Accounting Requirements for eAM and related Inventory Organization

WIP Accounting Class

Maintenance accounting classes are used to group costs for work orders used in Oracle Enterprise Asset Management (eAM). For example, if you are creating work orders for plant maintenance activities, you can define your accounting classes to separately value and report the costs related to asset. Maintenance accounting classes are automatically defaulted when you create eAM work orders.

When you define an accounting class, you must assign valuation and variance accounts to it. When you issue materials to a work order that uses this accounting class, the appropriate valuation accounts are charged. When the work order is closed, final costs and variances are calculated and posted to the variance and valuation accounts. When the accounting period is closed, these journal entries are automatically posted to the general ledger.

The WIP Accounting Class is the Class which is associated with eac Asset Number and then with Work Order. Accounting distributions for all the Work Order Transactions pertaining to that asset are posted as per the WIP Accounting Structure.

Generally the WIP Accounting Classes are Organization Specific i.e. for one Maintenance Organization there will be on WIP Accounting Class.

However based on accounting and finance reporting requirements, any number of WIP Accounting classes can be created and attached to the Asset Numbers and Work Orders.

Here in RGO, the Maintenance expenditure is posted to Asset Owner Department / Organization and sometimes to the Maintenance Organization. It depends. This issue needs special attention.

Valuation and Variance Accounts

WIP accounting class valuation accounts are charged when you issue components, move assemblies, complete assemblies, and charge resources.

Variance accounts associated with Standard Discrete and Non-standard Asset accounting classes are charged when jobs are closed. Variance accounts associated with Expense Non-standard Discrete, and optionally Repetitive accounting classes, are charged when accounting periods are closed.

As noted in the following table, different valuation and variance accounts are required under standard versus average costing:-

Sl No	Account	Valuation	Variance
1.	Material	Standard and Average	Standard and Average
2.	Material Overhead	Standard and Average	Standard and Average
3.	Resource	Standard and Average	Standard and Average
4.	Outside Processing	Standard and Average	Standard and Average
5.	Overhead	Standard and Average	Standard and Average
6.	Standard Cost	Standard Only	Variance Not Applicable
7.	Bridging	Average Only	Variance Not Applicable
8.	Expense	Average Only	Variance Not Applicable

The screen shot of the WIP Accounting is appended below

Resource Accounts

1.      Resource Absorption Account

2.      Variance Account

Sub Ledger Accounting and EAM

Without SLA, all material on a work order will debit the same material expense account.

SLA will enable the customer to define an expense account for each type of category (spares and supplies), so the work order can debit one expense account for spares, and a different expense account for supplies.

Valuation Accounts

Material Account - Normally an asset account this account tracks material costs. Under standard costing, it is debited at standard when you issue material to a job or schedule and credited at standard when you complete assemblies from a job or schedule, close a job, or close an accounting period. Under average costing, this account is debited at the average cost in effect at the time of the issue transaction and is credited when you complete assemblies from a job.

Material Overhead - Normally an asset account this account tracks material overhead (burden) costs. Under standard costing, it is charged/debited at standard when you issue material with material overhead to a job or schedule and relieved at standard when you complete assemblies from a job or schedule, close a job, or close an accounting period. Under average costing, this account is debited at the average cost in effect at the time of the issue transaction.

Resource - An asset account that account tracks resource costs. Under standard costing, it is charged/debited at standard when resources are charged to a job or schedule and relieved/credited at standard when you complete assemblies from a job or schedule, close a job, or close an accounting period. Under average costing, this account is debited and credited at the resource rate in effect at the time the resource is charged.

Outside Processing - An asset account that tracks outside processing costs. Under standard costing it is debited at the standard or purchase order cost when you receive items for a job or schedule in Oracle Purchasing. It is credited at standard when you complete assemblies from a job or schedule, close a job, or close an accounting period. Under average costing when you move job or repetitive schedule assemblies through an outside processing operation, it is debited at the resource's predefined rate or at the purchase order cost.

Overhead  - Normally an asset account this account tracks resource or department overhead cost. Under standard costing it is debited at standard when resources are charged to a job or schedule. It is relieved at standard when you complete assemblies from a job or schedule, close a job, or close an accounting period.

Variance Accounts

Material This account tracks variances that occur when the previous level material costs charged to the job or schedule do not equal the previous level material costs that are relieved. This calculation gives you a net material usage and configuration variance.

