What's Holding You Back from MASTERING Multiperiod Accounting Payables Cloud
Multiperiod Accounting
Multiperiod accounting feature allows user to create accounting entries across more than one accounting period for a single accounting event. The functionality is primarily used to defer recognition of expense incurred across multiple GL periods through which the benefits will accrue. For example, expenses incurred on annual maintenance contracts for equipment’s, rent paid in advance etc.
For creating a transaction with multiperiod accounting users need to enter the multiperiod accounting start date, end date and accrual account.
Start Date: Date when multiperiod accounting starts
End Date: Date when multiperiod accounting ends
Accrual Account: Account where the expenses will be parked till they are recognized.
These three new columns are available under the column group multiperiod accounting and are hidden by default. The new attributes are available on both the invoice line and invoice distributions. The values assigned at invoice line level will be automatically defaulted on to the invoice distributions, excluding recoverable tax distributions, which the user can override.
How it works
Multiperiod invoice will have two accounts on the lines and distributions. The existing expense account or distribution set will continue to be used to capture the account to which the expenses have to be booked. While another account is used to park the expenses in the interim account till the entire expenditure in recognized. This account is called the multiperiod accrual account. When the invoice is accounted the expenses will initially be debited to the multiperiod accrual account and later when the multiperiod accounting program is submitted a portion of the total expenses will be recognized and moved from accrual account to the actual expense account. The amount to be recognized will depend on the number of accounting periods for which recognition has to be done and the recognition formula used in the accounting rules.
Steps for multiperiod accounting
1. Create an invoice. Enter the values for multiperiod start and end date and multiperiod accrual account.
2. Validate the invoice.
3. Account the invoice in online mode on through batch accounting program.
4. At the end of each accounting period submit the Multiperiod Accounting Program (newly introduced) to recognize the expenditure for the relevant accounting program.
5. View the basic accounting as well as multiperiod recognition entries.
Changes to multiperiod accounting related attributes
All the three multiperiod accounting attributes can be changed on the invoice at any time until the expense are completely recognized. However not all changes take effect immediately. If transaction data or accounting method has been changed after the first recognition entry is accounted in final status, the accounting impact by the changes are reflected in future entries only and the already accounted journal entries will not be affected
Important Nuggets
1. End date cannot be changed to a date which is earlier that the last recognition journal date.
2. Multiperiod accounting start date and end date will not be editable after the expense are completely recognized.
3. Any changes to multiperiod accrual account will not be considered after the invoice is accounted.
4. Cancellation of invoice line or distribution will always be accounted on the first day of next open period after the last multiperiod accounting recognition journal date. This is applicable irrespective of whether the last MPA date is in open or closed period.
5. Its always advisable to run Multiperiod Accounting Program as part of period close process after all the Payables transactions are entered, accounted and transferred to General Ledger.
Setup
No setups are required to use the multiperiod accounting feature. System automatically considers an invoice for multiperiod accounting if the multiperiod start and end date are provided either on the invoice lines or distributions.
The only setup which you might want to change is the proration formula used in the seeded accounting rules to recognize the expenses. Two proration formulas are seeded by Oracle where one is to prorate the expenses based on number of days and the other one is for proration based on number of periods. The seeded accounting rules use proration based on number of periods