Understanding Encumbrance Accounting in R12

Encumbrance Accounting has always been one of those tricky areas to understand and it is often quite complex and time consuming to resolve issues that arise.  Having a detailed understanding of how Encumbrance Accounting works in General Ledger, Payables and Purchasing will get you on the right track faster.

Recently a new document was created that attempts to pull together all the information that relates to Encumbrance Accounting so that you can understand everything from what it is, to how the applications are setup to use it, to using diagnostic tools and checking patch levels when something doesn't work just how you expect it to.

Please review R12: MASTER TROUBLESHOOTING GUIDE (MTG) for Encumbrance Accounting Issues in Oracle PO and AP (Doc ID 1578275.1) available on MyOracleSupport which discusses the following topics:  

  • What is Encumbrance Accounting
  • How does Encumbrance Accounting work in Oracle?
  • Funds Reservation Statuses on PO Documents
  • Required Setups (GL, AP, PO)
  • Seeded Oracle Reports for Encumbrance Accounting
  • Recommended Patches
  • Diagnostic Tools 
  • Hot Topics
  • More Resources 

One of the additional resources referenced within the above document is R12 Encumbrances Accounting Bulletin (Doc ID 1583781.1).  This interactive document allows you to filter the knowledge based on a topic of choice and includes Encumbrance Transactions for both Accrue on Receipt and at Period End and shows you the transactions you would see and the values of DR and CR that would be inserted into the XLA tables at the various stages.  

Together these two fantastic documents should enlighten the reader and provide a detailed understanding of Encumbrance Accounting in Oracle Applications. 

Comments:

Very good document for beginers. I noticed that the entire example was shown for Expense Type Item. Is there any document showing the Inventory Items. There is an issue when we do an issue for the Inventory Items.

In short once an Issue for an inventory item, the encumbered value of the item is getting reversed, which in turn allows to create Purchase orders - even if the the encumbrance limit has been utilized once.

Posted by Balaji on May 14, 2014 at 07:21 AM EDT #

Hi Balaji! You can find information about the accounting that occurs in the background for encumbrances related to Inventory Items on My Oracle Support > Doc ID 429105.1: Impact of R12 Design in Procure To Pay Accounting Flow.

Hope that helps!

Marilyn :)

Posted by Marilyn Montgomery on June 03, 2014 at 02:11 PM EDT #

Phil et al,

Apologies for the delay but I have now received more information for you on this question. To not fill up this blog I've created a community thread for further discussion. Please review and post
any additional questions directly at

https://community.oracle.com/thread/3569543

Kind regards
Sam

Posted by guest on June 06, 2014 at 12:47 PM EDT #

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