Key points for accruing expense purchases at period-end include:
You record the total uninvoiced receipt liabilities accrued during the accounting period.
Actual journal entries are created for the amount of the receipt liabilities, debiting the charge account and crediting the PO distribution accrual account (normally the Expense A/P Accrual Account defined in the Define Purchasing Options form).
You reverse accrual journal entries manually at the start of the new accounting period. The accrual entries are reversed through complete multi-period accounting request on the first day of the next period.
If you are using encumbrance accounting, purchase order encumbrance is relieved when the invoice(s) matched to the purchase order are posted to the general ledger.
Purchasing does not record any accounting entries for expense during a receiving transaction if you use period-end accruals. You record all of your uninvoiced liabilities at month end using the Receipt Accruals - Period-End process. See: Receipt Accruals - Period End Process.
Use the Receipt Accruals - Period End process to create period-end accruals for your uninvoiced receipts for expense distributions. Purchasing creates an accrual journal entry in your general ledger for each expense distribution having uninvoiced receipt you choose using this form. If you use encumbrance or budgetary control, Purchasing reverses your encumbrance entry when creating the corresponding accrual entry.
Purchasing never accrues an uninvoiced receipt twice. Each time you create accrual entries for a specific purchase order distribution, Purchasing marks this purchase order distribution as accrued and ignores it the next time you run the Receipt Accrual - Period-End process. Purchasing creates accrual entries only up to the quantity the supplier did not invoice for partially invoiced receipts.
Purchasing creates the following accounting entries for each distribution you accrue using the Receipt Accruals - Period-End process:
| Account | Debit | Credit |
|---|---|---|
| PO charge account at Uninvoiced Quantity x PO unit Price | XX | |
| Expense A/P accrual account at Uninvoiced Quantity x PO price | XX |
As soon as you open the next period, Purchasing reverses the accrual entries using the following accounting entries. The Complete Multiperiod Accounting program reverses the actual entries on the first day of the next period.
| Account | Debit | Credit |
|---|---|---|
| Expense A/P accrual account at Uninvoiced Quantity x PO unit price | XX | |
| PO charge account at Uninvoiced Quantity x PO Price | XX |
Note: Purchasing adds nonrecoverable tax, if any, to the unit price and includes the exchange rate if the purchase order is in a foreign currency. The exchange rate comes from the receipt if the Invoice Match Option in the purchase order Shipments window is Receipt, from the purchase order if the Invoice Match Option is Purchase Order.
When you enter an invoice in Payables, you match each invoice distribution to a specific purchase order distribution or to a purchase order distribution for a receipt transaction in Purchasing. You can set up Payables to ensure that you pay only for the quantity you received. If you accrue your uninvoiced receipts at period-end, Payables records the expense transactions part of the accounting transactions.
Attention: Normally, you charge the original expense account for any invoice price variances, so your PO distribution variance account is the same as the PO distribution charge account. You do not record invoice price variances for expense purchases. Purchasing uses the Account Generator to set your purchase order distribution variance account to be the same as your purchase order charge account. If you want to record your invoice price variances to a separate account, use the Account Generator to define the business rules you use to determine the correct invoice price variance account.
If you use encumbrance or budgetary control, Purchasing creates encumbrance journal entries in your general ledger each time you approve a purchase order. Similar to accrual journal entries, encumbrance journal entries recognize a liability towards your supplier before any invoicing transactions occur. Unlike accrual journal entries, encumbrance journal entries are not actual transactions. General Ledger tracks actual and encumbrance journal entries and balances separately.
Purchasing provides you with complete flexibility and control for your period-end accruals. You can use the Uninvoiced Receipts Report to analyze your uninvoiced non-inventory receipts before you accrue these receipts. You can then use the Receipt Accruals - Period-End process as many times as you want to generate accrual entries for the vendor or category you choose.
For your period-end reconciliation, you should perform the following steps:
.Identify the purchasing period you want to reconcile and close.
Enter all receiving transactions for goods and services you received during the period. Purchasing automatically creates receipt accruals for all receipts you entered up to the end of this period. To prevent any period-end disruption, Purchasing lets you provide a receipt date that is different from the date you enter the receipts. You never have to enter all the receipts for a period before the end of this period. You can enter these receipts later. You simply need to back date the receipt date.
Enter and match all invoices you received during the period for your receipt accrual entries. You should make sure that you solve all posting holds problems in Payables before accruing receipts. Purchasing creates accrual journal entries for all purchase orders you received and did not match to an invoice. If you matched a purchase order or receipt to an invoice, Purchasing does not accrue the corresponding receipts. Purchasing does not accrue any purchase order that you closed on or before the end of the accrual period you choose. If the invoice is on posting hold, Payables has not yet accounted for the liability corresponding to the invoice. Under these conditions, the liability corresponding to this invoice would not appear in your books for the period. Payables lets you recognize this liability in the following period.
Close your accounts payable period corresponding to the purchasing period for your receipt accrual entries.
Note: The List of Values for period end accruals does not require the Accounts Payable period to be closed, however it's strongly recommended that closed periods are used, as the receipt accruals process will not pick up invoices entered after the accruals process is run for the period.
For period-end accruals of expense purchases, run the Uninvoiced Receipts Report. Use this report to analyze your uninvoiced receipts. The Uninvoiced Receipts Report lets you use the same selection criteria for your uninvoiced receipts as the Receipt Accruals - Period-End process. You always know exactly what you accrue and for what amount.
For period-end accruals of expense purchases, use the Receipt Accruals - Period-End process as many times as you need. You can use the search criteria to choose what you want to accrue and accrue your receipts step by step. You create accruals for a specific purchasing period. Purchasing automatically accrues all uninvoiced receipts your entered up to the end of the accrual period you specify. See: Receipt Accruals - Period End Process.
Each time you use the Receipt Accruals - Period-End process, Purchasing creates a batch in Receiving Subledger for your receipt accruals. It also creates accounting events in SLA.If you are using encumbrance, Purchasing creates another set of accounting events in SLA in your general ledger corresponding to the encumbrance reversal entries for the uninvoiced receipts you accrued.
Purchasing never accrues your uninvoiced receipt twice. Each time you create accrual entries for a specific uninvoiced receipt, Purchasing marks this receipt as accrued and ignores it the next time you use the Receipt Accruals - Period-End process. Purchasing creates accrual entries only up to the quantity your supplier did not invoice for your partially invoiced receipts.
Post Accrual and Encumbrance Reversal journal entry batches in your general ledger. (See the following section to identify Accrual and Encumbrance Reversal journal entry batches.) Run Create Accounting - Cost Management for process category receiving to create accounting in SLA.
Note: If you are using encumbrance then you don't need to run the Create Accounting - Cost Management as Receipt Accruals - Period-End creates the accounting in SLA automatically.
Transfer to general ledger from SLA using Transfer Journal Entries to GL - Cost Management for Process Category Receiving. You can provide the general ledger batch name while transferring to general ledger so that you can identify the batch in general ledger.
Post Accrual and Encumbrance Reversal journal entry batches in your general ledger.
Perform all the steps you need to close your accounting period and generate your period-end reports and financial statements in your general ledger.
Use your general ledger system to reverse all the receipt accrual and encumbrance reversal batches you created for your period-end accruals.
Close the purchasing period for your receipt accruals. When you close a purchasing period, Purchasing automatically un-marks all the receipts you previously accrued to make sure you can accrue these receipts again if they are still uninvoiced in the next period. See: Uninvoiced Receipts Report.
Run Complete Multiperiod accounting which automatically reverses the accrual entries on the first day of next period