Important Interview Question - Oracle Accounts Payables

Can you give a sample Process Flow for Procure to Pay Cycle?

Ans) Process flow for Procure to pay will go through two departments
(Commercial & Finance)
Procure - Commercial Department The following steps involve to procure any item
1. Received Requisition from concern Department
2. Request for Quotation from Suppliers at least three
3. Finalize the best Quotation by keeping in mind about our companies standard
4. Check the Budget for the same
5. Negotiate with supplier for more economic pricing and finalize the payment terms
6. Process the PO and forward to the supplier to supply the goods and services 

Pay Cycle - Finance Department
The following steps need to be fulfil
1. Invoice should be match with PO
2. Invoice should has all the supporting documents such as PO copy,Delivery note duly signed by reciever (our staff who authorized to received goods / store keeper)
3. If the invoice is for services then it should be forwarded to the concern department head or project manager for his confirmation of work done and his approval
4. Even if it not the services invoice, it should forwarded to the concern person's approval who request the PO for the same
5. Finance can reject the invoice if it is not budgeted and ask for the reasons.
6. After receiving all the confirmation and approvals from the concern department heads the invoice will be update in to the accounting system first in order to avoid any duplication of Invoice and PO (it shown on accounting package if the invoice is duplicate if not, at least it tells you if the PO already used or cancel)
7. Finance approved the invoice and process the payment base on payment terms with the supplier.

Explain about Oracle Accounts Payable Application. 
Ans)The Accounts Payable application component records and manages accounting data for all
vendors. It is also an integral part of the purchasing system: Deliveries and invoices are
managed according to vendors. The system automatically triggers postings in response to the
operative transactions. In the same way, the system supplies the Cash Management application
component with figures from invoices in order to optimize liquidity planning. 

How many types of purchase order types/agreements are there?
 
A) Standard Purchase Order: You generally create standard purchase orders for one-time purchase of various items. You create standard purchase orders when you know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions. If you use encumbrance accounting, the purchase order may be encumbered since the required information is known

B) Planned PO : A planned purchase order is a long-term agreement committing to buy it
items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities and estimated cost.
EX: Buying goods for Christmas from a specific dealer.

C) Contract PO : You create contract purchase agreement with your supplier to agree on specific terms and conditions without indicating the goods and services that you will be purchasing i.e. for $ amount you must supply this much quantity. You can later issue standard PO referencing your contracts and you can encumber these purchase orders if you use encumbrance accounting.

D) Blanket PO : You create blanket purchase agreements when you know the detail of goods or services you plan to buy from a specific supplier in a period , but you do not yet know the detail of your delivery schedules. You can use blanket purchase agreements to specify negotiated prices for your items before actually purchasing them.
A Blanket Purchase Agreement is a sort of contract between the you and ur supplier about the price at which you will purchase the items from the supplier in future. Here you enter the price of the item not the quantity of the items. When you create the release you enter the quantity of the items. The price is not updatable in the release. The quantity * price makes the Released Amount. Now suppose your contract with your supplier is such that you can only purchase the items worth a fixed amount against the contract. 

What is a Payment Method, what are different types?


A funds disbursement payment method is a medium by which the first party payer, or deploying company, makes a payment to a third party payee, such as a supplier. You can use a payment method to pay one or more suppliers. Oracle Payments supports several payment methods for funds disbursement, including the following:

·        Check

·        Electronic

·        wire

·        Clearing

Check:

You can pay with a manual payment, a Quick payment, or in a payment batch.


Electornic:

Electronic An electronic funds transfer to the bank of a supplier.You create electronic payments either through the e- Commerce Gateway, or by delivering a payment batch file to your bank. For both methods, Payables creates a file during payment batch creation. If you are using the e-Commerce Gateway to create the file of payments, an EDI translator is required to create the EDI Formatted file prior to delivering it to your bank.For electronic funds transfers, the file is formatted and delivered to your ap.out directory for delivery to your bank.

Wire:

Wire Funds transfer initiated be contacting the bank and requesting wire payment to the bank of a supplier. A payment method where you pay invoices outside of Payables by notifying your bank that you want to debit your account and credit your supplier’s account with appropriate funds. You provide your bank with your supplier’s bank information, and your bank sends you confirmation of your transaction. Your supplier’s bank sends your supplier confirmation of the payment. You then record the transaction manually.

Clearing:

Clearing Payment for invoices transferred from another entity within the company without creating a payment document.Payment method you use to account for intercompany expenses when you do not actually disburse funds through banks. You do not generate a payment document with the Clearing payment method. When you enter the invoice, you enter Clearing for the payment method.You can record a Clearing payment using a Manual type payment only. 

What do you mean by pay through date?

