Oracle Applications

Accounts Payable

EAS – Oracle Apps

Purchasing

Payables

Assets
Projects Cash Management

General Ledger
EAS – Oracle Apps
Payables Cycle
All payments pass through the following four-step Payables cycle:
I. Enter Invoices (This process may or may not include PO matching)
II. Approve Invoices for payment.
III. Select and Pay approved invoices.
IV. Reconcile the payments with the bank statement.
Payables Cycle (Contd…)

Enter Supplier
Enter Invoices

POs Approve Invoices

General Ledger

Pay Invoices

Reconcile Payments
 Enter Invoices
Invoice is at the heart of AP processing, allowing to process all types of invoices while maintaining accuracy
and control on the payment.
The various ways in which an invoice can be entered are:
Manual:
Invoice Workbench: Invoices are directly entered in the Payables system. Usually complex invoices or invoices which
require online validation or invoices which have to be paid immediately, are entered through this mode
Invoice Gateway: Used for quick, high volume invoices that do not require extensive validation and defaults. After entry,
these invoices are imported into the Payables system. Validation and defaulting occur during import.
Automatic Invoice Creation: These are basically recurring invoices which are required to be generated and paid on a
frequent basis.
Imported Invoices:
One can import invoices or invoice information to create invoices in Payables.
• Oracle Internet Expenses expense reports: Expense reports your employees enter using a Web browser.
• Credit Card invoices: Invoices for employee credit card expenses. The credit card company sends you these invoices
as a flat file.
• Oracle Projects expense reports. Project–related expense reports entered in Oracle Projects.
• EDI invoices. Electronic invoices transferred from Oracle e–Commerce Gateway.
• Invoices from external systems. Invoices, such as invoices from legacy systems, loaded using SQL*Loader.
• Oracle Property Manager invoices: Lease invoices transferred from Oracle Property Manager.
• Oracle Assets lease payments: Lease payments transferred from Oracle Assets.

EAS – Oracle Apps

Standard A regular supplier invoice.

Credit Memo An invoice received from a supplier representing a credit for goods or services
purchased.
Debit memo An invoice to notify a supplier of a credit recorded for goods or services purchased.

Expense For recording business-related expenses for employees.

PO Default An invoice for which the matching PO no is known.

Quick Match To automatically match to a specified PO and all the shipment lines on the PO.

Mixed A standard or credit/debit memo invoice for matching a PO, another invoice or both.

Prepayment To make advance payments for expenses/capital items where the goods/services
may not have been actually received.
Recurring Invoices
One can enter invoices for periodic expenses for which invoices may not be received, such as rent.
To enter recurring invoices, first define a recurring invoice template, then create invoices based on the
template. For creating a template a Special Recurring Calendar and a Distribution Set (of Type Full) is
required.
With a recurring invoice template, one can do the following:
 Specify the intervals in which invoices based on the recurring invoice template will be created.
 Create up to two special one-time invoice amounts of a non-standard amount, such as a deposit or balloon payment.
 Define recurring invoices to increase or decrease by a fixed percentage from period to period.

When Payables creates recurring invoices, the invoice date is the first date of the period in which the
recurring invoice is created. The Terms Date depends on the Terms Date Basis setting at the supplier
site, but is calculated differently than for regular invoices:
 If the Terms Date Basis is set to System Date, then the Terms Date is the same date that the recurring invoice was created.
 If the Terms Date Basis is set to anything else, then the Terms Date is the invoice date, which is the first day of the period in which
the recurring invoice is created.
Expense Report
 Use the Expense Reports window in Payables to enter Payables expense reports for the employees and to review/modify any of the following expense reports:
expense reports entered in the Payables Expense Reports window or submitted by the enterprise's employees using Oracle Internet Expenses or entered in
Oracle Projects and then transferred from Projects to Payables.
 If advance has been paid to an employee use this window to apply advances to expense reports to reduce the amount to be paid. One can also apply hold to an
expense report to prevent payment. This can be from any source.
 Before one can pay expense reports, submit the Expense Report Import program which automatically creates invoices from the expense reports. One can then
use Payables to validate, pay, and account for the invoices.
 The following are the steps to be follow to manage expense reports:
1. Enter employees and their locations, expense addresses, Supervisors, and default expense accounts.
2. Enter Human Resources Financials options and Expense Report Payables options.
3. Define the employee as a supplier.
4. For expense reports entered in Payables and Oracle Internet Expenses, define expense report templates that model the
different expense report formats your employees use.
5. Enter expense reports in any of the following products: Payables, Oracle Internet Expenses and Oracle Projects.
6. In the Payables Expense Reports window optionally apply holds and/or apply advances to the expense reports.
Optionally modify or review Payables or Projects expense reports. Review, audit, and approve expense reports entered in
Oracle Internet Expenses.
7. Submit Expense Report Import to create invoices and invoice distributions for the expense reports. Review the Expense
Report Import. If there are exceptions, correct any expense reports that caused exceptions and resubmit Expense Report
Import.
8. Submit the Employee Update Program to update employee-type supplier records with up-to-date name and address
information from the employee record.
9. Pay the invoices as any other invoices are paid off.
Payment
Once the invoice has been entered and approved, it must be paid in a timely manner.
One can initiate payment runs on a regular basis at a defined frequency. The pay run will select all invoices that are to paid,
according to the criteria and generate the appropriate payment documents. Either a single payment can be made for the unpaid invoices of a
supplier or each of them can be paid separately.

