Setting Up Payables Accounting

This chapter provides an overview of the Payables accounting environment and discusses how to set up ChartField inheritance options:

Understanding the Accounting Environment Setup

This section discusses:

• Interunit accounting setup in Payables.

• Posting method definition.

• ChartFields definitions in the accounting entry template.

• ChartFields definitions for General Ledger business units.

Interunit Accounting Setup in Payables

Interunit transactions enable you to balance by the General Ledger business unit. The system generates interunit due-to and due-from entries with respect to an anchor business unit. Payables derives the anchor business unit from the context of the transaction.

Intraunit transactions enable you to balance on ChartFields other than the General Ledger business unit. You can select how many and which ChartFields require balancing. You can achieve Intraunit balancing through inheritance or due-to and due-from balancing.

Payables uses the Centralized Inter/IntraUnit Application Engine process (IU_PROCESSOR) to process intraunit and interunit accounting. This central processor generates interunit and intraunit accounting entries for all PeopleSoft financial products. In Payables, both the Voucher Posting and Payment Posting processes call the central processor to process the interunit and intraunit accounting entries. To enable Payables to call the Centralized Inter/IntraUnit processor, you must complete several set up pages in the Inter/IntraUnits component.

Interunit accounting tracks interunit payables and receivables among General Ledger business units. Interunit accounting occurs at the General Ledger business unit level, independent of the Payables business unit definition.

Payables:

• Does not require netted interunit distribution and payments within the same general ledger account.

• Separates distribution and payment interunit entries.

• Supports interunit accounting among General Ledger business units with different base currencies.

When you enter invoices for a vouchering (Payables) business unit, the charged-to distribution (General Ledger) business unit associated with that vouchering business unit appears by default in the GL Unit field on the distribution lines of the voucher. You can override that General Ledger business unit. The Payables business unit is the entity to which the vendor liability is recorded. The General Ledger business unit is the entity to which the distribution line is recorded.

Note. When you enter interunit vouchers on the Invoice Information page, the header budget status changes from Valid to Not Chck'd (not checked). Run the Budget Processor COBOL process (FSPKBDP) to reset the status to Valid to make the voucher eligible for the Voucher Posting process.

If you prorate or allocate the non-merchandise items, the system charges the General Ledger business unit with both the merchandise costs and the non-merchandise costs. If you do not prorate or allocate, the system charges all non-merchandise items to the Payables business unit and the merchandise to the General Ledger business unit.

Balancing ChartFields and their relationship to a balanced set of accounts or books is central to interunit and intraunit processing, as well as ChartField inheritance. You can set up direct, indirect, or pairs balancing methods. If you use the direct balancing method, the system retrieves the due-to and due-from ChartFields that are used to balance each business unit in the transaction are retrieved the business unit's own inter/intraunit template definition. If you use the indirect balancing method, the system retrieves the due-to and due-from ChartFields from the affiliate business unit's inter/intraunit template definition. If you use the pairs balancing method, the system retrieves the due-to and due-from ChartFields from a definition for the pair of business units that are involved in the transaction. Pairs are defined on the InterUnit Pair Maintenance page.

Note. If your environment uses alternate accounts, use the direct balancing method.

Voucher Accounting Entries

The Affiliate ChartField displays the affiliate business unit that has been charged. If you change the General Ledger business unit on the distribution line on the Invoice Information page, the system populates the Affiliate ChartField during the Voucher Posting process.

This table lists accounting entries for the voucher when you are using the direct balancing method:

In the direct balancing method, the system charges the business unit's ChartFields. In the previous table, General Ledger business unit US001 uses account 100103 as its interunit payable account. In the direct balancing method, the system charges account 100103 (its own account).

This table lists the accounting entries for the voucher when you are using the indirect balancing method:

When you use indirect balancing method, the system charges the affiliate business unit's ChartFields instead of the business unit's ChartFields.

This table lists the accounting entries for the voucher when you are using the pairs balancing method:

In the pairs balancing method, the system charges the business units that are defined for the pair of business units involved in the transaction. In the previous table, the interunit payable account is defined as account 100103 for the US001:US003 pair, and the interunit receivable account is defined as account 100105.

Payment Accounting Entries

This table lists the accounting entries for the payments when you are using the direct balancing method:

This table lists the accounting entries for the payments when you are using the indirect balancing method:

This table lists the accounting entries for the payments when you are using the pairs balancing method:

See Also

Reviewing Posted Accounting Entries

Setting Up Payables Installation Options

Using Interunit and Intraunit Accounting and ChartField Inheritance

Posting Method Definition

Payables supports two posting methods of balancing voucher accruals and payments entries. These flexible posting methods define which ChartField values are inherited from the corresponding accounting entries. Define a posting method on the Installation Options - Payables page. The two posting methods are:

• Summary Control posting method.

• Detail Offset posting method.

Summary Control Posting Method

The Summary Control posting method balances vouchers at the voucher header level, rather than the individual lines, with summary control accounts such as the accounts payable accrual account for each voucher. It also creates summary expense accounts for nonmerchandise expenses like freight and sales and use tax if you elect not to prorate or allocate these non-merchandise amounts to the voucher distribution lines. The Summary Control posting method creates one summary accounts payables accrual entry for all of the distribution lines.