Pay Through Date. Payables selects all approved and unpaid invoices that have a due date on or before the Pay Through Date. You cannot update this field after invoice selection for a payment batch

What are different status in payment batch?

ANS – Status  (Payment Batches window only). Payables displays the status of the payment batch. Payables displays the status in red if there is an error, for example, if the concurrent manager goes down during a process.

1.     Selecting : Payables in Identifying the invoices which needs to be selected for payment on the basis of Criteria defined in Payment template

2.     Building. Payables is determining which invoices will be paid by each payment document.

3.     Built. Payables has determined which invoices will be paid with each payment document. You can now review the Preliminary Payment Register, Modify the Payment Batch, or Format the Payment Batch.

4.     Cancelled. You have cancelled the payment batch.

5.     Cancelling. Payables is cancelling the payment batch.

6.     Confirmed. You have confirmed the payment batch.

7.     Confirming. Payables is either confirming or partially confirming the payment batch based on the action you selected in the Confirm Payment Batch window.

8.     Formatted. Payables has completed formatting your payments and has created the output file that you can use to print checks or, if you are making electronic payments, you can deliver the output file to the e-Commerce Gateway or your bank for processing.

9.     Formatting. Payables has created the output file that you can use to print checks or, if you are making EFT payments, you can deliver the output file to your bank for processing.

10. Modified. Payables has modified the payment batch based on the modifications you made in the Modify Payment Batch window.

11. Modifying. Payables is modifying the payment batch based on the modifications you made in the Modify Payment Batch window.

12. Rebuilding. You have modified a payment batch, and Payables is rebuilding the modified payment batch.

13. Restarting. You have confirmed a partial payment batch and have chosen Restart Payment Batch in the Confirm Payment Batch window. Payables is rebuilding and reformatting the remaining portion of the payment batch.

14. Selected. Payables has selected invoices that match the payment batch criteria you entered.

15. Unstarted. The payment batch is unstarted.

 Explain The concept of Automatic Offset?

If you enter invoices for expenses or asset purchases for more than one balancing segment, you might want to use Automatic Offsets to keep your Payables transaction accounting entries balanced.
If you do not use Automatic Offsets, Payables creates a single liability accounting entry for invoice transactions (if you use accrual basis accounting) and a single cash type accounting entry for payment transactions.
When you use Automatic Offsets, Payables automatically creates balancing accounting entries for your transactions. The GL account that each of the offsetting accounting entry is charged to depends on which method you use, Balancing or Account:

·                      Balancing. Payables builds the offsetting GL account by taking the balancing segment (usually the cost center code) from the invoice distribution and overlaying it onto the appropriate default GL account, for example the Liability account from the supplier site.

·                      Account. The Account method takes the opposite approach with one segment (the designated account segment) being retained from the default GL account and all other segments being retained from the invoice distribution.

What is an ERS (Pay on Receipt) ? How is it setup?

Payment on Receipt enables you to automatically create standard, unapproved invoices for payment of goods based on receipt transactions. Invoices are created using a combination of receipt and purchase order information, eliminating duplicate manual data entry and ensuring accurate and timely data processing. Payment on Receipt is also known as Evaluated Receipt Settlement (ERS) and Self Billing.

You can automatically create invoices with multiple items and distribution lines, and include tax.

You define which supplier sites participate in Payment on Receipt and enforce matching rules to ensure the proper payments are made to the suppliers.

Amount – Payment on Receipt builds invoices with the following information: Determined by multiplying the Quantity received by the Purchase Order Item Unit Price.

Payment Terms  - Defaulted from the purchase order payment terms or from the supplier site payment terms, depending on your Oracle Public Sector Payables setup.

Tax  - Based on Tax Codes on each purchase order shipment, or the default tax hierarchy in Payables.

If the purchase order currency and the supplier site Payment Currency (in the Supplier Sites window) are not fixed–rate currencies (for example, not euro–related currencies), Payment on Receipt builds the invoices this way, regardless of the supplier site Invoice Currency:

Invoice Currency – Defaulted from the purchase order Currency.

Payment Currency – Defaulted from the purchase order Currency.

What is the relevance of Withholding tax group?

Use this window to define withholding tax groups that include multiple Withholding Tax type tax codes. You can assign the same tax code to more than one group. When you assign a withholding tax group to an invoice or distribution, Payables calculates invoice withholding tax based on every tax code in the withholding tax group. For example, you assign a withholding tax group to an invoice or distribution if you need to withhold taxes at both the local and country level, each withheld at different rates and remitted to different tax authorities. You define and assign to the invoice or distribution a Withholding Tax Group that includes both taxes.

You rank all of the tax codes in a withholding tax group when you define the group. When you enter an invoice and enter a withholding tax group, Payables calculates the taxes in order of rank. Lower ranked taxes are applied to the amount of the invoice or distribution amount less the previous withholding tax amounts.

