Prepayments in Release 11i

Amish Vanjaria
Oracle Corporation

Abstract cannot apply a Temporary prepayment to invoices

Oracle Payables introduces enhanced functionality and
handling of prepayments in 11i. To help introduce
these enhancements, this paper will provide an
overview of entering and applying prepayments in 11i,
a description of the new prepayment enhancements, the
changes in prepayments from release 10.7 and 11
compared to 11i, and the accounting entries generated
by prepayments.
or expense reports before the settlement date.
4. If you want to restrict the prepayment’s application
to invoices matched to a particular purchase order,
enter a value for Prepayment PO Number.
5. Enter the distributions. You can enter distributions
manually or automatically with Distribution Sets,
purchase order matching, allocation, and automatic
tax calculation.

Scope If you do not enter distributions automatically, then

when you navigate to the Distributions window and
I. Enter Prepayment enter Item distributions, Payables defaults the
II.Apply Prepayment prepayment account from the supplier site.
III.
Prepayment Enhancements
IV.Changes in Prepayments from Release 10.7 and 11 6. Review or modify the scheduled payments.
to Release 11i
V. Accounting Entries for Prepayments 7. Approve the prepayment as you would any other
invoice.
References 8. Save your work. The prepayment is ready for
payment. You must fully pay prepayments. After
Oracle Payables Release 11i User’s Guide, pages 4-195 you fully pay a Temporary prepayment, it is
& 4-214. available to be applied.

I. ENTER PREPAYMENT II. APPLY PREPAYMENT

To enter a prepayment in Release 11i: To apply a prepayment in Release 11i:

1. In the Invoices window select Prepayment as the
invoice type and enter all basic invoice
information. Before entering distributions, proceed
with the next three steps.
2. Select a Prepayment Type:
• Temporary. You can apply this prepayment to
invoices after you approve and pay it, and after
the settlement date.
• Permanent. You cannot apply this prepayment
to invoices.
3. The Settlement Date that defaults here is calculated
based on your Prepayment Settlement Days
Payables option. You can update this value. You
1. In the Invoices window, query either the
prepayment or the invoice to which you want to
apply it.
2. Choose the Actions button and select the
Apply/Unapply Prepayment check box. Choose
OK. The Apply/Unapply Prepayments window
opens. This window shows different information
depending on what you queried, an invoice or a
prepayment.
If you initially queried a prepayment, Payables
displays all invoices that are not fully paid and to
which the prepayment can be applied. If you want
to limit available choices, enter a query or use the
Find Invoices to Apply window by choosing Find
from the View menu.

1

Check the Apply check box for each Prepayment
distribution you want to apply to the invoice.
Enter the amount to apply for each prepayment.
Optionally change the GL Date, which is the
accounting date for the new Prepayment
distributions that Payables creates when you apply
a prepayment. If you want to see more information
on an invoice, select it and choose the Invoice
Overview button.
If you initially queried an invoice, Payables
displays all approved and paid Prepayment
distributions that you can apply to the invoice. If
you want to limit available choices, enter a query
or use the Find Prepayments to Apply window by
choosing Find from the View menu.
Check the Apply check box for each Prepayment
distribution you want to apply to the invoice. Enter
the amount to apply for each prepayment.
Optionally change the GL Date, which is the
accounting date for the new Prepayment
distributions that Payables creates when you apply
a prepayment. If you want to see more information
on a prepayment select it and choose Invoice
Overview.
3. If you want to print a Prepayment Remittance
Notice for the supplier, select the Print check box.
4. Choose the Apply/Unapply button to apply the
prepayment amounts you specified and to save your
work.
5. When you apply a prepayment, in addition to
updating fields in the Apply/Unapply Prepayments
window, Payables updates the following fields.
• For the invoice:
- Invoices window: Prepaid Amount;
Status is updated to reflect that the invoice
has been paid or partially paid.
- Distributions window: Payables creates a
negative Prepayment type distribution on
the invoice populating the Prepayment
Number and Prepayment Distribution
fields. On the Prepayment distributions
you can adjust the values in the
description fields.
• For the prepayment:
- Invoices window: If you have applied all
Item distributions, the invoice Status will
change from Available to Fully Applied.
- Distributions window: Prepay Amt
Remaining
6. Save any changes and approve the invoice. Any
unpaid amount remaining on the invoice is ready
for payment.
III. PREPAYMENT ENHANCEMENTS
Prepayments are now treated much like standard
invoices. The following describes new enhancements
introduced in 11i for Prepayments:
• A prepayment can be matched to a purchase order.
The match is treated as a reservation of the
quantity billed. Invoice price variance and
exchange rate variance is not calculated at this
point. You cannot change the unit price and final
matching is not allowed. When the matched
prepayment is applied to an invoice, the matched
quantity on the prepayment is backed out of the PO
to reflect the balance of total quantity matched.
Example: You hire a general contractor for $5000
and he requires a $1000 deposit. You create an
amount based purchase order with the following:
Quantity = 5000
Price = $1
Unit of measure = each
Currency = USD
You match a prepayment of $1000 to the PO.
Then later, you match the invoice to the PO for
$5000. This will result in a message that says,
"This action will result in an overbill". This is
due to the fact that you have already matched the
prepayment for $1000. The invoice may go on
hold due to your tolerance levels.
You apply the prepayment to the invoice. This
reverses the "reservation" of the prepayment match
to the PO, resulting in a net match of $5000.
• A prepayment can be matched to a receipt.
Prepayments matched to receipts behave the same
way prepayments are matched to purchase orders.
The receipt matching is back out.
2
• You can use automatic withholding tax on
prepayments in the same fashion as standard
invoices. A reversal line for the withheld tax
amount is inserted and a withholding invoice is
created according to the system options. The
timing of prepayment application is important
when using automatic withholding tax:

- If you have the Withholding Tax Payables

Option set to Apply Withholding Tax at
Invoice Approval Time, and you apply the
prepayment before Approval, the withholding
tax is calculated net of prepayments.
Prepayment
You need to add a Withholding Tax
distribution line for negative $10 on the
invoice. Then, adjust the invoice and
distribution amount on the Withholding Tax
invoice to be $10.