The Summary Control posting method creates one summary cash distribution entry for each cash account defined on the External Banks page.

Note. The Payment Posting process is not dependent on the Voucher Posting process.

Detail Offset Posting Method

The Detail Offset posting method balances each individual voucher distribution line. During the posting processes, offsets to the distribution lines and cash entries inherit the nonaccount ChartField values based on the established inheritance rules.

Offsets to the distribution lines inherit the nonaccount ChartField values and any other balanced ChartField values from the distribution line. Nonbalancing and nonaccount ChartFields also follow inheritance rules. The Detail Offset posting method creates accounts payable accrual entries for each distribution line.

Because each distribution line is balanced with an offsetting accounts payable accrual account, payments must be allocated to the distribution lines to properly relieve the accounts payable liability. This is done during the Payment Posting process.

Note. The Payment Posting process does not depend on the Voucher Posting process.

The Detail Offset posting method does not support the expensing of non-merchandise charges, early payment discounts, or discounts earned or lost. These charges are allocated, or prorated, back to the distribution line rather than being posted to summary accounts.

Using ChartField Inheritance with Posting Methods

The Detail Offset posting method can inherit header level ChartField values from the distribution line because each distribution line has its own accounts payable accrual (APA) entry.

The Summary Control posting method cannot use inheritance for header level ChartFields. Because the system creates only one APA entry for multiple distribution lines, it does not know from which distribution line to inherit the ChartField values.

Example 1: Summary Control Posting Inheritance (Allocate Freight)

This scenario assumes:

• Allocate freight.

• Only the fund code is balanced.

• No interunit accounting.

• Payables header level entries, such as APA, inheritance options:

  Field	Inheritance Option
  FUND_CODE	Use Unit Definition
  DEPTID	Use Unit Definition
  PRODUCT	Use Unit Definition
  All Others	Do Not Inherit

• Payables distribution level entries, such as freight (FRG), inheritance options:

  Field	Inheritance Option
  OPERATING_UNIT	Always Inherit
  FUND_CODE	Always Inherit
  DEPTID	Use Unit Definition
  PRODUCT	Inherit Within Unit
  All Others	Do Not Inherit

This table illustrates the accounting results after running the Voucher Posting process:

Example 2: Summary Control Posting Inheritance (Expense Freight)

This scenario assumes:

• Expense freight.

• Only the fund code is balanced.

• No interunit accounting.

• Payables header level entries, such as APA, inheritance options:

  Field	Inheritance Option
  FUND_CODE	Use Unit Definition
  DEPTID	Use Unit Definition
  PRODUCT	Use Unit Definition
  All Others	Do Not Inherit

• Payables distribution level entries, such as FRG, inheritance options:

  Field	Inheritance Option
  OPERATING_UNIT	Always Inherit
  FUND_CODE	Always Inherit
  DEPTID	Use Unit Definition
  PRODUCT	Inherit Within Unit
  All Others	Do Not Inherit

This table lists the accounting results after running the Voucher Posting process:

Example 3: Detail Offset Posting Inheritance

This scenario assumes:

• Allocate freight.

• No interunit accounting.

• Payables header level entries, such as APA, inheritance options:

  Field	Inheritance Option
  FUND_CODE	Always Inherit
  DEPTID	Inherit Within Unit
  PRODUCT	Use Unit Definition
  All Others	Do Not Inherit

• Payables distribution level entries, such as FRG, inheritance options:

  Field	Inheritance Option
  OPERATING_UNIT	Always Inherit
  FUND_CODE	Always Inherit
  DEPTID	Use Unit Definition
  PRODUCT	Inherit Within Unit
  All Others	Do Not Inherit

The accounting results after running the Voucher Posting process:

See Also

Setting Up Payables Installation Options

ChartFields Definitions in the Accounting Entry Template

When setting up inheritance for Payables, if you select Do Not Inherit as the inheritance option for an inheritance group, the system uses the ChartField values that were established on the accounting entry template to generate the appropriate accounting entry lines.

See Also

Creating Accounting Entry Templates

ChartFields Definitions for General Ledger Business Units

When setting up inheritance for Payables, if you select Use Unit Default as the inheritance option for an inheritance group, the system uses the ChartField values that were established on the General Ledger business unit to generate the appropriate accounting entry lines.

If you select Inherit Within Unit as the inheritance value and the entries are for different General Ledger business units, the system also uses the ChartField values that were established on the General Ledger business unit to generate the appropriate accounting entry lines.

See Also

Specifying Interunit and Intraunit Settings for General Ledger Business Units

Prerequisites

Before you can use the voucher and payment posting processes, you must:

1. Complete general ledger setup.

   Before you set up inheritance in Payables, define setIDs, ledgers, and General Ledger business units. Non bank-related inheritance options are maintained by setID and inheritance group. Bank inheritance options are maintained by bank account.

