R12 = AP THEORY

Accounts Payables Theory

We maintain the following things at Accounts Payables Module.

1. Maintaining purchase invoice

2. Making payments to Suppliers
3. Payments reconciliation with bank for cash management

To maintain the purchase invoice the following things are needed.

1. Name and address of the supplier

2. Date of purchase
3. Quantity of purchase
4. Invoice amount
5. Payment method
6. Payment terms

We contact with the suppliers at different levels:

Request for Quotation (RFQ)
Purchase Order
Payments

We create Supplier definition in two levels:

1. Header
2. Site

Header information of Supplier can be accessed by global level; it means all

other operating unit people can access Supplier Header information.

Whereas Site information is local level; only specific operating unit people
can access. One supplier can have multiple sites (Addresses)

Sites are 3 types based on the purpose: RFQ, P.O and Payment site.

If you want to record invoice we should have minimum one pay site.

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Accounts Payables Theory

Payment methods:

We have 4 payment methods in OF.

1. Check
2. Electronic (EFT)
3. Wire
4. Clearing

At the time of creating invoice we have to opt for payment method and
Currency.
Check : Payment through the regular bank check

Electronic : System will create one instruction file with all

The Details of invoice and payment. This file
will send to bank for payment.

Wire : It is manual process of sending instructions to

bank.
System will not generate any instruction file.

Clearing : In this process we will not make Payment physically. This is

used as adjustment for inter company transfers and transfer between the
branches.

Payment Terms:

payment terms are used to schedule the transaction for payment in one (or )
more installment's along with discounts.

Accounts Payables Theory

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Distribution Set:

Distribution Set is used to automatically enter distributions for an invoice

when you are not matching it to a purchase order.

For example:

Total invoice amount: Rs. 100000

Plant cost : Rs. 90000 90%
Tax : Rs. 5000 5%
Freight : Rs. 5000 5%

If we receive the invoices in future with the same arrangements we can use
the distribution set.

You can assign a default Distribution Set to a supplier site so Payables will
use it for every invoice you enter for that supplier site.

If you do not assign a default Distribution Set to a supplier site, you can
always assign a Distribution Set to an invoice when you enter it.

We have 2 types of distribution sets.

1. Full
2. Skeleton

A Full Distribution is a collection of distribution's with the percentage and

accounts. The percentage of distribution must be equal to zero.

Skeleton Distribution Sets to create distributions with no set distribution

amounts.

We can enter distribution sets in 2 ways:

1. Manual
2. Automatic (by creation of distribution sets)

Accounts Payables Theory

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Types of invoices in Accounts Payables

1. Standard invoice
2. Debit Memo
3. Credit Memo
4. Mixed invoice
5. Recurring invoice
6. Pre payment invoice
7. Expenses invoice
8. Interest invoice
9. Withholding tax invoice
10. Retain age Release
11. Transportation

System automatically generated invoices:

1. Recurring invoice
2. Expenses invoice
3. interest invoice
4. Withholding Tax invoice

Remaining all other invoices we have to create manually.

1. Standard invoice:

A standard invoice which is received from the supplier and entered in the
oracle ap.

2. Debit Memo

Debit Memo is used by Customers only.

This is used for purchase returns.
To reduce the balance payable to supplier we create Debit Memo.
Only negative amounts can be entered through Debit Memo.

Accounts Payables Theory

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3. Credit Memo

To reduce the supplier balance Credit Memo will be used.

Credit Memo will rise by Supplier and sent to us.

Generally credit memos used, when we get discount on payables or on any

price differences.

We can enter only negative balances through Credit Memos.

4. Mixed Invoice

We can enter Positive and Negative balances also thru Mixed Invoices.

5. Recurring Invoice.

We require a calendar to create recurring invoice, called Special Calendar.

6. Pre payment invoice.

Pre payment invoice are used when there is advance payment made to
Suppliers against purchases or Employees for Travel expenses (Imprest
amount).

Pre payments are two types: Temporary pre payment & Permanent pre
payment.

Temporary pre payments are adjusted against the future purchase invoice.

Whereas we cannot adjust Permanent pre payments against future

purchases. This payment we can receive when the contract cancelled with
the supplier.

We can convert Permanent pre payment into Temporary pre payment. After
conversion we can use that to adjust against future invoices.
Accounts Payables Theory

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7. Expenses invoice

When employees spent the amount and submit the bills for reimbursement,
that information we have to maintain as expenditure report in the system.
With the help of this expenses report information we can create Expenses
Invoice.

8. Interest invoice

When we make payments after the due date crossed, if interest penalty is
applicable, system will create one invoice for only the interest portion
amount apart from the standard invoice.

9. Withholding tax invoice

If customer want to with hold the tax amount charged by supplier in the
invoice, and he want to pay the tax amount directly to tax authorities
instead of paying to supplier.
System will automatically create a withholding tax invoice.
In this case tax authority would be a supplier.

Accounts Payables Theory

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Batch Invoice:

We can enter invoices individual one by one or through batch invoices at a

time many.
By default we can enter individual invoices only.

In GL batch journal only control total is there.

