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Accounting for Payables Transactions in Fusion Applications

Introduction:

In this article, we are going to discuss the accounting involved in the Oracle Fusion Payables. It is a known fact that the default accounting for taxes for the transactions of the Oracle Payables is based on the tax nature, tax account assigned to the configuration of relevant tax, and tax recoverability. Payables transactions accounting relies on the categories like:

1.Purchase order matched invoices

2..Unmatched standard invoices

3.Prepayments

4.Receipt matched invoices

Now, let’s look at the categories to know credit and debit accounts.

1. Purchase Order Matched Invoices:  The approach of tax accounting purchase matched order invoices that are very similar to the unmatched invoices. Given below are the key areas in which PO matched invoice varies from the invoice unmatched accounting-

When there are some differences in taxes between the invoice and purchase, these are identified as variances and can be accounted for accordingly. The variances of the tax are only accounted for the non-recoverable amounts of tax. The variance accountants can be defined as a part of the configuration of Oracle Fusion Payables. If there is no tax expense account that is specified for the tax rate, then the charge account used to account for the related line of the item is used.

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The account derivation for the Tax Rate Variance and Tax Invoice Price Variance depends on the items used, and the accrual method is described below :

Item Type:  Inventory   – Accure at Receipt: Disabled -The variance accountants purchase Order has defaulted from the parameter of  Inventory organization receiving accounts.           

Accure at Receipt: Enabled – The variance accountants purchase Order has defaulted from the parameter of  Inventory organization receiving accounts.   

Expense – Accure at Receipt: Disabled – Tax expense account is used.   

Accure at Receipt: Enabled –    Purchase order change account  is used.

The tax variance accounting treatment is:

Case : 1

Nature of Taxes : All Taxes

Variance Type : Tax Rate Variance

Recoverability : Nonrecoverable

Credit Account : Payables

Debit Account : Charge Account, Tax Expense

Notes : The Tax Rate Variance invoice distribution is posted to the account, which can be used for accounting for the amounts of invariance tax. Suppose the tax rate has an expense account of tax, then the same account can be used. Otherwise, the charge account is used.

Case : 2

Nature of Taxes : All taxes

Variance Type : Invoice Price Variance

Recoverability : Nonrecoverable

Credit Account : Payables

Debit Account : Invoice Price Variance Account

Notes : This is referred to as the tax difference between the invoice and purchase order due to the price changes in the invoices. This amount is posted to the variance account of the  invoice price. The account is the same as the accounting, which is used for the variance with the line of item.

Case : 3

Nature of Taxes : All taxes

Variance Type : Exchange PO Rate Variance

Recoverability : Nonrecoverable

Credit Account : Payables

Debit Account : Exchange PO Rate Variance Loss or Gain Account

Notes : Due to the exchange rate changes, this is the difference in tax amount between the invoice and purchase order. This amount is posted to the rate of exchange variance loss or gain account. The account can be the same as the one which is used for the accounting variance with the item line.

2. Unmatched standard invoices: If you want to know more about the unmatched standard invoices, here we are there to help you. The below method helps you to describe the taxes accounting for the unmatched standard invoices:

Case : 1

Nature of Tax : All taxes

Debit Account : Tax Expense

Recoverability : Nonrecoverable

Credit Account : Payables

Notes : The tax expense debit account applies only while the tax expense account is specified for the tax rate. The debit is applied to the charge account for the transaction line if it is not defined.

Case : 2

Nature of Tax : All taxes

Debit Account : Tax Expense

Recoverability : Recoverable

Credit Account : Payables

Notes : The account of the recoverable tax is derived from the tax rate if it is not defined there.

Case : 3

Nature of Tax : Deferred to payment tax point

Debit Account : Tax Expense

Recoverability : Nonrecoverable

Credit Account : Payables

Notes :   –

Case : 4

Nature of Tax : Deferred to payment tax point

Debit Account : Interim Tax

Recoverability : Recoverable

Credit Account : Payables

Notes :   Until payment, the recovery for these taxes is very deferred. The tax account of the interim is credited on payment with a debit to the account of tax recovery.

Case : 5

Nature of Tax :  Self-assessed

Debit Account : Tax Expense

Recoverability : Nonrecoverable

Credit Account : Tax Liability or Recoverable

Notes :   –

Case : 6

Nature of Tax :  Self-assessed

Debit Account : Tax Liability or Recoverable

Recoverability : Recoverable

Credit Account : Tax Liability or Recoverable

Notes :   As these taxes are to be paid and assessed by the first party company. Instead of the payable account, the credit is posted to the tax liability.

Case : 7

Nature of Tax :  Offset tax

Debit Account : Tax Liability or Recoverable

Recoverability : Recoverable

Credit Account : payables

Notes :   Always, offset taxes are hundred percent recoverable. These taxes are defined with an invoice distribution, and a negative rate with a negative amount is created. The payables amounts between the offset tax and base tax are negated. What remains is the debit to tax recovery or tax expense and negative debit to tax account of liability.

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3. Prepayments: While the applied amount handling for a tax can be recalculated, on the prepayment application, the taxes are recalculated. The difference in the tax amount between the invoice and prepayment is posted to the account of the tax difference. Depending on the amount change, negative or positive, the amount is either debited or credited to this account. Partially, if the tax is recoverable, only the tax non-recoverable amount is posted to the tax difference. The account of tax difference is applicable only while there is prepayment one-to-one full application to the invoice and where there’s a difference in the tax amount that is involved.

4. Receipt matched invoices: The only difference in accounting between receipt-matched invoices and regular payables invoices is the account to which taxes of non-recoverable are debited. This amount is debited to the accrual account payables instead of the charge account or expense account. The below process describes the treatment of the accounting for a receipt matched invoice:

Nature of Tax :  All taxes

Debit Account : Payables Accrual Account

Recoverability : Nonrecoverable

Credit Account : payables

The treatment of accounting for the variances applicable to a matched receipt invoice is the same as a matched purchase order invoice.

Conclusion:

Hope this article helps you to know the complete details about the accounting for payables transaction in the Oracle Fusion Applications. If you have any queries, Gologica is there to help you. Just call us: 82969 60414.

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