Oracle Accounts Payable Interview Questions In R12

Accounts Payable Interview Questions In R12

1.Explain about Accounts Payable.
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.

2.What is the meaning of invoice?
Ans)An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms.

In the rental industry, an invoice must include a specific reference to the duration of the time being billed, so rather than quantity, price and discount the invoicing amount is based on quantity, price, discount and duration. Generally speaking each line of a rental invoice will refer to the actual hours, days, weeks, months etc being billed.

3) 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 invovle to prcure any item
1. Received Requsition 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. Negociate 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 fulfill
1. Invoice should be match with PO
2. Invoice should has all the supporting documents such as PO copy, Delivery note duly signed by receiver (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, altelast 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.

4)What are the journals entries in Procure to Pay Cycle.

Ans) 

Description                                                                             DR                                  CR

A) Po creation                                                                    No Entry                          No Entry

B)  While Receiving the goods                                       Material Receiving            Ap Accurval 

C) While Inspection                                                        No Entry                            No Entry 

D) While Trans ford the good to Inventory               Inv Org Material              Material Receiving

                                                                                     Purchase price Varience

F) While Po Is Matching to Invoices                         Ap Accurval                        Liability

G) While Making the Payment                                 Liability                               Cash Clearing 

 H) Ofter Reconciliation                                           Cash Clearing                     Cash

 I) Final Entry                                                            Inv Org Material                Cash

5)What is the difference between EFT & Wire?

Ans)EFT and WIRE are the most popular form of electronic payment method. EFT stands for electronic fund transfer and it is one of the fastest mode of electronic payment after WIRE. EFT is a batch oriented mechanism for transfering funds from one bank to another because of which clearing & settlement takes around 2 to 4 days. On the other hand, WIRE is a RTGS i.e. real time gross settlement system of making the fund transfer on real time and gross basis. Clearing and settlement happens on the same day. WIRE is more expensive and faster than EFT.  

6) What is meant by Distribution Sets:

Ans)You can use a Distribution Set to automatically enter distributions for an invoice when you are not matching it to a purchase order. For example, you can create for an advertising supplier a Distribution Set that allocates advertising expense on an invoice to four advertising departments.
You can assign a default Distribution Set to a supplier site so Payables will use it for every invoice you enter for that supplier site. If you do not assign a default Distribution Set to a supplier site, you can always assign a Distribution Set to an invoice when you enter it.

Use Full Distribution Sets to create distributions with set percentage amounts, or use Skeleton Distribution Sets to create distributions with no set distribution amounts. For example, a Full Distribution Set for a rent invoice assigns 70% of the invoice amount to the Sales facility expense account and 30% to the Administration facility expense account. A Skeleton Distribution Set for the same invoice would create one distribution for the Sales facility expense account and one distribution for the Administration facility expense account, leaving the amounts zero. You could then enter amounts during invoice entry depending on variables such as that month's headcount for each group.

7)What is the meaning of GRN?
Ans) GOODS RECEIPT NOTE MEANS IT PROVES THAT MATERIAL IS DELIVERED AT STORES DEPARTMENT. GRN IS THE BASE DOCUMENT AND IMPORTANT DOCUMENTS FOR PROOF OF RECEIPT OF MATERIAL AT WARE HOUSE.THIS CAN BE PREPARED BY STORES DEPARTMENT AND APPROVED BY PLANT HEAD. GRN CONTAINS ORDERED QTY,RECEIVED QTY AND ACCEPTED QTY. BILL WILL BE PASSED BASED THE GRN NOTE. ONCE THE GRN IS PREPARED AUTOMATICALLY INVENTORY WILL BE UPDATED AND ACCORDINGLY PAYMENT WILL BE RELEASED TO THE VENDOR.

GRN contains the following details.

1.Ordered quantity .
2.Received Quantity.
3.Defective quantity in received quantity .
4.Quality standards details.

8) How does the payment mechanism work?

Ans) The open items of an account can only be cleared once you post an identical offsetting amount to the account. In other words, the balance of the items assigned to each other must equal zero.During clearing, the system enters a clearing document number and the clearing date in these items. In this way, invoices in a vendor account are indicated as paid, and items in a bank clearing account are indicated as cleared.

You generally use the payment program to clear invoices. Manual clearing of open items is therefore not usually necessary. However, you will sometimes have to clear items manually if, for example, you receive a refund from your vendor or you have set up a direct debit procedure.

