Sunday, 8 August 2021

Difference between Accrue on receipt and Accrue at period end

What is difference between Accrue on receipt and Accrue at period end

Difference between accrue on receipt and accrue at period end in oracle

In this post we will see what is difference between Accrue on receipt and Accrue at period end

Accrue on receipt

When the option Accrue on receipt is selected, the accounting entries are immediately generated and sent to general ledger whenever a receipt is created and saved. This is also called as “online accrual”

Accrue on receipt is a feature in Oracle Purchasing that allows you to automatically accrue accounting entries for goods or services received, even if you have not yet received the invoice for those goods or services.

When accrue on receipt is enabled for a purchase order, the system creates a liability account entry for the amount of the goods or services received as soon as the receipt is entered in the system. This means that the accounting entry is made when the goods are received, rather than when the invoice is received and processed.

The accrue on receipt feature can be useful for businesses that want to track their liabilities for goods and services received, even if they haven't yet received the invoice. It can also help to reduce the time and effort required to process invoices and ensure that accounting records are up-to-date and accurate.

In Oracle Purchasing, you can enable accrue on receipt for a purchase order by selecting the "Accrue on Receipt" option on the "Terms" tab of the purchase order. You can also set up accrual rules and thresholds to control how and when the accrual entries are created.

It's important to note that while accrue on receipt can help to streamline accounting processes and provide more accurate financial reporting, it does not eliminate the need for processing invoices and making payments on time. Accruals should still be reconciled with vendor invoices and payments should be made according to the agreed upon terms.

Accrue at period end

On the other end when the option Accrue at period end is selected , the accounting entries are not generated when the receipt is created or saved , instead the accounting entries are generated at the period end and that time sent to GL. For this run Receipt accrual period end process.

Accrue at period end is a feature in accounting that allows businesses to recognize expenses or revenues at the end of an accounting period, even if they have not yet received or paid for goods or services.

When accrue at period end is enabled, a business can estimate the amount of an expense or revenue that will be incurred or earned during a particular accounting period, and create an accounting entry for that amount at the end of the period. This allows the business to match expenses with the revenue they generate, and provides a more accurate representation of the business's financial performance during the period.

For example, a business might accrue expenses for salaries, rent, or utilities at the end of a period based on estimated amounts, even if the actual bills for those expenses haven't been received yet. Similarly, a business might accrue revenue for services provided during the period, even if the customer hasn't yet been invoiced.

The accrue at period end feature can be useful for businesses that have significant timing differences between when expenses or revenues are incurred or earned, and when they are actually paid or received. It can also help to ensure that financial statements accurately reflect the business's financial position and performance during the period.

Typically, expense items are accrued at period end and inventory items are accrued at receipt.