
Allow Posting: Yes
Type: Liability
1.5. Save the record.

2) Enable Budgetary Control
2.1. Navigation in GL: Setup -> Financials -> Books
2.2. Query up the proper Set Of Books
2.3. In the Budgetary Control Options alternate region:
Enable Budgetary Control: Yes
Require Budget Journals: Can be blank - dependent on business needs.
2.4. Add Reserve For Encumbrance Account
2.5. Save

3) Open the Encumbrance Year (GL)
3.1. Navigation in GL: Setup -> Open -> Close.
3.2. Set the year to open.
3.3. Click button Open Next Year.
3.4. After confirming the prompt to open the selected year, a concurrent
request is launched; the encumbrance year will be open upon completion
of this concurrent request.

4) Set Encumbrance Types (PO)
4.1. Navigation in PO: Setup -> Organizations -> Financial Options
Encumbrance Alternate Region
4.2. Choose encumbrance types for Requisitions and Purchase Orders.
Oracle Financials provides two predefined encumbrance types that you
can use to identify requisition, purchase order, and invoice
encumbrances: Commitment and Obligation. Additional encumbrance types
can be defined in Oracle General Ledger.
4.3. Use Requisition Encumbrance:
If you enable this option, Purchasing creates journal entries and
transfers them to General Ledger to encumber funds for purchase
requisitions.
- Encumbrance Type:
If you enable Use Requisition Encumbrance, you must select a
requisition type by which you can identify your requisition
encumbrance journal entries. Purchasing assigns this encumbrance
type to the encumbrance journal entries it creates for purchase
requisitions.
- Reserve at Requisition Completion:
If you enable Use Requisition Encumbrance, indicate whether you want
requisition preparers to have the option to reserve funds. If you
do not enable this option, only requisition approvers will have the
option to reserve funds.
4.4. Use PO Encumbrance:
Enable this option to encumber funds for purchase orders, invoiced
matched to purchase orders, and basic invoices (not matched to a PO).
If you enable this option, Purchasing encumbers funds for purchase
orders and Payables encumbers funds for variances during approval of
invoices matched to purchase orders. If you enable this option and
enter a non-purchase order-matched invoice, Payables will encumber
funds for it during approval. All Payables encumbrances are reversed
during posting. If you enable Use Requisition Encumbrance, you must
also enable this option.

5) Define Budgetary Control Groups
5.1. Navigation in GL: Budgets -> Define -> Controls.
5.2. Query the Standard budgetary control level.
5.3. Select the funds checking level to either absolute, advisory or none.
5.4. Save.

6) Define Budget
6.1. Navigation in GL: Budgets -> Define -> Budget.
6.2. Enter a name and description
6.3. Status: Open
6.4. Require Budget Journals: Yes
6.5. Define the budget periods (these are typically for the duration of the
fiscal year).
6.6. Click the Open Next Year button (concurrent process gets submitted).

7) Define Budget Organization
7.1. Navigation in GL: Budgets -> Define -> Organization
7.2. Enter Budget Organization Name and Description.
7.3. Ordering Segment: Account
7.4. Display Sequence: Enter the sequence of segments desired.
7.5. Suggest not entering a password but you may if so desired.
7.6. Click the Ranges button.
7.7. Enter the Account Range From/To, click OK.
7.8. Type: Entered
7.9. Currency: USD
7.10. Encumbrance: Yes
7.11. Funds Check Level: Select from Absolute, Advisory, or None.
7.12. Amount Type: YTD (usual entry)
7.13. Funding Budget: Enter the Budget created on step 6 above.
7.14. Save.

8) Define Budget Journal (GL)
8.1. Navigation in GL: Budgets -> Enter -> Journals
8.2. Enter the Budget Organization created in Step 7
8.3. Find the appropriate budget, accounting periods, currency.
8.4. Alternate Region: Worksheet mode
8.5. Click and enter the accounts field and enter the accounts range.
8.6. Enter the budget amounts for each time period in question (usually
monthly budgets)
8.7. Save
8.8. Click the Create Journals button
8.9. Name a journal batch (make it meaningful)
8.10. Category: Budget
8.11. Funds Status: Required.
8.12. Click Check Funds button (concurrent request submitted).
8.13. Wait for completion of task.
8.14. Click Reserve Funds button (concurrent request submitted).
8.15. Wait for completion of task.
8.16. Click View Results to ensure proper status of above entries.
8.17. Click Done button to exit forms.
8.18 View Concurrent Requests to ensure successful completion of the above-
submitted concurrent requests.

9) Post Journal Entries (GL)
9.1. Navigation in GL: Journals -> Post
9.2. Find Balance Type: Budget
9.3. Select the journal entry batches you entered for posting by enabling
the check box
9.4. Click the Post button; this submits a concurrent request.

10) Review Posted Entries (GL)
10.1. Navigation in GL: Inquiry Account
10.2. Select Accounting Period From/To
10.3. Alternate Region: Primary Balance Type
10.4. Actual: yes
10.5. Alternate region: Secondary Balance Type
10.6. Budget: Yes
10.7. Budget: Select the budget from the LOV.
10.8. Click in the account field for account range.
10.9. Click the Show Variance button.
10.10. The account should show the budgets as defined with an actual of $0.



RELATED DOCUMENTS
-----------------

Note 121858.1 Purchasing Encumbrance Accounting Concepts and Process Model


.

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