Payment Methods:
Check: A manual check, a Quick payment, or a check in a payment batch.
Electronic: An electronic funds transfer file is generated and delivered to bank to create payments, or
an e-Commerce Gateway payment.
Wire: Used to manually record a wire transfer of funds between organizations’ bank and supplier's
bank.
Clearing: Used for recording invoice payments to internal suppliers within organization.

Payment Types:
Manual: Used to record a payment made outside of Payables. For example, a typed check or wire transfer.
Quick: Quick payment, which is a single computer-generated check.
Refund: A payment received from a supplier or employee to return funds for an invoice payment made.
Refund payments pay a debit balance, and are always entered as negative amount payments.
Batch: A payment created by payment batch processing.
Accounting Methods
While setting up AP, a primary and an optional secondary accounting method is required.
The accounting method determines the number and nature of the journal entries Payables creates when the
transactions are transferred to GL.
There are three accounting methods which are as under:
Cash:
When an item is purchased, the expense or the increase in asset value of an FA item, is recognized when
the item has been paid for. Only payments are posted to GL and not the liability. The payment distributions
typically debit the expense or asset a/c and credit the cash/bank/cash clearing a/c.
Accrual:
When an item is purchased, the expense or the increase in asset value of an FA item, is recognized when
the invoice is received from the Supplier. At that point a liability is recorded to pay the invoice. Both invoice
and payments are posted to GL The invoice distributions typically debit the expense or asset a/c and credit a
liability a/c.
Combined:
One can maintain one set of books for cash accounting and another for accrual accounting. The primary and
secondary set of books are to be determined. Invoice distributions are entered in the accrual set of books
and the payment distributions are recorded in both cash and in the accrual set of books.
Accounting Entries
Accounting entries are based on accounting events. The various accounting events are:
Invoice entry, issuing payments, adjusting invoices, creating expense reports and processing prepayments.
Invoices: An invoice increases the supplier’s account balance by the invoice amount. The expense (or
asset) and tax accounts are to be entered in the invoice distribution lines. The nature of the accounting
transactions for an invoice depends on whether liability has been posted for goods received and whether
Oracle Purchasing is used to initiate the invoice.
Prepayments: Prepayment is payment before the receipt of invoice from a supplier. A prepayment could be
sent with PO as deposit for goods / services. On applying a prepayment to an invoice, the amount due on
the invoice is reduced.
Cr. and Dr. Memos: A memo increases the supplier balance by the memo amount. Both Cr. And Dr. memo
reduce the amount that is owed to a Supplier. They are used to record a credit against an invoice for
goods/services purchased. They are netted off against the original invoice at payment time, resulting in a
payment being issued for the reduced amount.
Cr. Memo: Negative amount invoice created by a supplier and sent to the company to notify a credit
Dr. Memo: Negative amount invoice created by the company and sent to the supplier to notify the supplier
of a credit the company is recording.
Payments: A payment decreases the Supplier’s a/c balance by the payment amount. Payments do not give
raise to tax postings.
Accounting Entries (Contd…)
Accounting Event Account Head Debit Credit

Entering Invoices Expense / Asset A/c 100$

Tax A/c (say 10%) 10$

Supplier Liability A/c 90$

Making Payments Supplier Liability A/c 90$

Cash/Bank/Cash Clearing A/c 90$

Cr. Or Dr. Memos Supplier Liability A/c 50$

Expense / Asset A/c 45$

Tax A/c (say 10%) 5$

Entering Prepayments Advance A/c 100$

Tax A/c (say 10%) 10$

Supplier Liability A/c 90$

Adjusting Expense / Asset A/c 200$

Tax A/c (say 10%) 10$

Supplier Liability A/c 90$

GL Transfer:
A program has to be run from AP for transferring the accounting entries of all transactions in a batch mode
to the interface table that is ready to be imported to the GL as a journal. These journals are identified
based on the Batch name, journal name and sources. One can choose to transfer invoice, payment or
both. AP also creates distributions for discounts taken and foreign currency ex gain/loss incurred between
invoice and payment time.