Resource This account tracks variances that occur when the this level resource costs charged to the job or schedule do not equal the this level resource costs that are relieved. If you charge actual labor without creating resource rate variances (resource standard rate is set to No), the resource variance includes any rate, efficiency, and method variances. If you recognize rate variances or charge resources at standard, the resource variance includes resource efficiency, and any method variances.

Outside Processing Tracks the variances that are occur when the this level outside processing costs charged to the job or schedule do not equal the this level outside processing costs that are relieved. If you do not calculate purchase price variance (resource standard rate is set to No), the outside processing variance includes any rate, efficiency, and method variances. If you recognize purchase price variance, this account includes efficiency and any method variances.

Overhead Tracks the variances that are occur when the this level overhead costs charged to the job or schedule do not equal the this level overhead costs relieved from the job or schedule. These variances include both efficiency and method variances.

Standard Cost Applies only to standard discrete and non-standard asset. This account is charged for the sum of all the elemental standard cost adjustments when you perform a standard cost update that impacts an active job. Cost updates are not performed for repetitive schedules or expense non-standard jobs.

Estimated Scrap Applies only to lot based jobs in Oracle Shop Floor Management enabled inventory organizations when Estimated Scrap Accounting is enabled. If this feature is enabled, both Estimated Scrap accounts are required. The scrap account field is required when defining a department on the Departments window. Additionally when you define this account, you can also track operation yield and estimated scrap absorption when creating transactions for lot based jobs.

Sub Inventory – Accounts

Accounts Required for Subinventory

1.      Material Account

2.      Outside Processing

3.      Material Overhead

4.      Overhead

5.      Resources

6.      Expense

7.      Encumbrance

OSP (Outside Service Processing) Transactions – Accounts

1.      AP Accruals

2.      Receiving Accrual

Direct Items – Accounts

1.      AP Accrual

2.      Receiving Inspection

Invoice Variance Transferring – Accounts

1.      Invoice Variance Adjustment Account

Configuration History

1.      Maintenance Offset Account

Work Order Closing and Capitalization - Accounts

1.      Asset Clearing Account / Offset Account / Variance Account

2.      Asset Cost Account

Inventory Organization – Valuation Accounts

1	Material	An asset account that tracks material cost. For average costing, this account holds your inventory and intransit values. Once you perform transactions, you cannot change this account.
2	Material Overhead	An asset account that tracks material overhead cost.
3	Resource	An asset account that tracks resource cost.
4	Overhead	An asset account that tracks resource and outside processing overheads.
5	Outside processing	An asset account that tracks outside processing cost.
6	Expense	The expense account used when tracking a non-asset item.

  

Inventory Organization – Other Accounts

1	Sales	The profit and loss (income statement) account that tracks the default revenue account.
2	Cost of Goods Sold	The profit and loss (income statement) account that tracks the default cost of goods sold account.
3	Purchase Price Variance	The variance account used to record differences between purchase order price and standard cost. This account is not used with the average cost method.
4	Inventory A/P Accrual	The liability account that represents all inventory purchase order receipts not matched in Accounts Payable, such as the uninvoiced receipts account.
5	Invoice Price Variance	The variance account used to record differences between purchase order price and invoice price. This account is used by Accounts Payable to record invoice price variance.
6	Encumbrance	An expense account used to recognize the reservation of funds when a purchase order is approved.
7	Project Clearance Account	When performing miscellaneous issues to capital projects, the project clearance account is used to post the distributions.
8	Average Cost Variance	Under average costing with negative quantity balances, this account represents the inventory valuation error caused by issuing your inventory before your receipts.

Inter Organization Transfer Account

1.      Transfer Credit

2.      Purchase Price Variance

3.      Receivable

4.      Payable

5.      Intransit Inventory

Category Accounts

1.      Material: A default general ledger account to accumulate material costs for this category/subinventory combination. This is usually an asset account.

2.      Outside Processing: A default general ledger account to accumulate outside processing costs for this category/subinventory combination. This is usually an asset account.

3.      Material Overhead: A default general ledger account to accumulate material overhead or burden costs for this category/subinventory combination. This is usually an asset account.

4.      Overhead: A default general ledger account to accumulate resource or department overhead costs for this for this category/subinventory combination. This is usually an asset account.

5.      Resource: A default general ledger account to accumulate resource costs for this category/subinventory combination. This is usually an asset account.

6.      Encumbrance: A default general ledger account to hold the value of encumbrances against subinventory items belonging to this category set.

Purchasing – Receiving Options – Accounts

1.      Receiving Inventory Account

2.      Retroactive Price Adjustment Account

3.      Clearing Account

Purchasing – Purchasing Options

1.      Expense AP Accrual Account