9) Difference between interface tables and base tables?
Ans)   The difference between the interface and base tables is as below

Interface table: is the table where the data gets validated before data get posted to the base tables. There are many interfaces which are seeded with Oracle. You can consider as the entry point of the data, and the interface checks the sanity of data.

Base tables: As told earlier once the data is validated will get updated in the base tables, and is considered as the data which is in the base table is accurate and used in many ways. (Reporting..etc..)


The base tables in AP are as follows:

1) ap_invoices_all
2) ap_invoice_payments_all
3) ap_invoice_distibutions_All
4) ap_payment_schdules
5) ap_payment_dustributions_all
6) ap_checks_all
7) ap_accounting_events_all
8) ap_bank_accounts_all
9) ap_bank_accounts_uses_all
  

10) What is the process of creating an Invoices and transferring it to GL?
Ans)
 1. create batch
2. create invoice
3. create distribution
4. validate the invoice
5. actions -à approve
6. if individual create accounting click ok
7. If batch go to batch create accounting.
8. Create accounting hits Payable Accounting(Transfer) ??Program which will create accounting.
9. Run Transfer to GL Concurrent Program
10. Journal Import
11. Post journals
12. Hits balances.

11) How do u Transfer from AP to GL?
Ans)“Payables transfer to GL program” is used to transfer from AP to GL.

12) How many types of invoices are there in AP.
Ans) 
1. Standarad invoice 
2. Debit Memo
3. Credit Memo
4. Mixed Invoice
5. Retain age Invoice
6. Transportation invoice
7. Prepayment invoice
8. Expenses Report Invoice
9. Payment Request Invoice
10. Po default

13) 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.

14.Payment Method:

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 suplier.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. 

15.What id recurring invoices? What are AP setup steps? 

 Ans) some times suppliers would not be sending any invoices. but still the payment have to made to home: rent, lease rentals. in this situation we have to create invoice every period wise. For that purpose we have to create one recurring invoice template. Template means with one master copy creating the multiple invoices is called template. Here we are creating the one invoice master copy is formally known as recurring invoice or recurring invoice template.

Accounting Entries

It is confusing for most of the beginners or new users to understand how an Oracle Application is performing the accounting on various events. Though after going through the application they get use to it. The option of “Create Accounting” and “View Accounting” helps a lot.

Here are some of the events, its explanation and its accounting performed by Oracle Payables, technically, the accounting engine is moved to Oracle Subledger Accounting (SLA). But the accounting is still viewed in Payables.

Anyways,

STANDARD INVOICE:

	DEBIT	CREDIT
Expense / Item Expense / Misc. Expense	100
Supplier / Liability		100
PAYMENT:
Supplier / Liability	100
Bank / Cash / Cash Clearing		100
TOTAL	200	200

How is liability account code combination credited in the above accounting entry?

You see when you define Supplier’s Site, you have to give the liability account code combination on that particular site. Although the liability account is defaulted from Payables’ Financial Setup, but you can change the account code according to your need. You can even change the liability account code combination on the Invoice Workbench by enabling the Column from Folders option.

When you create a standard invoice, you have to give the Supplier Master name and a Site, from this site, the application picks the liability account. For expense account code combination you can either use a distribution set or manually enter it.

Now comes the payment, the liability account is fetched from the supplier whose invoice is being paid, the cash clearing or cash account is fetched from the bank you select during the payment. This account is defined during the Bank Account Setup.

PREPAYMENTS / ADVANCES:

	DEBIT	CREDIT
Prepaid Expense / Advance Paid	70
Supplier / Liability		70
PAYMENT:
Supplier / Liability	70
Bank / Cash / Cash Clearing		70
STANDARD INVOICE:
Expense / Item Expense / Misc. Expense	100
Supplier / Liability		100
PREPAYMENT APPLIED TO STANDARD INVOICE:
Supplier / Liability	70
Prepaid Expense / Advance Paid		70
TOTAL	310	310

The idea of prepayment or advance is that you pay the supplier before receiving its goods or services. Now what if you pay the supplier but due to some reason or dispute you cancel the agreement or contract before receiving the supplies or service from that supplier? The supplier will have to pay back, now if you are receiving the cash it’s more of an asset. So the prepayment’s accounting is doing the same. When you create a prepayment invoice, the application automatically selects the Assets account given on that particular supplier’s site. And when you apply that prepaid invoice on the standard or actual invoice, the application clears the asset account as well as the liability.

