Inventory - Standard Costing
Prerequisites
• Define Organization Parameters
• Costing Method is set to Standard
• Transfer Detail to GL is appropriately set
• Default Material Sub–Element account (Required)
• Define cost types are defined.
• Define activities and activity costs are defined.
• Define material overhead defaults are defined
• Define item, item costs, and establish item cost controls.
• Launch transaction managers are launched
Inventory Standard Cost Transactions The following transactions can be performed in distribution organizations.
• Purchase Order Receipt To Receiving Inspection:
• Delivery From Receiving Inspection To Inventory:
• Purchase Order Receipt To Inventory:
• Return To Supplier From Receiving:
• Return To Supplier From Inventory:
Purchase Order Receipt to Receiving Inspection You can use the Receipts window in Oracle Purchasing to receive material from a supplier into a receiving location. You can also use this window to receive material directly to inventory. Please note that this section addresses Inventory destinations only.
When you receive material or outside processing items from a supplier into receiving inspection, the Receiving Inspection account is debited and the Inventory A/P Accrual account is credited based on the quantity received and the purchase order price.
Account Debit Credit
Receiving Inspection account @ PO price XX
Inventory A/P Accrual account @ PO price XX
Delivery From Receiving Inspection to Inventory
You can use the Receiving Transactions window to move material from receiving inspection to inventory. The system uses the quantity and the purchase order price of the delivered item to update the receiving inspection account and quantity. The system uses the standard cost of the delivered item to update the subinventory balances.
Account Debit Credit
Subinventory accounts @ standard cost XX
Receiving Inspection account @ PO price XX
Debit/Credit Purchase Price Variance
If your item has material overhead associated with it, the sub inventory account is debited for the amount of the material overhead and the material overhead absorption account(s) are credited.
Purchase Price Variance (PPV)
Purchase price variances (PPV) occur when there are differences between the standard cost and the purchase order cost of an item.
Expense Sub inventories and Expense Items When you receive inventory expense items into expense sub-inventory locations, the following accounting entry is generated:
Account Debit Credit
Sub-inventory Expense account @ PO price XX
Inventory A/P Accrual account @ PO price XX
When you receive an expense (non–asset) inventory item, or into an expense sub inventory, the sub-inventory expense account instead of the valuation account is debited. Because the expense account is debited at the purchase order price, there is no purchase price variance.
Purchase Order Receipt to Inventory When you receive material from a supplier directly to inventory, the receipt and delivery transactions are performed in one step.
First, the Receiving Inspection account is debited and the Inventory A/P Accrual account credited based on quantity received and the purchase order price.
Account Debit Credit
Receiving Inspection account @ PO price XX
Inventory A/P Accrual account @ PO price XX
Next, the Sub-inventory and Receiving Inspection accounts are, respectively, debited and credited based on the transaction quantity and standard cost of the received item.
Account Debit Credit
Sub-inventory accounts @ standard cost XX
Receiving Inspection account @ PO price XX
Debit/Credit Purchase Price Variance
If your item has material overhead(s), the sub-inventory entry is debited for the material overhead and the material overhead absorption account(s) is credited.
Account Debit Credit
Sub-inventory accounts XX
Material Overhead Absorption account XX
Attention: If the sub inventory account is combined with the above entry, the material overhead absorption account adds one additional entry.
Return To Supplier From Inventory
When you do not use receiving inspection, the return to supplier transaction updates the same accounts as the direct receipt to inventory, with reverse transaction amounts. The Inventory A/P Accrual account is debited and the Receiving Inspection account is credited based on quantity received and the purchase order price.
Prerequisites
• Define Organization Parameters
• Costing Method is set to Standard
• Transfer Detail to GL is appropriately set
• Default Material Sub–Element account (Required)
• Define cost types are defined.
• Define activities and activity costs are defined.
• Define material overhead defaults are defined
• Define item, item costs, and establish item cost controls.
• Launch transaction managers are launched
Inventory Standard Cost Transactions The following transactions can be performed in distribution organizations.
• Purchase Order Receipt To Receiving Inspection:
• Delivery From Receiving Inspection To Inventory:
• Purchase Order Receipt To Inventory:
• Return To Supplier From Receiving:
• Return To Supplier From Inventory:
Purchase Order Receipt to Receiving Inspection You can use the Receipts window in Oracle Purchasing to receive material from a supplier into a receiving location. You can also use this window to receive material directly to inventory. Please note that this section addresses Inventory destinations only.
When you receive material or outside processing items from a supplier into receiving inspection, the Receiving Inspection account is debited and the Inventory A/P Accrual account is credited based on the quantity received and the purchase order price.
Account Debit Credit
Receiving Inspection account @ PO price XX
Inventory A/P Accrual account @ PO price XX
Delivery From Receiving Inspection to Inventory
You can use the Receiving Transactions window to move material from receiving inspection to inventory. The system uses the quantity and the purchase order price of the delivered item to update the receiving inspection account and quantity. The system uses the standard cost of the delivered item to update the subinventory balances.
Account Debit Credit
Subinventory accounts @ standard cost XX
Receiving Inspection account @ PO price XX
Debit/Credit Purchase Price Variance
If your item has material overhead associated with it, the sub inventory account is debited for the amount of the material overhead and the material overhead absorption account(s) are credited.
Purchase Price Variance (PPV)
Purchase price variances (PPV) occur when there are differences between the standard cost and the purchase order cost of an item.
Expense Sub inventories and Expense Items When you receive inventory expense items into expense sub-inventory locations, the following accounting entry is generated:
Account Debit Credit
Sub-inventory Expense account @ PO price XX
Inventory A/P Accrual account @ PO price XX
When you receive an expense (non–asset) inventory item, or into an expense sub inventory, the sub-inventory expense account instead of the valuation account is debited. Because the expense account is debited at the purchase order price, there is no purchase price variance.
Purchase Order Receipt to Inventory When you receive material from a supplier directly to inventory, the receipt and delivery transactions are performed in one step.
First, the Receiving Inspection account is debited and the Inventory A/P Accrual account credited based on quantity received and the purchase order price.
Account Debit Credit
Receiving Inspection account @ PO price XX
Inventory A/P Accrual account @ PO price XX
Next, the Sub-inventory and Receiving Inspection accounts are, respectively, debited and credited based on the transaction quantity and standard cost of the received item.
Account Debit Credit
Sub-inventory accounts @ standard cost XX
Receiving Inspection account @ PO price XX
Debit/Credit Purchase Price Variance
If your item has material overhead(s), the sub-inventory entry is debited for the material overhead and the material overhead absorption account(s) is credited.
Account Debit Credit
Sub-inventory accounts XX
Material Overhead Absorption account XX
Attention: If the sub inventory account is combined with the above entry, the material overhead absorption account adds one additional entry.
Return To Supplier From Inventory
When you do not use receiving inspection, the return to supplier transaction updates the same accounts as the direct receipt to inventory, with reverse transaction amounts. The Inventory A/P Accrual account is debited and the Receiving Inspection account is credited based on quantity received and the purchase order price.
