Key accounts - P2P Cycle

Here are some of the key accounts used in P2P(Procure to Pay) Cycle.

RECEIVING INVENTORY ACCOUNT
This is one of the clearing account.The account is used for receipt accruals.After receiving transactions are processed and the Transfer Transactions toGL process is run, the Receiving Inventory Account is cleared and theMaterial account is charged with the cost of the capitalized inventory You can specify this account when you define Receiving Information foryour inventory organizations.

INVENTORY AP ACCRUAL
This is the account used by Purchasing to accrue your payable liabilitieswhen you receive items you will capitalize as inventory.This account represents your uninvoiced receipt liability and is usuallypart of your Accounts Payable Liabilities in the balance sheet.Oracle payables relieves this account when the invoice is matched andvalidated.So, you have to specify this account when you define InventoryInformation for your inventory organizations in the Other Accounts tab.

AP LIABILITY ACCOUNT
This account defaults from the supplier site and is credited when astandard invoice is entered or debited when a credit memo or debit memois entered. The account is relieved when the invoice is paid.When you are creating an invoice, the liability account will get defaultedbased on the hierarchy i.e., it can be from Financial options/Supplier/Supplier site.However you will still have an option to modify the Liabilityaccount by replacing the defaulted account.(0r) do you see a different account getting defaulted during Invoicecreation

EXPENSE AP ACCRUAL
This is the account used by Purchasing to accrue your payable liabilitieswhen you receive items you will expense. This account represents youruninvoiced receipt liability when you run the Receipt Accruals - PeriodEnd process.When you receive the goods,the accounting entry will beReceiving Inv DrTo Expense Accrual CrIn PayablesExpense Accrual DrTo Liability Cr.So the Expense Accrual will knock-offYou can specify this account on the Accrual tab when you set upPurchasing Options.

MATERIAL ACCOUNT
An asset account is used for to tracks material cost .In the average costing, this account holds your inventory and in transitvalues. Once you perform transactions, you cannot change this account.You can specify this account when you define Inventory Information foryour inventory organizations in the Valuation Accounts region for theCosting Information tab.

CHARGE ACCOUNT
This is the charge account is the account that will be charged for the purchase on eitherthe balance sheet or income statement.
• If the destination type for the distribution is Inventory, this accountwill be the Material account associated with the subinventory andyou cannot override it. This is the balance sheet account that willbe charged after inventory is capitalized.
• If the destination type is expense, you can specify this account(provided it isn’t project related) and override any defaults. Thisaccount will be either an asset clearing account that will beincluded on the balance sheet or an expense account that will beincluded on the income statement. This account is either created orspecified when you create a purchase order.Look at the Material Account on the destination inventory organization, or(if specified), destination subinventory.Under Inventory: Setup/Organizations/Parameters or Sub inventories

PURCHASE PRICE VARIANCE
This account is used to record differences between purchase order lineprice and standard cost.The Purchase Price Variance is calculated when items delivered toinventory are costed.You should note, this account is not used with the average cost method.For example, assume the purchase order line price for an item was set at$100 per item but standard cost was set to $120 per item and youpurchased 10 items. The Purchase Price Variance would be $200.You can specify the Purchase Price Variance account when you defineInventory Information for your inventory organizations in the OtherAccounts tab.

INVOICE PRICE VARIANCE
The variance account used to record differences between purchase orderprice and invoice price.This account is used by Payables to record the invoice price variance forinventory items.For expense items, the account generator uses the charge account to recordany invoice price variance.You can understand with this set of example, how its works;
1). Create a purchase order with expense type item having the above        Navigation: Purchasing->Purchase Orders->Purchase Orders
2). Receive the goods for this PO.Navigation: Purchasing- >Receiving>Receipts 
3). Login as Payables manager, create an invoice and match it to the PO created in step 1.Navigation :Payables->Invoices->Entry-Invoices for example PO Quantity=100 PO Price = 5 Now you match an invoice to the PO and Invoice(match) details are as follows: Matched Quantity=100 Price on Invoice= 1 in this case, probably you have set the Invoice price variance account in define Organization Parameters form( alternate region: other accounts)same as the expense account on the PO Invoice Price Variance= (PO Price - Invoice Price) x Qty. Invoiced You can specify this account when you define Inventory Information for your inventory organizations in the Other Accounts tab.