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26 July 2011

Purchasing Encumbrance Accounting Concepts and Process


Encumbrance accounting is a form of budgetary control within Oracle Applications which allows a company to allocate funding for specific accounts.  There is a funds checking feature integral to encumbrance accounting which checks for funds availability on those accounts and can either prevent (absolute), warn (advisory) or ignore (none) funding availability (dependent on how each account is defined in GL) for the specific transaction (requisition or purchase order)
that is currently being performed
Basic Process
---------------------
The basic process flow for encumbrance accounting activity related to Oracle Purchasing typically is as follows:
1. Create a requisition.
2. Approve and reserve funds for the requisition.
3. AutoCreate requisition onto a purchase order.
4. Approve and reserve PO (which automatically reverses the requisition funds
   reservation)
5. Receive against the purchase order (either period-end or online accruals)
   and the funds are reversed for the amount received and entered against the
   charge account
Funds reversal also occur when documents are cancelled or finally closed.
Requisitions, when autocreated onto a purchase order, have their funds reversed
either when the PO is approved and reserved or when the requisition line(s)
are rejected or returned

Basic Encumbrance Process Flow
--------------------------------------------
                ______________
                |            |
         _______| Purchasing |_______
PO/REQ   |      |            |      | Receipt 
Reserve  |      --------------      | Accrual
         |                          |
  _______|__________        ________|_________
  | Table          |        | Table          | 
  |  GL_BC_PACKETS |        |  GL_INTERFACE  | 
  |                |        |                | 
  ------------------        ------------------
         |                          |
  _______|__________        ________|_________
  | Process        |        | Process        | 
  |GLSWPR "Sweeper"|        |  GL_INTERFACE  | 
  |Create Journals |        |Journal Import  | 
  ------------------        ------------------
         |    __________________    |
         |____| Table          |____| 
              |  GL_JE_LINES   |
              |    ____________|______
              |____| Table           |
                   |  GL_JE_HEADERS  |
                   |                 |
                   |_________________| 
                       |
               ________|_________      
               | Process        |
               |    GLPMAI      |
               | Journal Post   |
               |________________|                        
                        
Purchasing Encumbrance Process Flow

As you can see from Figure 1, the transactional flow has funds reservation being performed through the GL_BC_PACKETS table when reserving funds for purchasing documents, and through the GL_INTERFACE table for receipt accruals (whether they be On Receipt or at Period End).   The funds checker processtakes place whenever funds reservation and/or adjustment is made,
After transactions have taken place in Purchasing, it will become necessary to run the Create Journals program in GL.  This program essentially sweeps through the GL_BC_PACKETS table and creates journals for the entries as entered. Most customers set this process up to run several times a day (dependent on the volume of transactions) as a report set, but it can also be ran manually  

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