Use this region to control accounting information for your Payables system.
Account For Payment: Choose when you want to create payment accounting entries. You can select one or both options.
Payables creates the following accounting entries, depending on how the Account for Payment option is set. This accounting assumes you use accrual basis accounting. You specify the GL accounts when you define the payment document. Any accounting entries for gain and loss are controlled by the Account for Gain/Loss Payables option, so they are not included here.
Note: Carefully consider these settings at implementation time. After you set them and save this record, the only change you can make is to also account for the payment when the payment clears.
Both (When Payment is Issued, and When Payment Clears): Payables accounts for each payment you issue twice-once as an unreconciled payment and once again as a cleared payment. If you select both options you have the same functionality as the Allow Reconciliation Accounting option provided in previous releases.
Payables creates the following accounting entries after payment issue:
unreconciled payment: debit the AP Liability account and credit the Cash Clearing account
For future dated payments, debit the AP Liability account and credit the Future Dated Payment Account. Then, at payment maturity, debit the Future Dated payment Account and credit the Cash Clearing account.
Payables then creates the following accounting entries after payment reconciliation or clearing in Cash Management:
reconciled payment: debit the Cash Clearing account and credit the Cash account
bank charges: debit the Bank Charges account and credit the Cash account
bank errors: account in Cash account and Bank Errors account. Debits and credits depend whether the bank error was a positive or negative amount
When Payment is Issued: Payables accounts for each payment once, after payment issue. After you issue the payment, Payables creates the following accounting entries.
unreconciled payment: debit the AP Liability account and credit the Cash account.
For future dated payments, debit the AP Liability account and credit the Future Dated Payment Account. Then, at payment maturity, debit the Future Dated payment Account and credit the Cash account.
Although you can reconcile the payment in Cash Management, Payables does not create accounting entries for payment reconciliation, bank charges, or bank errors, or gain and loss at reconciliation.
When Payment Clears. If you select only this option, Payables accounts for each payment once, after clearing. After you clear the payment in Oracle Cash Management, Payables creates the following accounting entries.
reconciled payment: debit the AP Liability account and credit the Cash (asset) account.
bank charges: debit the Bank Charges account and credit the Cash account.
bank errors: account in Cash account and Bank Errors account. Debits and credits depend whether the bank error was a positive or negative amount.
See also: Accounting Methods.
Account For Gain/Loss: Select the time at which you will record currency gains or losses for foreign currency payments. If you selected Account For Payment When Payment Clears above, then the system enables the When Payment Clears option here and you cannot update it. See also: Gain/Loss Calculation.
Note: Carefully consider these settings at implementation time. After you set them and save this record, the only change you can make is to also account for the gain/loss when the payment clears.
The combination of Payables options you select and your accounting method control which gain and loss accounting entries Payables creates. The following table shows between which transactions Payables calculates gains and losses, depending on your system setup:
Gain/Loss Accounting for Accrual Basis Accounting
| Account for Payment Transaction | Account for Gain/Loss: Payment Issue Only | Account for Gain/Loss: Payment Clearing Only | Account for Gain/Loss: Payment Issue and Payment Clearing |
|---|---|---|---|
| Account for Payment: Payment Issue Only | Invoice -> Payment Issue | (not available) | (not available) |
| Account for Payment: Payment Clearing Only | (not available) | Invoice ->Payment Clearing | (not available) |
| Account for Payment: Payment Issue and Payment Clearing | (not available) | Invoice -> Payment Clearing When accounting for the Payment, Payables uses the invoice exchange rate so there's no gain/loss at payment time) | 1) Invoice -> Payment Issue 2) Payment -> Payment Clearing For future dated payments: 1) Invoice -> Payment 2) Payment ->Payment Maturity, and 3) Payment Maturity -> Payment Clearing |
The following table shows between which transactions Payables calculates gains and losses, depending on your system setup:
Gain/Loss Accounting for Cash Basis Accounting
| Account for Payment Transaction | Account for Gain/Loss: Payment Issue Only | Account for Gain/Loss: Payment Clearing Only | Account for Gain/Loss: Payment Issue and Payment Clearing |
|---|---|---|---|
| Account for Payment: Payment Issue Only | (not available) | (not available) | (not available) |
| Account for Payment: Payment Clearing Only | (not available) | (not available) | (not available) |
| Account for Payment: Payment Issue and Payment Clearing | (not available) | Payment -> Payment Clearing | Payment -> Payment Clearing For future dated payments: 1) Payment Issue -> Payment Maturity, and 2) Payment Maturity -> Payment Clearing |
You can select one or both options.