But in AP, batch invoices have 2 controls: 1. Control total 2. Control count.
Control total is grand total of all invoices & Control count is total number of
invoices.

In GL if control total does not match system will not allow user to save the
journal until we change the control total to match with entered total.

In AP if control total and control count does not match also system allows us
to post the invoice and allows for further processing. It shows only variance.

Unlike batch journal, we can enter invoices either individual or batch

invoices.
If you want to enter batch journals we have to create profile option. In that
case we cannot enter invoices individually.

Accounts Payables Theory

Types of Bank accounts:

We have 3 types of bank accounts:

1. Internal Bank Account

2. Supplier Bank Account
3. Customer Bank Account.

Internal Bank account is maintained by our company to make payments or

receive payments in any mode. (Check, Electronic, Wire and Clearing).

In electronic and wire payments our company has to maintain Supplier bank
account and Customer bank account.

Accounts Payables Theory

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Payment types:

When we are making payment to supplier we need to have bank account,

Check book.
As per OF we called check leaves as Documents.

We have 3 types of payment:

1. Manual
2. Quick
3. Refund

Manual: We have to write the check manually and then enter the same
details into system and hand over the same check to Supplier.

Quick: System will print payment details on the check. once you save
the payment, automatically check will be printed on pre printed
stationary. Then check can be hand over to Supplier.

Refund: When we received funds return from the suppliers we record

them as refund.

Work Bench:

We maintain Recording invoices and Payments in AP.

We have two work benches in AP:

1. Invoice work bench
2. Payment work bench

In invoice work bench we can enter and maintain invoices.

Payment work bench is to maintain 3 types of payments 1. Manual 2. Quick

3. Refund.

Accounts Payables Theory

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Payment Batch:

Payments also can be processed as individual payments or through batch.

Batch payments are automation.
Automation means if we give instruction to system, system will make
payment automatically.

There are various stages in payment batch:

1. Selection
2. Building
3. Rebuilding
4. Formatting
5. Confirm

Selection: We have to select the invoices for payment.

Building: We can view the invoices that selected for payment through
building.
We can make modifications also.

Rebuilding: If we make modifications system will show as Rebuilding.

Formatting:Formatting is nothing but for print purpose. If we format only we

can get print the payments.

Confirm: Once we confirm only system considered the payment has been
done and the balances will be updated. If we do not confirm
system will not allow to create one more payment batch.

** We can cancel the payment batch before confirmation.

Accounts Payables Theory

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OPTIONS:

We have 3 types of options.

1. Financial Options
2. Payable Options
3. Payables System Setup

Payable options are specific to Accounts payables module only.

Financial options we can see across AP, PO and FA modules.

These options will work as heart to application. Using these options we can
set some CONTROLS & DEFAULTS.

We use these options to manage application functionality. We can set some

properties or to set behaviors of the application through these options.

** Invoice Structure is 2 parts: 1. Header information 2. Distribution

Accounts Payables Theory

Data flow into Application of Accounts Payables:

Financial Options

Payables options

Supplier header

Supplier Sites

Invoice header

Invoice Distribution

Payment
Accounts Payables Theory

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** In payables also we can enter foreign currency invoices. There is some

setup required. The exchange rate we setup in GL is applicable to all
modules.

** If we record the invoice in one currency, we cannot make payment other

than that invoice currency. Currency should be same in PO, invoice and
payment.
Cross currency payment is not possible in AP. But that is possible in AR.

** To cancel the invoice we have to enter Credit memo.

** Zero payments: If we cancel the invoice, there is no balance to pay,

but system will show as zero balance. For elimination of zero balance
payments we have to create dummy bank accounts and dummy checks.

Payables Integration:

1. Purchasing
2. General Ledger
3. Cash Management
4. Accounts Receivables
5. Web Expenses

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PERIOD CLOSING PROCEDURES

1 Accounts Payables

1.1 Before submitting the Payables Accounting Process

1. Run the following Standard reports.

a) Invoice Register (with Unvalidated Invoices parameter as

YES).
This report gives the details of invoices entered into the system,
but no action is taken i.e. the status of the invoice is Never
Validated.

b) Invoice on hold Report.

This report gives details of all the invoices that are on hold in the
system. Pass the Parameters as shown in the Screen Shot below,
give the period end date in the To Entered Date field.

Resolve the Holds in the period end so that no Invoices are carried
forward to the next period during the Year End Close. In the Month
End Closing you can also choose to Sweep the Invoices in the next
period. .

2. Based on the information from above reports, take necessary

action on invoices. Approve the Unvalidated Invoices, Account for the
Unaccounted Invoices, Release Holds where ever the Invoices are
placed on Hold.

3. If payment batches are used, confirm all the Payment Batches.

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4. Submit the Payables Accounting Process Program to account for

transactions. All the transactions needs to be accounted before
transferred to General Ledger.

5. Run and Review the Standard report Unaccounted Transactions

Report. Review any unaccounted transactions and correct data as
necessary. Then resubmit the Payables Accounting Process to account
for transactions corrected.

6. Unposted Payable Journal entries will be found in the GL and it will

be posted into the General ledger.

