In this post, we are going to cover about Automatic Offset Accounting for Accounts Payables (AP).
For those who are new to this term; When an AP invoice is entered, there may be multiple expense/ distribution accounts and the corresponding liability account generally booked is the default account picked from the Supplier site or the one defaulted at Invoice header level.
However, there may be scenarios where a business entity is using the same Operating Unit to make purchases against multiple balancing segments. In such cases, it would be imperative to have different liability accounts booked against each of the different distribution accounts.
For example, consider an AP Invoice with a default liability account and two different distribution accounts.
Distribution 1 – BSV1.Expense Account1.Cost Center1.Future1 Dr 100
Distribution 2 – BSV2.Expense Account2.Cost Center2.Future1 Dr 150
Liability Acc – BSV3.Liability Account1.Cost Center3.Future3 Cr 250
Here, note that we have different charge accounts distributions and a single liability account for the invoice.
In normal cases, without any additional setup, the invoice will have entries posted against different Balancing Segment Values (BSV). However, for EBS implementations where a single entity may use multiple balancing segments, the requirement may be to post different liability accounts automatically based on the different distribution accounts.
Standard Oracle EBS provides the Automatic Offset Functionality to split the liability accounts for the invoice based on the different distribution accounts.
Setup Navigation – Payables > Setup > Options > Payables Options
By default, the value defined here is None, meaning Offset accounting is disabled.
Choosing the “Balancing” option would mean that the default liability account will be used with balancing segment values changed as per the distribution accounts.
In the example taken earlier for our invoice, the system will post the accounting entries as –
Distribution 1 – BSV1.Expense Account1.Cost Center1.Future1 Dr 100
Distribution 2 – BSV2.Expense Account2.Cost Center2.Future1 Dr 150
Liability Acc 1 – BSV1.Liability Account1.Cost Center3.Future3 Cr 100
Liability Acc 2 – BSV2.Liability Account1.Cost Center3.Future3 Cr 150
Choosing the “Account” option would mean that only the natural account will be used from the default liability account at invoice header level and all the segments will be copied from the invoice distributions.
In the example taken earlier for our invoice, the system will post the accounting entries as –
Distribution 1 – BSV1.Expense Account1.Cost Center1.Future1 Dr 100
Distribution 2 – BSV2.Expense Account2.Cost Center2.Future1 Dr 150
Liability Acc 1 – BSV1.Liability Account1.Cost Center1.Future1 Cr 100
Liability Acc 2 – BSV2.Liability Account1.Cost Center2.Future1 Cr 150
Please note that the changes will not be reflected on the invoice screen. The changes will be seen once the invoice is accounted for and posted and will be visible in GL journals/ View Accounting for the invoice.
Reference:
This post is from our Oracle Financial Functional Training, in which we cover General Ledger (GL), Account Payables (AP), Account Receivables (AR), Sub-Ledger Accounting, Fixed Assets, Cash Management and much more.
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Vijay says
Hi
Could you share cost for this course,I want to gift it to my son.
Rahul Dangayach says
Hi Vijay,
We are Glad you liked this, but apologies we are no longer doing this course.
Hope this helps,
Thanks and Regards
Rahul Dangayach
Team K21Academy