Accounting in Oracle Inventory
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This document discusses accounting entries for inventory transactions under average costing. It defines key inventory accounts like material, material overhead, and expense. It then provides examples of common inventory transactions and whether the average cost is recalculated for the receiving subinventory. For transactions like receipts, issues, transfers, the average cost is not changed. But for adjustments, completions or scrapping of work in process jobs, the average cost is recalculated based on the associated charges to the job.
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Accounting in Oracle Inventory
- 1. Accounting in Inventory Accounts Definition You choose a default valuation account when you define organization parameters. Under standard costing, these accounts are defaulted when you define subinventories and can be overridden. Under average costing, these accounts (except for Expense) are used for subinventory transactions and cannot be updated. For a detailed discussion of cost elements. Following are the accounts that are defined in organization parameters and used in inventory. Account Type Description Material This is an asset type account that tracks material cost. Under standard costing, these accounts are defaulted when you define subinventories and can be overridden. For average costing, this account holds your inventory and intransit values. Once you perform transactions, you cannot change this account. Material Overhead An asset account that tracks material overhead cost. Resource An asset account that tracks resource cost. Overhead An asset account that tracks resource and outside processing overheads. Outside processing An asset account that tracks outside processing cost. Expense The expense account used when tracking a non-asset item.
- 2. Accounting for Material Transactions Accounting Entries Transaction Accounts Value Average Cost Recalculated? DB Receiving Inspection PO price PO Receipt CR A/P Accrual PO price No, same as current. DB Subinventory Valuation PO price +MOH CR Receiving Inspection PO price PO Delivery to subinventory CR Material OH Absorption calc’d MOH Yes. DB Receiving Inspection PO price DB Material OH Absorption MOHReturn to Receiving from subinventory CR Subinventory Valuation PO price +MOH Yes, if MOH had changed since receipt, must use original rate— DOCUMENT. DB A/P Accrual PO price Return to Vendor from Receiving Inspection CR Receiving Inspection PO price No. DB Subinventory Valuation— receiver Current averageSubinventory Transfer—asset subinventory to asset subinventory CR Subinventory Valuation—sender Current average No Subinventory Transfer—expense subinventory to expense subinventory No Entries Not Applicable DB Subinventory Valuation or Expense—receiver Current averageSubinventory Transfer—asset to expense or vice verse CR Subinventory. Valuation or Expense—sender Current average No DB Subinventory Valuation Current average or U.S. Miscellaneous Receipt CR User-specified Account Current average or user-specified (U.S.) Yes, if user overrides, new average is calculated.
- 3. DB User-specified Account Current average or U.S. Miscellaneous Issue CR Subinventory Valuation Current average or U.S. Yes, if user overrides, new average is calculated. DB Subinventory Valuation Average cost of original shipments on sales order line RMA Receipt CR Cost of Goods Sold Average cost of original shipments on sales order line Y es, if reference to sales order line exists. DB Cost of Goods Sold Current average RMA Return CR Subinventory Valuation Current average No. DB No entries Direct Interorg Transfer—expense to expense CR Average Cost Recalculated? Not applicable. Applies to both standard and average organizations. DB Subinventory Valuation—receiver Standard Current average CR Subinventory Valuation—sender DB Interorg Receivable Direct Interorg Transfer— Std org to Average org except expense to expense CR Interorg Payable Yes DB Subinventory Valuation—receiver Current average CR Subinventory Valuation—sender DB Interorg Payable Direct Interorg Transfer— Average org to Average org excluding exp to expense CR Interorg Receivable (sending org) Yes, (receiving org) recalculation of average cost is not applicable if receiving subinventory is expense. DB Subinventory Valuation—receiver CR Interorg Payable (sending org) Direct Interorg Transfer— Average org to Standard org excluding expense to expense DB Interorg Receivable No. there is no PPV if receiving subinventory is expense.
- 4. DB PPV—receiving org CR Subinventory Val—sender DB Subinventory Valuation—receiver CR Interorg Payable DB Interorg Receivable Receipt from Intransit (Standard org) into Average org— FOB Receipt CR Intransit Inventory Standard No, same as standard asset to average (intransit is an asset subinventory). DB Subinventory Valuation—receiver CR Interorg Payable Current average DB Interorg Receivable Receipt from Intransit (Average org) into Average org— FOB Receipt CR Intransit Inventory Yes, recalculation of average cost is not applicable if receiving subinventory is expense. DB Intransit Inventory Current averageShipment to Intransit from Average org— FOB Receipt CR Subinventory Valuation or Expense No, intransit is booked elementally, asset to intransit washes. DB Subinventory Valuation or Expense Current averageReceipt from Intransit into Average org—FOB Shipment CR Intransit Inventory Current average No, intransit to asset in and out of the same accounts. DB Intransit Inventory CR Interorg Payable Standard DB Interorg Receivable Shipment to Intransit (Average org ) from Standard org asset subinv—FOB Shipment CR Subinventory Valuation—sender Yes. DB Intransit Inventory Standard Yes. CR Interorg Payable DB Interorg Receivable Shipment to Intransit (Avg org) from Std org expense subinventory—FOB Shipment CR Subinventory Valuation—sender
- 5. DB Intransit Inventory Current average CR Interorg Payable(sending organization) DB Interorg Receivable Shipment to Intransit (Avg) from Avg org— FOB Shipment CR Subinventory Valuation—sender Yes, unit cost recalculated in receiving organization. DB Inventory Adjustments Current average Inventory Adj— cycle count or physical inv CR Subinventory Valuation No, same as current DB Cost of Goods Sold Current average Sales Order Shipment CR Subinventory Valuation No. DB A/P Accrual PO Price CR Accounts Payable Invoice Receipt of Vendor Invoice DB IPV Not applicable. DB Work in Process Inv Current average Issue to Job from subinventory CR Subinventory Valuation No, expense subinventory to expense job carries no cost. DB Subinventory Valuation Current average Component Return to subinventory CR Work in Process Inv No. DB Work in Process Inv Actual Charge Labor Resource to WIP job CR Resource Absorption Not applicable. standard rate = No; charge type = Manual; actual employee rate. DB Work in Process Inv User-defined Charge Non-Labor Resource to WIP job CR Resource Absorption Not applicable. Pre-defined rate or actual rate. Charge Overhead to WIP job DB Work in Process Inv Calculated OH Not applicable
- 6. CR Overhead Absorption DB Work in Process Inv PO price Charge Outside Processing to WIP job CR OSP Resource Absorption No DB Subinventory Valuation Calc avg +MOH CR Work in Process Inv calc avgComplete Assemblies CR Material OH Absorption calc’d MOH Yes, completion algorithm calculations based on job charges. DB Work in Process Inv Average cost of job completions DB Material OH Absorption Return Assemblies to WIP CR Subinventory Valuation Yes. DB Scrap Calculated Scrap Assemblies from WIP CR Work in Process Inv Not applicable. If checkbox Require Scrap Account is checked, scrap calcs are based on job charges DB Work in Process Inv Reverse Scrap CR Scrap Average cost of job scrap No. DB Variance Close WIP Jobs CR Work in Process Inv Not applicable. Entries only if job has a residual DB Subinventory Valuation User-specified Average Cost Update CR Inventory Adjustment Yes, enter % or amount of change, or new unit cost.