7. This will be queried in the Journal Entry form with source as

Payables and posting status as Unposted. These Journal entries will
be reviewed and Posted into the GL. If Auto post is scheduled for
Payables Invoices, query for any unposted journals that are remaining
after the program runs. Review and post the remaining entries.

8. After running the Payables Accounting Process Program

program, run Create Mass Additions program from Account Payables
responsibility. This program transfers all the account lines that are
marked as Track as Asset and have corresponding Clearing Account
set up in Fixed Assets. (You cannot run this program before Payable
Transfer to General Ledger program is run, as it considers all lines to
be interfaced to the Fixed Assets must be transferred to the General
Ledger).

9. Reconcile with the General Ledger .The following standard reports

from payables module can be used for reconciliation.

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1. Account Payables Trial Balance.

2. Posted Invoice Register.
3. Posted Payment register.

1.2 Opening/Closing of AP periods

Module: AP Module.

Navigation: Accounting > Control Payables Periods.

1. Complete the Transfer to General Ledger from the Payables for

the period to be closed.
2. Select the period to close. Select Closed from list of values in the
Period Status and save the record. I
3. If any invoice/s, debit/credit memo, prepayment, expenses
reports are not approved, these will be swept into the next or decided
open/future period. If sweep is required, future period should be
opened before sweeping is done.
4. Select the Next period to open. Select Open from list of values in
the period status and save the record.

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PROCURE TO PAY CYCLE

Requisition

RFQ

Quotation

Quotation Analysis

Purchase Order

Goods Receipt Note

Invoice

Payment

Reconciliation

Requisition:

Requisition is raised by employee and send to the buyer of the

organization.
Requisitions are 2 types:
1. Internal Requisition

2. Purchase Requisition

RFQ:

Buyer will send Request for Quotation to supplier.

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RFQs are 3 types:

1. Catalog RFQ

2. Standard RFQ

3. Bid RFQ

Quotation:

Upon receiving RFQ from Buyer, supplier will send Quotation to Buyer.
Quotations are 3 types:
1. Catalog

2. Standard

3. Bid

Purchase Order:

After Quotation analysis buyer will raise Purchase Order to Supplier.

Purchase orders are 4 types:
1. Standard PO

2. Planned PO

3. Blanket PO Agreement

4. Contract Purchase Agreement

Goods Receiving:

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There are 3 stages in goods receiving.

1. Direct Delivery

2. Standard Receipt

3. Inspection

JOURNAL ENTRIES IN ACCOUNTS PAYABLES P2P CYCLE

1. Receiving item

Receiving inventory account Dr

To AP Accrual account

2. Move the items from receiving point to sub inventory

Inventory account Dr
To Receiving Inventory

3. Prepare purchase invoice

AP Accrual account Dr
To Liability account

4. At the time of payment if reconciliation is there

Liability Account Dr
To Cash Clearing account

5. At the time of reconciliation

Cash Clearing Account Dr

To Cash Account
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AP INVOICE STATUS

1. Standard invoice:

Before validation: Never validated

After validation: Validated

Journal Entry:
Item Expenses A/c Dr
Freight A/c Dr
Tax Expenses A/c Dr
To Liability Account

If create accounting not run,

Run a program Validate Application Accounting Definition program

2. Prepayment invoice

Before validation: Un validated

After validation: Un paid
After pay in full: Un paid

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 R12 = AP THEORY

After conversion to temporary pre payment(part amount)

: Available
If applied full amount: Fully applied
After apply to invoice: Validated

Journal Entry:
Pre paid expenses A/c Dr
To Liability A/c

MASS ADDITION OF ASSETS

Mass addition process is used to convert the AP invoice information as a

fixed asset.

Step: 1 Create Standard Invoice in Accounts Payables

Navigation: Invoices Entry Invoices

Enter all the information as it is for standard invoice

Choose Account as Asset clearing Account in the distribution

*** (Asset clearing Account in the Asset category & Invoice distribution
account should be same)

Place the Cursor on Account field

Go to Folder Show field
Track as asset

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Say OK
Save your work.

Validate, Create accounting from Actions button

Step: 2 Transfer the data to GL

Navigation View Request

Program Name: Transfer Journal Entries to GL

Step: 3 Run Journal Import program from GL

Navigation: Journal Import Run
Source: Payables
Choose your Ledger.
Say Import
System will import AP data as un posted journals
Review un posted journals and post them

Step: 4 Run mass Additions create in AP

Mass additions create program will run to transfer AP data to FA.

Navigation: View Request

Program Name: Mass Additions Create

Choose Asset Book
Ensure program completed normal

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Step: 5 Prepare Mass additions in F.A.

Navigation: Mass Additions Prepare mass Additions
Choose your Book

Say Find

say Open

Change Queue New to : Post

Invoice number

Choose Asset Category & Location

Go to Asset details

Enter Description Done

Step: 6 Run Post mass additions program

Navigation: Mass Additions Post Mass additions

Program Name: Mass additions post

Parameters: Choose your asset book and say Submit

Step: 7 Query the Asset in the Asset work bench

Navigation: Assets Asset work bench
Choose your asset book and say Find.

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