2. Set up interunit accounting.

3. Define a posting method on the Installation Options - Payables page.

4. Define accounting entry templates on the Accounting Entry Template page.

5. Define ChartFields for General Ledger business units.

6. Define inheritance options.

See Also

Setting Up Ledgers

Setting Up Payables Installation Options

Creating Accounting Entry Templates

Specifying Interunit and Intraunit Settings for General Ledger Business Units

Setting Up ChartField Inheritance Options

This section provides an overview of ChartField inheritance setup discusses how to:

• Define non bank-related ChartField inheritance options.

• Define bank-related ChartField inheritance options.

• Validate posting setup.

See Also

Using ChartField Inheritance

Understanding ChartField Inheritance Setup

Inheritance refers to the process by which transactions are forced to balance by automatically copying, or inheriting, ChartField values from one entry in the transaction to other entries in the transaction. Values for nonbalancing ChartFields can also be inherited to provide additional detail for financial analysis. You can specify which ChartFields are automatically inherited for Payables.

ChartField inheritance means that any offset entries created for distribution lines or payment entries inherit nonaccount ChartFields when they are created. ChartField inheritance enables the user to select the source of certain ChartField values on certain system-generated accounting entries.

For example, when posting Payables vouchers, the user can choose to have the fund code on the vendor liability entry come from either the voucher distribution line, the General Ledger business unit default values, or the accounting entry template.

Important! When balancing by ChartFields, you must first establish inheritance options for each ChartField during implementation. Doing this prevents the system from posting the balancing entries to a rounding account. To correct entries posted to a rounding account, you must manually create General Ledger journal entries to the appropriate ChartField accounts.

See Defining Bank-Related ChartField Inheritance Options.

Note. If you implement the Project Costing application, the system displays an additional six project that are related ChartFields. If you do not install PeopleSoft Project Costing, only the Project ChartField appears.

Pages Used to Set Up Inheritance Options

Defining Non Bank-Related ChartField Inheritance Options

Access the ChartField Inheritance page.

Inheritance Group

Payables is delivered with three inheritance groups: Payables Header Level Entries: Defines the inheritance to use when generating entries for the vouchering General Ledger business unit. The Payables liability entry uses this inheritance group. Payables Distrib Level Entries (payables distribution level entries): Defines the inheritance to use when generating entries for the distribution line General Ledger business unit. Allocated freight uses this inheritance group. Payables VAT Non-Recoverable: Defines the inheritance to use in generating nonrecoverable VAT entries. Note. To fully understand how these inheritance groups work, you must also understand how allocation and proration work in Payables.

Inheritance Option

Select an inheritance option for each ChartField within each of the three Payables inheritance groups. Values are: Always Inherit: The ChartField value is always inherited from the distribution entries on the transaction, regardless of whether the ChartField value is in the same General Ledger business unit. Select this value only if all business units share the same ChartField values; otherwise, the inherited value could be invalid. Do Not Inherit: The ChartField value is inherited from the accounting template for that distribution account type (DST_ACCT_TYPE), not from the transaction itself. Inherit Within Unit: The ChartField value is inherited from the distribution entries on the transaction, but only if the other entry is in the same General Ledger business unit. Otherwise, the system uses the business unit default (of the nondistribution General Ledger business unit). Use Unit Definition: The ChartField value is the default value that is associated with the General Ledger business unit. Default values come from the values on the Inter/IntraUnit page in the General Ledger Definition component.

Setting Up Inheritance Options

For inheritance to generate the appropriate accounting entry lines, set up your inheritance options using the following guidelines.

This table lists the options for balanced and nonbalanced ChartFields for each inheritance group when you use the Summary Control posting method:

This table lists the options for balanced and nonbalanced ChartFields for each inheritance group when you use the Detail Offset posting method:

Define ChartFields as balanced or nonbalanced in the Ledger Group component.

See Also

Setting Up Nonmerchandise Charges

Linking Ledgers to a Ledger Group

Using ChartField Inheritance

Defining Bank-Related ChartField Inheritance Options

Access the ChartField Options page.

The ChartField Options page is similar to the ChartField Inheritance page except that you specify options for bank-related accounting entries.

See Also

Defining External Account Information

Validating Posting Setup

Access the Posting Setup Validation page.

Use this page to run the Validate Posting Setup process, which verifies that you have set up your ChartField inheritance correctly. This process finds any set up issues that might cause problems for the Payables voucher and payment posting processes and posts them to the Process Message Log. Potential issues include:

• Any SetID/AP inheritance group combinations in which ChartField inheritance has not been defined.

• Any bank ChartField inheritance that has not been defined for banks with Payables setup.

• Any SetID/AP inheritance group that has been defined but has an invalid option.

• Any procurement accounting controls for business units with invalid allocations.

To view the error messages:

1. Click the Process Monitor link on the Posting Setup Validation page.

2. Click the Details link on the Process List page.

3. Click the Message Log link on the Process Details page.

4. Click the Explain button on the Message Log page.

Viewing posting setup issues on the Explain page (PMN_MSG_EXPLAIN)