In the above scenario of Prepayment, the total liability was PKR. 100, but the prepayment or the advance was paid of PKR. 70. When the Prepayment was applied to the Standard Invoice, the liability on Standard Invoice was decreased by PKR. 70. Still the remaining amount of PKR. 30 has to be paid and it will be a Standard Payment.

INVOICES with “TRACK AS ASSETS”:

	DEBIT	CREDIT
Asset Clearing	100
Supplier / Liability		100
INVOICE TRANSFERRED TO ORACLE ASSETS:
Asset	100
Asset Clearing		100
TOTAL	100	100

“Track as Asset” is a functionality for moving the items from Oracle Payables to Oracle Assets. It is a check box on the Invoice Line TAB and can be enabled on Distribution Line using the Folder View option. When you check this box and run the “Mass Addition Create Report” from Payables, the items on invoice line or distribution line moves to Oracle Assets. You can give the item description on invoice line so that you don’t have to give it when the items are transferred to Oracle Assets.

Now, how does the system identifies that on which account it should move the items to Assets?

It is because the same Asset Clearing account is given in the Assets Setups.

INVOICE with WITHHOLDING TAX (say 6%):

	DEBIT	CREDIT
Expense / Item Expense / Misc. Expense	100
Supplier / Liability		100
Payment with Withholding Tax :
Supplier / Liability	100
Bank / Cash / Cash Clearing		94
Withhodling Tax		6
WITHHOLDING TAX  INVOICE (Usually Auto Generated)
WHT Expense	6
WHT Payables (NBP or SBP)		6
TOTAL	106	106

The above scenario is of an invoice with a withholding (WHT).

In above accounting entry the WHT payables or Liability account is selected from the supplier defined as a Tax Authority. The WHT expense is picked from the WHT setup.

This is some basic accounting entries made by Oracle Payables.

Oracle Accounting Entries in AP:

This document describes the accounting entries created when we enter Invoices in Payables using the Accrual method of accounting.

Invoice:

When we enter a standard invoice through the Invoices window, payables creates the following journal entry:

DR Item Expense

DR Tax (if charged tax)

DR Fright (if any)

CR Liability

When we pay the Invoice, payable creates the following journal entry:

DR Liability

CR Cash Clearing

CR Tax (if charged tax)

CR Fright (if any)

After reconciliation of payment to the bank statement, journal entries are:

DR Cash Clearing

CR Cash

Credit/Debit memo:

When we enter a Credit Memo or Debit Memo against an Existing Invoice, payables creates the following journal entry:

DR Liability

CR Item Expense

When the Credit/Debit Memo is refunded, payable creates the following journal entry:

DR Cash Clearing

CR Liability

After reconciliation of payment to the bank statement, journal entries are:

CR Cash Clearing

DR Cash

Prepayment:

When we enter a prepayment for a supplier, payable creates the following journal entry:

DR Prepaid Expense

CR Liability

When the Prepayment is paid, payable creates the following journal entry:

DR Liability

CR Cash Clearing

After reconciliation of payment to the bank statement, journal entries are:

DR Cash Clearing

CR Cash

Expense Report:

When an Employee raises an expense through expense Report Window, payable creates following Journal Entries:

DR Item Expense

CR Liability

When the Expense is paid, payable creates the following journal entry:

DR Liability

CR Cash Clearing

After reconciliation of payment to the bank statement, journal entries are:

DR Cash Clearing

CR Cash

Prepayment Accounting entries in Accounts Payables

When Prepayment Invoice is created.

Prepaid Expense A/c----------Dr
Liability A/c--------------------Cr

When Prepayment Invoice is paid.

Liability A/c---------------------Dr
Bank/cash A/c-------------------Cr

When Invoice is raised for Expense

Expense Charge A/c--------------Dr
Liability A/c----------------------Cr

When Prepayment is applied to invoice it reverses the original prepaid invoice accounts creates the following accounts

Liability A/c------------------------Dr
Prepaid Expense A/c--------------Cr

SET UP:

 1)we have to create one special calendar 

2)we have to create one full distribution set 

3)we have to enter payment terms in the recurring invoice window 

4)enter the template no, first invoice amount, special invoice amounts

Mandatory setups for Payables :

The following are the mandatory setups for payables.