Both. (When Payment is Issued and When Payment Clears).
Cash Basis: Record currency gains and losses between payment time and payment clearing time.
For future dated payments, records gains and losses between payment and payment maturity and then between payment maturity and payment clearing.
Accrual Basis: Record currency gains and losses between invoice time and payment issue time. For future dated payments, record gains and losses between invoice time and payment issue, and then between payment issue and maturity time of the payment.
Then record currency gains and losses between payment time (payment maturity time for future dated payments) and payment clearing time.
When Payment is Issued. (Available only if you use accrual basis accounting). Record currency gains and losses between invoice time and payment issue.
When Payment Clears. If this is the only enabled option, then Payables will record currency gains and losses between payment time and payment clearing time
Cash Basis: Records gains and losses between payment issue and payment clearing.
Accrual Basis: Record gains and losses between invoice time and payment clearing.
Account for Gain/Loss. Select the transaction level at which you want to calculate foreign currency gains and losses.
When Automatic Offsets is enabled in the Accounting Option tab, you can select only For Each Invoice. If you set this option to For Total Payment then you cannot enable Automatic Offsets in the Accounting Option region.
For Each Invoice. Calculate the gain or loss for each invoice on the payment.
For Total Payment. Calculate the gain or loss for the entire payment.
Future Dated Payment Account Source. You can define a future dated payment account at both the supplier site and the payment document level. This option controls which account Payables will use to create accounting entries for future dated payments.
From Payment Document
From Supplier Site
Automatic Offset Method. Enable Automatic Offsets by selecting Balancing or Account as your Offset Method if you want Payables to automatically create balancing accounting entries for your invoice and payment transactions. For details, see: Automatic Offsets.
Attention: Carefully consider this option before setting it. Changing your automatic offset setting after creating accounting entries can result in slower accounting process performance. Also, under certain circumstances, changing this setting can result in accounting irregularities.
None. Do not use Automatic Offsets. For your invoice transactions, Payables creates one liability accounting entry, and for your payment transactions, Payables creates one cash type accounting entry.
Balancing. Payables uses the supplier site's default liability account and overwrites the balancing segment (usually the company code) with the balancing segment from the expense distribution GL Account.
Account. When creating the offsetting liability account, Payables uses the expense GL Account from the invoice distribution and overwrites the account segment with the default liability account from the supplier site.
Discount Method. The method you want Payables to use for distributing the discounts you take when making payments.
If you leave this field blank, Payables uses the System Account method for distributing your discounts.
Prorate Expense. Payables automatically prorates any discounts across all the invoice distributions. Payables assigns the discount to the charge account unless the invoice is matched to a purchase order with Accrue on Receipt enabled, in which case it is assigned to the price variance account.
If your Exclude Tax From Discount Calculation Payables option is enabled in this window and you enable this option, then the discount is prorated only to the expense lines and not the tax lines.
Prorate Tax. Payables automatically prorates a percentage of the discount amount across the tax distributions. Payables only prorates the percentage of discount amount equal to the percentage of your tax distributions. Payables credits the remaining discount amount to the Discount Taken account you enter in the Financials Options window.
For example, if your tax distributions are 10 percent of the total invoice amount, Payables prorates 10 percent of the discount amount across the tax distributions. Payables credits the remaining 90 percent of the discount amount to the Discount Taken account.
You cannot select Prorate Tax if your Exclude Tax From Discount Calculation Payables option is enabled in this window.
System Account. Payables credits all discounts to the system Discount Taken account you define in the Financials Options window.
If you enable Automatic Offsets, and you want to have Payables distribute Discount Taken amounts across balancing segments, choose this method. See also: Automatic Offsets.
If you enable the Use Bank Charges option in the payment region, the Discount Distribution Method defaults to System Account and you cannot update it.