Automatic Offsetting in Oracle Payables

Simplifying Automatic Offset in Oracle Payables

When a company buys things and receives a bill (AP Invoice) from a supplier, it needs to keep track of the money it owes (liability). Sometimes, the bill is for different types of expenses, and each expense needs its own liability account. the corresponding liability account is generally booked as the default account selected from the Supplier site or the one defaulted at the Invoice header level. However, scenarios may arise where a business entity uses the same Operating Unit to make purchases against multiple balancing segments. In such cases, it becomes imperative to have different liability accounts booked against each of the different distribution accounts. This is where Automatic Offset in Oracle Payables becomes useful.

For instance, consider an AP Invoice with a default liability account and two difference distribution accounts. The liability serves as an offset account.

Liabilities can be offset in three ways: 

• None
•  Balance

 Account

Liability account set at Supplier site is:

If you enable Automatic Offsets, Payables automatically balances invoice and payment distributions that cross balancing segments by creating offsetting entries for each balancing segment. Automatic Offsets are a powerful feature that significantly impacts processing throughout Payables."

• None:

If the Automatic Offset method is set to "None," when offsetting the liability account for invoices distributed with multiple BSVs, it will use the liability account mapped at the Supplier Site and automatically generate Intercompany Accounts to balance the journal.

Example for None:

          Account                                   Debit      Credit

01.01.00.00.12250                        5000

02.11.00.00.12250                       5000

01.00.00.00.43307                                             -10000

01.00.00.00.1810(IC Rec)            5000

02.00.00.00.2370(IC Pay)                                 -5000

It will generate Intercompany accounts only when we enable Intercompany accounts at the GL; otherwise, it will fail to generate accounting.

• Balance:

In the Balance method, when offsetting the liability account, the Balancing Segment is derived from the same entry, and all the remaining segments come from the Supplier Site.

 Example for Balance: 

                 Account                           Debit      Credit

01.01.00.00.12250                        5000

02.11.00.00.12250                       5000

01.00.00.00.43307                                             -5000

02.00.00.00.43307                                             -5000

• Account:

In the Account method, all segments come from the same entry, and the Natural Account segment comes from the Supplier Site. 

Example for Account: 

            Account                           Debit           Credit

01.01.00.00.43307                    5000

02.11.00.00.43307                    5000

01.01.00.00.12250                                -5000

02.11.00.00.12250                                 -5000

These examples showcase how the company offsets its liabilities based on different methods, each serving a specific purpose in managing expenses and accounts.

How to Set Automatic Offset In oracle EBS:

 Go to AP -> Setup -> Options -> Payables Options.

Choose your Operating Unit and select "Automatic Offset Method." Set it to "None" to see how it works.

How to Set Automatic Offset In oracle fusion:

Go to AP -> Setup and maintenance -> Manage common Option for payables and Procurement

Choose your Operating Unit and select "Automatic Offset Method." Set it to "None" to see how it works.