1. Define Financial Options.

2. Define Payment terms.

3. Define Payment Methods.

4. Define Payment Formate.

5. Define Pay Group.

6. Define Supplier.

7. Define Banks.

8. Define Distribution Sets (Optional).

1. Define Financial Options.

Use the Financials Options window to define the options and defaults that you use for your Oracle Financial Application(s). Values you enter in this window are shared by Oracle Payables, Oracle Purchasing, and Oracle Assets. You can define defaults in this window to simplify supplier entry, requisition entry, purchase order entry, invoice entry, and automatic payments. Depending on your application, you may not be required to enter all fields.
Although you only need to define these options and defaults once, you can update them at any time. If you change an option and it is used as a default value elsewhere in the system, it will only be used as a default for subsequent transactions. For example, if you change the Payment Terms from Immediate to Net 30, Net 30 will be used as a default for any new suppliers you enter, but the change will not affect the Payment Terms of existing suppliers.

Navigation: Payables --> Setup --> Options --> Financial.

 
 Click on New button.

Accounting Tab:

You are required to enter defaults for the Accounting Financials Options in the Accounting region. 

Accounts Like:

Liability, Prepayment, Discount Taken. 

Supplier-Purchasing Tab:

If you do not also have Oracle Purchasing installed, you do not need to enter defaults in the Supplier- Purchasing region.

 Encumbrance Tab:

If you do not use encumbrance accounting or budgetary control, you do not need to enter defaults in the Encumbrance region.

Tax Tab:


If your enterprise does not need to record a VAT registration number, you don't need to enter defaults in the Tax region.

Human Resources Tab:

If you do not have Oracle Human Resources installed, you are not required to enter defaults in the Human Resources region.

2. Define Payment terms.

We define payment terms that you can assign to an invoice to automatically create scheduled payments when you submit Payables Invoice Validation for the invoice. You can define payment terms to create multiple scheduled payment lines and multiple levels of discounts. You can create an unlimited number of payment terms.


Payment terms have one or more payment terms lines, each of which creates one scheduled payment. Each payment terms line and each corresponding scheduled payment has a due date or a discount date based on one of the following:

• a specific day of a month, such as the 15th of the month
• a specific date, for example, March 15, 2002
• a number of days added to your terms date, such as 14 days after the terms date
• a special calendar that specifies a due date for the period that includes the invoice terms date. Only due dates can be based on a special calendar. Discount dates cannot be based on a special calendar.

Each payment terms line also defines the due or discount amount on a scheduled payment. When you define payment terms, you specify payment amounts either by percentages or by fixed amounts.

Navigation: Payables --> Setup --> Invoice --> Payment terms.

To define payment terms

1. In the Payment Terms window, enter a unique payment term Name and a Description. These will appear on a list of values whenever you select payment terms.
2. If you enter Day of Month terms, enter a Cut-off Day.
3. If you enable Automatic Interest Calculation using the Interest Payables Options, enter a unique value in the Rank field.
4. If you want to make this payment term invalid on and after a certain date, enter that date in the To field of the Effective Dates region.
5. Enter each payment terms line.
   Enter one of the following to determine the portion of an invoice due on the scheduled payment:
• % Due
• Amount

In the Due tab, enter one of the following to determine the due date on the scheduled payment line:

• Calendar
• Fixed Date
• Days
• Day of Month, and Months Ahead
5. If you use discount terms, define payment terms lines in the First Discount , Second Discount, and Third Discount tabs. Define your discounts so that the first discount has an earlier discount date than the second and so on. You can realize only one discount on a payment terms line.

Note: You cannot use a special calendar to define discount terms.

Enter one of the following to determine the portion of the invoice to discount on the scheduled payment:

• % Discount
• Amount

In the Discount tabs, enter the discount percent.
Enter one of the following to determine the due date on the scheduled payment line:

• Due Days
• Day of Month, and Months Ahead

Save.

3. Define Payment Method:

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 suplier.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.


Navigation: Payables --> Setup --> Payment --> Payment Administrator.

Click on Go To Task.

 Click on Create button.

Enter the Payment Method name and code and then click on Next.

 
 Select the respective responsibilities which we want shown this payment method in these responsibilities.

Click on Next, Next, Finsh.

Payment Method In R12

Payment Method:


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 suplier.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.

Navigation: Payable Manager --> Setup --> Payment --> Payment Administrator.

Click on Go To Task.

 Click on Create button.

Enter the Payment Method name and code and then click on Next.

 Select the respective responsibilities which we want shown this payment method in these responsibilities.

Click on Next, Next, Finsh.