Amortization of Prepayment invoices

Method 1: Creating Recurring Invoices

In this method when we get a physical invoice. We will create it as a prepayment invoice coded to
prepaid account in oracle payables workbench and create a subsequent recurring invoice coded to
expense account to be applied every month to the prepayment invoice to get amortized.

There are some pre requisite setups that have to be done for this method

Prerequisite Steps 1: Creation of Distribution Set for Expense Account.

Navigation: Payables Manager >> Setup >> Invoice >> Distribution Set

Enter Expense account in the distribution line. You can enter multiple accounts in the distribution set.
Create multiple distribution sets if there are multiple expense account.

Prerequisite Steps 2: Defining the monthly periods for recurring invoice in special calendar

The periods in this special calendar will be already defined in Production but if in case the special
calendar does not have the periods we can define the periods that we want. To define the Periods for
‘Monthly’ special calendar (This will be a one-time setup)

Navigation: AP Manager ECS US >> Navigate >> Setup >> Calendar >> Special Calendar

Press F11 and query the Recurring Invoice calendar Name ‘Monthly’ and enter the Period Details
After configuring all the prerequisite steps we can create the recurring invoice in oracle Payables
workbench.

Steps to create Recurring Invoice

Step 1: Create recurring invoices for the timeframe of amortization to be covered. E.g. the invoice comes
in for $600 and has to cover a period of 6 months then 6 invoices would be created for 100$ each

Navigation: AP Manager ECS US >> Navigate >> Invoices >> Entry >> Recurring Invoices

Enter

 Enter the supplier information in the supplier section

 Enter the invoice number
 In the Distribution Origin section enter the distribution set EXPENSE_ACCOUNT that we had
created
 In the Calendar section select the calendar as ‘Monthly’ since we are going be amortizing the
invoices monthly.
 Enter the number of periods for which you want the invoice to be amortized and the period
from which it should start amortization.
 In the Amounts tab enter the amount for which the invoice will be created every month and
amortized
 Click on Create Recurring Invoices button
  Invoice will be created for the open month.
 In this way every month a recurring invoice will be created for the following open period by
querying the recurring invoice (this will be a manual process)

Now the recurring invoice has been created. The next step is to create a Prepayment invoice.

To create a Prepayment Invoice follow these steps

Navigation: AP Manager >> Navigate >> Invoices >> Entry >> Invoices

 Create invoice with type as ‘Prepayment’ with Prepayment type as ‘Temporary’

 In the Distributions of the invoice enter the Prepaid Account.

 Validate the invoice by clicking on Actions >> Validate Invoice (This will be automated in
Production)
The next step is to pay the invoice.

 To pay the invoice click on Actions >> Pay in Full

After Payment the Accounting would look like this

The next step is to apply the recurring invoice to the Prepayment Invoice

Whenever the invoice has to be amortized the recurring invoice has to be applied to the prepayment
invoice. To apply the recurring invoice go to

 Open the Prepayment invoice >> Click on Actions >> Apply/Unapply Prepayment >> click OK

 Select the invoice and check the Apply checkbox on the left and click on Apply/Unapply
  Run the Payables Accounting Process Program (Automated in Production)
 This way the invoice will be amortized each month.

Method 2: Creating Asset for the Invoice

In this method when the invoice comes in it will be routed to FA and an asset will be created for it.
This Asset will then depreciate every month.

There are some pre requisite setups that have to be done for this method

Prerequisite Steps 1: Creation of Major and Minor values for Asset Category.

First we will have to define the Major and Minor for our Asset Category

Navigation: GL Application Admin ECS US >> Setup >> Financials >> Flexfields >> Key >> Values

Find the major valueset by searching for ‘ARW_GLOBAL_FA_MAJOR_CATEGORY’

Enter a new value. Click Save

Now search for the Minor category valueset ‘ARW_GLOBAL_FA_MINOR_CATEGORY’. In the

Independent Value field enter the major category that we created (PREPAID_INV)
Create the number of categories for the number of depreciation months that you have to amortize the
invoices. Click on Save

Now that the Major and Minor Categories are configured we can create the Asset Categories.

Prerequisite Steps 2: Creation of Asset Category with Asset Clearing Account defined as Prepaid
Account.

Navigation: FA Manager >> Setup >> Asset System >> Asset Categories
  Select the category based on the timeframe the invoice will cover for depreciation. E.g. if
depreciation is for 3 months then select minor as ‘3 MONTHS’. If depreciation is for 12 months
then select minor category as ’12 MONTHS’
 In the Asset Clearing field and Accumulated Depreciation field enter the Prepaid Account.

 Uncheck the ‘In Physical Inventory checkbox’

 Click on ‘Default Rules’ and enter the time period for which the invoice should get depreciated
and the depreciation method.
 Do this setup for all the depreciation categories defined

The setup for Asset categories is complete. Now whenever an invoice is created it should be coded to
the prepaid invoice and on the configuration done above it will create an asset after running Mass
Additions program.

To create an Asset for the prepaid invoice do the following steps

 Create an Invoice with the distribution coded to Prepaid Account that we have defined in the
Asset Clearing and Accumulated Depreciation in the Asset Category.
 When you have entered the account that is defined in the Asset Clearing in your Asset category
the ‘Track as Asset’ field gets automatically checked.

 In the next step validate and pay the invoice and run ‘Payables Transfer to General Ledger’
Program (Automated in Production)
 After payment of invoice the accounting will look like this
  In the next step run the ‘Mass Additions Create’ program to transfer the invoice to FA
 In the next step we have to Prepare and Post the Asset that has been transferred to FA

To Prepare the Asset do the following steps

Navigation: FA Manager ECS US >> Mass Additions >> Prepare Mass Additions

 Search by the invoice number

 Select Queue = POST
 Select Category according to the timeframe of invoice
 Enter your Expense Account in the ‘Expense Account field’
 Enter the Asset Key and Description in the Asset Details tab
 Click on Done

Now go to FA Manager ECS US >> Mass Additions >> Post Mass Additions
Submit the Program

In the Next step Run Depreciation by Going to Depreciation >> Run Depreciation

The invoice will get depreciated every month after the depreciation Program Runs.