Flow of accounting information in Procure to Pay Cycle
If you are implementing the Procure to Pay Cycle in Oracle Apps, you might have come across the following accounting activities:1. Run the Create Accounting program after creating an invoice to post entries to the General Ledger
2. Run the Create Accounting program after making payments to post entries to the General Ledger.
As a newbie consultant, I always used to wonder why someone would have run the accounting entries twice. If you are one of the professional consultants or belong to the Chartered Accounting fraternity, you may already know the answer.
Else, read on..
1. The reason for creating accounting entries after creating an invoice is to ensure that the General Ledger is updated with the correct accounting information for the following 2 types of accounts:
a) Accounts Payable A/C
b) Merchandise A/C (incase of goods purchased) or Expense A/C (in case of expense)
When a supplier invoice is created, the business is liable to pay for the invoice and hence, the Accounts Payables A/C is credited. Since the invoice is raised for purchasing goods or for an expense, the corresponding Merchandise A/C or Expense A/C is debited.
| Account | Dr | Cr | |
| Merchandise A/C or Expense A/C | 100 | ||
| Accounts Payable A/C | 100 |
a) Cash A/C or Bank A/C
b)Accounts Payable A/C
When the invoice is paid, the payment is made in Cash. Hence the Cash A/C or Bank A/C is credited. Since the payment reduces the amount that the company owes to the Supplier, the Accounts Payable A/C is debited to the same extent.
| Account | Dr | Cr | |
| Accounts Payable A/C | 100 | ||
| Cash A/C | 100 |
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