What are different rate structure for Withholding Tax ?

Period Limit. After you pay a certain amount for a withholding tax in a period, Payables does withhold further taxes. For example, for each special calendar period, Payables withholds no more than $10,000.

If you select this value you must enter values for the Period Limit, and Calendar fields. You cannot enter values for the Amount Basis and Period Basis fields.

Flat Rate. The withholding tax has no amount or period limits. If you select this value you cannot enter a value in the Amount Basis, Period Basis, and Period Limit fields.

Amount Ranges. The tax rate depends on how much you have already paid during a time period. Base the paid amount on either the gross amount of total paid invoice amounts, or on the total amount of tax withheld. The time period can be per withholding tax calendar period or per invoice. For example, define a tax that for each invoice that withholds at a rate of 10% until you have paid $1000 in tax, after which it withholds at 15%. If you select this value you must enter values for the Amount Basis and Period Basis fields. If you select Period as your Period Basis, you must also select a Calendar. You cannot enter a value for Period Limit.

What is Prepayment and what are different type of Prepayments?

Pre-payment invoice are used when there is advance payment made to Suppliers against purchases or Employees for Travel expenses (Impress amount).

Pre payments are two types:

    1.Temporary pre-payment

    2.Permanent pre-payment.

Temporary pre payments are adjusted against the future purchase invoice. Whereas we cannot adjust Permanent pre payments against future purchases. This payment we can receive when the contract cancelled with the supplier. We can convert Permanent pre-payment into Temporary pre-payment. After conversion we can use that to adjust against future invoices.

Permanent - which is used for long term deposit. Ex:-Fixed deposit, Term deposit

Temporary-which is used for short term advance. Ex:-Advance to supplier

Can we automatically ‘Close’ the Purchase order without receiving the full quantity?

The Receipt Close Tolerance lets you specify a quantity percentage within which Purchasing closes a partially received shipment. For example, if your Receipt Close Tolerance is 5% and you receive 96% of an expected shipment, Purchasing automatically closes this shipment for receiving.

What is 2-way, 3-way, 4-way matching?

Oracle Payables shares purchase order information from your purchasing system to enable online matching with invoices. Invoiced or billed items are matched to the original purchase orders to ensure that you pay only for the goods or services you ordered and/or received.

Two–Way: Purchase order and invoice quantities must match within tolerance before the corresponding invoice can be paid.

Three–Way: Purchase order, receipt, and invoice quantities must match within tolerance before the corresponding invoice can be paid.

Four–Way: Purchase order, receipt, accepted, and invoice quantities must match within tolerance before the corresponding invoice can be paid.

What is the difference between 'Accrue On Receipt' and 'Accrue at Period End'?

A: Accrue On Receipt means that when a receipt is saved, accrual transactions are immediately recorded and sent to the general ledger interface. This is also known as "online" accruals. Accrue at Period End means that when a receipt is saved, the accrual transactions are not immediately recorded and sent to the general ledger; instead, the accounting entries are generated and sent at the end of the month by running the Receipt Accruals - Period-End Process.

All items with a destination type of either Inventory and Outside Processing are accrued on receipt. For items with a destination type of Expense, you have the option of accruing on receipt or at period end.

Sub-ledger Accounting Configuration - Part 1

Sub Ledger Accounting method (SLAM):

SLA is a rule based accounting Engine that introduced the ability to define how transactions originating in Sub Ledgers can be Accounted. Hence in order achieve this high level of flexibility SLA is accommodated with lot of configurable and predefined components.

This article will talk about different Predefined and configurable components of SubLedger Accounting which are used to setup accounting rules in order to achieve various accounting requirement.

Below mentioned are Predefined Components of SLA. We will talk about their specific Examples as we move on.

Predefined Components of SLA:

Entities:

Entities in SLA represent a Specific Document category in the Application. For example an Invoice or Payment in Account Payables. 

Event Class:

Event Class in SLA represents a specific type of the entity for which the Corresponding accounting entry will be generated. For Example a Standard Invoice is a Type Of invoice there by Standard Invoice will be an Event class for the Entity AP Invoice.

Event Type:

Event type is an Action or an event which should be defined as trigger for the creation of accounting entries.

For example: in reference to a Standard accounting requirement an Standard Invoice should get accounted once it is validated. Hence the Event which will initiate the accounting for the invoice is Validation. So Standard invoice validation is the Event Type for Event Class Standard Invoice

In Order to explain the complete concept let’s take one more example.

There should be accounting entries generated for Cancellation of a credit memo. And hence Credit Memo is a Type of Account Payables invoice.

Entities à AP invoice

Event Class à Credit Memo

Event à Cancellation.