Accrual Write-off

[kommineni7]

Hi,

What is the exact functionality of Accrual write- off? what we will write off the accruals?

plese post with an example.. this is very urgent quick reply will appreciate.. pls post if u have any docs also

Thanks,
Venkatesh

[pinnashanmukh]

Hi,

Accrual write off is tightly linked with accrual reconciliation report.


Ideally Accrual reconciliation report, should show only pending accrual amount for which liability is not yet booked.

Standard Accrual reconciliation report shows all the transactions where ever accrual account was used in subledgers AP, Inv which were not closed.

If there are any unwanted lines appearing in the accrual reconciliation report the same can be corrected through accrual write off functionality.

Accrual write off will only eliminate the transaction appearing in the accrual reconciliation report. A manual JV needs to be passed in GL to maintain the balances tallied with GL & Accrual reconciliation report.

Thanks,
Shanmukh

[kommineni7]

Thanks for your reply shanmukh..

Can u explian with an example..

in what scenarios difference will come.. what is the reason behind these reason..

Write off is automatic functionality or we need to write off manully..

[pinnashanmukh]

<u><b>Concept of accrual:</b></u>

When we receive the material the same is accrued by crediting the accrual account and when the Invoice matched to a PO accrual will be reversed by debiting the accrual account.

Ideally there should not be any difference in accrual account if we book all the invoices for which receipts are made.

But this is not the case because of the below scenarios

? Quantities differ between receipts and invoices
? Incorrect purchase order or invoice unit prices (previous releases
only)
? Discrepancies in supplier billing
? Accounts Payable clerk matched an invoice to the wrong
purchase order or purchase order line or the wrong receipt or
receipt line
? Receiving clerk received against the wrong purchase order or
wrong purchase order line
? Miscellaneous inventory or work in process transactions that do
not belong to the accrual accounts
? Payables entries for sales tax and freight that do not belong to
the accrual accounts

(Above scenarios take from user guide)



<u><b>Example:</b></u>
? Quantities differ between receipts and invoices

Receipt for 10 units [@] 2$ per unit --> Accrued amt --> 20$

Invoice made for 9 units --> Reversed accrued amt -->18$


In this case accrual account continues to show 2$ as yet to be invoiced.

In an ideal situation it is correct but we know for sure that supplier is not going to send any invoice in future for the reasons best know to us.

To rectify the accrual account we need to use the accrual write off acount


<u><b>Example 2:</b></u>

Miscellaneous inventory or work in process transactions that do
not belong to the accrual accounts

If accrual account is used in miscellaneous transaction. Same needs to be written off through accrual write off.




<u>process:</u>

Accrual write off is a manual process, We cannot automate

Accrual reconciliation report should be analyzed every month end and find whether any adjustments are required.

Those adjustments are done through accrual write off feature

[kommineni7]

Thkank Q very much Shanmukh.....

[Zee_ora]

Wow! Thank u so much pinnashanmukh for such a nice xplanation and thnx for kommineni7 too cuz of asking detail for accrual write off process.