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AGENDA
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FUNCTIONALITY
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Educational institutions (Universities & Public School Boards) and government agencies (Federal, Provincial & Municipal) use encumbrance accounting to:
Track spending by departments before an actual invoice is received. Ensure that departments don't exceed their budget or are made immediately aware when they do Plan the timing of actual expenditures
ENCUMBRANCE TYPES
Oracle heavily integrates encumbrance functionality into its purchasing, payables and ledger modules. To differentiate between the different modules and associated transactions, encumbrances are normally referred to by different terms: Budget (GL) A budget entry is not an encumbrance; however, it represents the beginning of the encumbrance process. Commitment (PO) A commitment is solely associated with a requisition. A commitment is generated to an account when a requisition is approved.
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CONTD.
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Purchase Obligation (PO) A purchase obligation is associated with a purchase order. When funds are reserved on a purchase order, a purchase obligation is created. Invoice Obligation (AP) An invoice obligation is associated with an invoice. Within Oracle, an invoice obligation is generated to an account when an invoice is approved. Actual (AP, GL) An actual is not an encumbrance; however, it does represent the culmination of the encumbrance process.
FUNDS BALANCE
The simplest overview of an account's current balances can be found within the Funds Inquiry form Nev: GL-> Inquiry->Funds. The funds inquiry form essentially shows the basic encumbrance formula.
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None
While encumbrances are still tracked, users aren't notified or prevented from processing any given transaction.
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Turn on funds checking for your accounting structure (set of books). Within the Budgetary Control Options, set 'Enable Budgetary Control' to Yes. This will enable funds checking within the GL, AP and PO modules. If you would like an audit trail for budgetary transactions, also set 'Require Budget Journals' to Yes. The advantage to setting this option to 'Yes' is that budgetary transactions can be tracked; the disadvantage is that the related journals add additional data to the database Navigate to GL: Setup \ Financials \ Books.
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The following encumbrance types are highly recommended: Commitment - An encumbrance your record when a requisition is created. PO Obligation - An encumbrance you record when a purchase order is created. Invoice Obligation - An encumbrance you record when an invoice is created. Create additional encumbrance types by navigating to GL: Setup \ Journal \ Encumbrances.
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Define any necessary budgetary control groups by navigating to GL-> Budgets -> Define -> Controls.
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STEP 2: SETTING UP PO
Enable encumbrances within PO. Assign the encumbrance types from step C to the various encumbrances. Once again, a unique encumbrance type of Invoice Encumbrances is highly recommended.
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STEP 3: SETTING UP AP
Examine the Invoice Approvals by navigating to While not mandatory, it is recommended that all invoice approvals be set to nonpostable. This setup facilitates user understanding of encumbrances, as funds won't be effected until an invoice is fully approved.
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TECHNICAL ASPECTS:
Encumbrance Reservations are created in GL_BC_PACKETS While Encumbrance reversals are created in - MTL_TRANSACTION_ACCOUNTS ( Accounting_line_type = 15
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- RCV_RECEIVING_SUB_LEDGER
( Actual_Flag
=E)
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