Accrual Process for Period-End Accruals

Accrual Process for Period-End Accruals

Key points for accruing expense purchases at period-end include:

• You record the total uninvoiced receipt liabilities accrued during the accounting period.

• Actual journal entries are created for the amount of the receipt liabilities, debiting the charge account and crediting the PO distribution accrual account (normally the Expense A/P Accrual Account defined in the Define Purchasing Options form).

• You reverse accrual journal entries manually at the start of the new accounting period.

• If you are using encumbrance accounting, purchase order encumbrance is relieved when the invoice(s) matched to the purchase order are posted to the general ledger.

Receiving Transactions

Purchasing does not record any accounting entries for expense during a receiving transaction if you use period-end accruals. You record all of your uninvoiced liabilities at month end using the Receipt Accruals - Period-End process. See: Receipt Accruals - Period End Process

Receipts Accruals-Period End

Use the Receipt Accruals - Period End process to create period-end accruals for your uninvoiced receipts for expense distributions. Purchasing creates an accrual journal entry in your general ledger for each uninvoiced receipt you choose using this form. If you use encumbrance or budgetary control, Purchasing reverses your encumbrance entry when creating the corresponding accrual entry.
Purchasing never accrues an uninvoiced receipt twice. Each time you create accrual entries for a specific uninvoiced receipt, Purchasing marks this receipt as accrued and ignores it the next time you run the Receipt Accrual - Period-End process. Purchasing creates accrual entries only up to the quantity the supplier did not invoice for partially invoiced receipts.
Purchasing creates the following accounting entries for each distribution you accrue using the Receipt Accruals - Period-End process:

Account	Debit	Credit
PO charge account @ Uninvoiced Quantity * PO Price	XX
Expense A/P accrual account @ Uninvoiced Quantity * PO price		XX

As soon as you open the next period, Purchasing reverses the accrual entries using the following accounting entries:

Account	Debit	Credit
Expense A/P accrual account @ Uninvoiced Quantity * PO price	XX
PO charge account @ Uninvoiced Quantity * PO Price		XX

Match, Approve, and Post an Invoice

When you enter an invoice in Payables, you match each invoice line to a specific purchase order shipment in Purchasing. You can set up Payables to ensure that you pay only for the quantity you received. If you accrue your uninvoiced receipts at period-end, Payables records the expense transactions part of the accounting transactions:

Account	Debit	Credit
PO Distribution Charge Account @ Invoice Quantity * PO Price	XX
PO Distribution Variance Account @ Invoice Quantity * (Invoice Price - PO Price)	XX
A/P Liability @ (Invoice price * Invoice Quantity)		XX

Attention: Normally, you charge the original expense account for any invoice price variances, so your PO distribution variance account is the same as the PO distribution charge account. You do not record invoice price variances for expense purchases. Purchasing uses the Account Generator to set your purchase order distribution variance account to be the same as your purchase order charge account. If you want to record your invoice price variances to a separate account, use the Account Generator to define the business rules you use to determine the correct invoice price variance account.

Complete Period Transactions

If you use encumbrance or budgetary control, Purchasing creates encumbrance journal entries in your general ledger each time you approve a purchase order. Similar to accrual journal entries, encumbrance journal entries recognize a liability towards your supplier before any invoicing transactions occur. Unlike accrual journal entries, encumbrance journal entries are not actual transactions. General Ledger tracks actual and encumbrance journal entries and balances separately.

Period-End Checklist

Purchasing provides you with complete flexibility and control for your period-end accruals. You can use the Uninvoiced Receipts Report to analyze your uninvoiced non-inventory receipts before you accrue these receipts. You can then use the Receipt Accruals - Period-End process as many times as you want to generate accrual entries for the receipts you choose.
For your period-end reconciliation, you should perform the following steps:

1. Identify the purchasing period you want to reconcile and close.

2. Enter all receiving transactions for goods and services you received during the period. Purchasing automatically creates receipt accruals for all receipts you entered up to the end of this period. To prevent any period-end disruption, Purchasing lets you provide a receipt date that is different from the date you enter the receipts. You never have to enter all the receipts for a period before the end of this period. You can enter these receipts later. You simply need to back date the receipt date.

3. Enter and match all invoices you received during the period for your receipt accrual entries. You should make sure that you solve all posting holds problems in Payables before accruing receipts. Purchasing creates accrual journal entries for all purchase orders you received and did not match to an invoice. If you matched a purchase order to an invoice, Purchasing does not accrue the corresponding receipts. Purchasing does not accrue any purchase order that you closed on or before the end of the accrual period you choose. If the invoice is on posting hold, Payables has not yet accounted for the liability corresponding to the invoice. Under these conditions, the liability corresponding to this invoice would not appear in your books for the period. Payables lets you recognize this liability in the following period.

4. Close your accounts payable period corresponding to the purchasing period for your receipt accrual entries.

Note: The List of Values for period end accruals does not require the Accounts Payable period to be closed, however it's strongly recommended that closed periods are used, as the receipt accruals process will not pick up invoices entered after the accruals process is run for the period.rcvaccov

5. For period-end accruals of expense purchases, run the Uninvoiced Receipts Report. Use this report to analyze your uninvoiced receipts. The Uninvoiced Receipts Report lets you use the same selection criteria for your uninvoiced receipts as the Receipt Accruals - Period-End process. You always know exactly what you accrue and for what amount.

6. For period-end accruals of expense purchases, use the Receipt Accruals - Period-End process as many times as you need. You can use the search criteria to choose what you want to accrue and accrue your receipts steps by steps. You create accruals for a specific purchasing period. Purchasing automatically accrues all uninvoiced receipts your entered up to the end of the accrual period you specify. See: Receipt Accruals - Period End Process.

Each time you use the Receipt Accruals - Period-End process, Purchasing creates an unposted journal entries batch in your general ledger for your receipt accruals. If you are using encumbrance, Purchasing creates another journal entries batch in your general ledger corresponding to the encumbrance reversal entries for the uninvoiced receipts you accrued.

Purchasing never accrues your uninvoiced receipt twice. Each time you create accrual entries for a specific uninvoiced receipt, Purchasing marks this receipt as accrued and ignores it the next time you use the Receipt Accruals - Period-End process. Purchasing creates accrual entries only up to the quantity your supplier did not invoice for your partially invoiced receipts.

7. Post Accrual and Encumbrance Reversal journal entry batches in your general ledger (See the following section to identify Accrual and Encumbrance Reversal journal entry batches.)

8. Perform all the steps you need to close your accounting period and generate your period-end reports and financial statements in your general ledger.

9. Use your general ledger system to reverse all the receipt accrual and encumbrance reversal batches you created for your period-end accruals.

10. Close the purchasing period for your receipt accruals. When you close a purchasing period, Purchasing automatically un-marks all the receipts you previously accrued to make sure you can accrue these receipts again if they are still uninvoiced in the next period. See: Uninvoiced Receipts Report.