Obligation & commitment

[karthik]

Can anyone explain me the difference between obligation & commitment?

[SIVAKUMAR_G]

Hi

The Term Commitment and Obligations are part of Encumbrance accounting in Purchasing Module. It is optional to use encumbrance accounting and not mandatory.

Commitment refers to Purchase Requisition and Obligation refers to Purchase Order.

The Encumbrance accounting is meaningful only if you use Budgetary Control set up in GL.

If you use Budgetary control in GL and fix a Budget amount for an expense account and the Available fund Balance for the Expense account is calculated as follows

Budget expense amount - ( Commitment (Purchase Requisition) + Obligation (Purchase Orders) + Others (encumbrance invoices) + Actual (Invoices)) = Fund Balance.

So you can create new PR/PO or invoice only for the available Fund balance.

You can set the expense account controlling level to absolute (never allow to go beyond budget amount by blocking creating a transaction), advisory (Pops up a warning) and None controls for an expense account so that better control can be established

Hope this helps

Regards
Sivakumar