Approved Prepayment $100 • You can use any terms date, payment terms, and
distribution sets with prepayments.
Paid $100
Note: You cannot use a payment term that splits
payments into multiple payment lines with
Invoice different dates.
Unapproved Invoice - $200
• You can use a distribution line type of item, tax,
10% Withholding Tax
freight, or miscellaneous on a prepayment.
Apply Prepayment -
• A prepayment can be applied to an unapproved
$100
invoice.
$100
Approve Invoice -
• After applying a prepayment to an invoice, the
Withholding Tax line -
prepayment does not need to be re-approved.
$10
is created
• Discounts can be taken on prepayments and are
calculated net of prepayments.
- If you submit Approval before you apply the
prepayment, you must adjust the withholding Example: Enter an invoice and a prepayment that
tax amount. You must also adjust the has terms of 2/10 Net 30.
withholding invoice if your Withholding Tax
Payables Option is set to Create Withholding Prepayment
Invoice at Invoice Approval Time or At
Payment Time. Approved Prepayment $100
Terms: 2/10 Net 30
Prepayment
Pay prepayment within -$
Approved Prepayment $100
2
10 days therefore
Paid $100
discount is applied.

Invoice Paid $ 98
Unapproved Invoice - $200 Invoice
10% Withholding Tax
Approved Invoice $200
Approve Invoice - Terms: 2/10 Net 30
Withholding Tax line -$
20 Apply prepayment - 3
is created $100
$100
 and tax amount if the Prepayment distribution has
a tax code assigned.

IV. DIFFERENCE IN PREPAYMENTS

FROM RELEASE 10.7 AND 11 TO
RELEASE 11i

Prepayments are handled differently in release 11i than

in previous releases of Oracle Payables. The most
When a prepayment is applied to an invoice, which noticeable change is on the Invoice and Distributions
has a discount, the discount on the invoice is window.
calculated net of prepayments. This way, the
discount amount is not overstated on the payment. • The following fields were added to the Invoices
You can adjust the discount amounts as needed. window:
- Prepaid Amount
• Multiple tax distributions and multiple line - Withheld Amount
distributions are allowed on prepayments. • The following fields were added to the
Distributions window:
• Invoice tax is calculated net of prepayments. - Prepayment Number
- Prepayment Distribution
Line or Tax Code level tax calculation allows the - Prepayment Amt Remaining
user to enter as many item lines associated with
taxes and then automatically calculate the tax The fields that are updated when an invoice is applied
based on the tax code specified on the item lines. to a prepayment have changed in release 11i.

If automatic tax calculation at the line level or tax • Example (Release 10.7 and 11): You have a
code level is used, and prepayments are applied prepayment that is paid in the amount of $15.15.
before the tax is calculated then Payables calculates This amount is applied to an invoice for $40.
the tax amount net of the prepayment application. When the prepayment is applied to the invoice, the
Amount Paid on the invoice becomes $15.15. Next,
Prepayment when the balance of the invoice, $24.85, is paid,
the Amount Paid on the invoice becomes $40.
Approved Prepayment $100
See Appendix A
Paid $100
• Example (Release 11i): You have a prepayment
Invoice that is paid in the amount of $15.15. This amount
is applied to an invoice for $40. When the
Unapproved Invoice – $200 prepayment is applied to the invoice, the
Line level tax calculation prepayment amount of $15.15 now appears in the
Prepaid Amount column and the Amount Paid
10% Prepay Sales Tax remains zero on the invoice. Next, when the
balance of the invoice, $24.85, is paid the Amount
Apply Prepayment - Paid on the invoice is updated to only $24.85.
$100
$100 See Appendix B

Approve Invoice - -$ V. ACCOUNTING ENTRIES FOR

10 PREPAYMENTS
Note: If you use header level tax calculation, you
For the following example of accounting entries,
might need to manually adjust the invoice amount
assume that we have:

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1. Entered a prepayment for $15.15
2. Entered an invoice for $40 and applied the
prepayment.
3. Paid the balance of the invoice.

Release 10.7 and 11:

Cash Liability Prepay Expense
Enter Prepayment 15.15 15.15
Pay Prepayment 15.15 15.15
Enter Standard Invoice 40.00 40.00
Apply Prepayment to 15.15 15.15 15.15 15.15
Invoice
Pay Balance of Invoice 24.85 24.85

Release 11i:
Cash Liability Prepay Expense
Enter Prepayment 15.15 15.15
Pay Prepayment 15.15 15.15
Enter Standard Invoice 40.00 40.00
Apply Prepayment to 15.15 15.15
Invoice
Pay Balance of Invoice 24.85 24.85

Conclusion

It is my hope that this paper has helped you

understand Prepayments in Release 11i.

About the Author

Amish Vanjaria is a Technical Analyst for the

Accounts Payable team in Orlando.

5
 APPENDIX A: Release 11.0.3

Invoice after prepayment of $15.15 is applied.

A
 APPENDIX A: Release 11.0.3

Invoice paid in full after application of prepayment.

A
 APPENDIX B: Release 11i

Invoice after prepayment of $15.15 is applied.

Invoice paid in full after application of prepayment.