COST S03 Recording (24-Oct-26)

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0:01 – 1: Case Study and Assignment Review       ⟶       

8:47 – 2: Purchase Order Accounting Flow       ⟶       

12:20 – 3: Configuring Mapping Sets       ⟶       

24:42 – 4: Defining Account Rules       ⟶       

30:44 – 5: Transaction Account Definition Setup       ⟶       

50:03 – 6: Defining Item Cost Scenarios       ⟶       

54:49 – 7: Defining Item Cost Elements       ⟶       

59:25 – 8: Manufacturing Roll Up Costs       ⟶       

1:02:40 – 9: Purchase Order Accounting Flow       ⟶       

1:11:07 – 10: Verifying Transaction Account Definitions       ⟶       

1:24:21 – 11: Receipt Accounting Distribution Processes       ⟶       

1:33:27 – 12: Reviewing Receipt Accounting Journals       ⟶       

1:38:16 – 13: Running Cost Accounting Distributions       ⟶       

1:46:32 – 14: Monitoring Inventory Valuation Fluctuations       ⟶       

1:50:34 – 15: Reviewing Cost Distributions and Draft Accounting       ⟶       

1:52:13 – 16: Q&A Session       ⟶       

2:20:54 – 99: Video is Complete       ⟶       

Accounting a Purchase Order Through Cost Management

Kestrel Outdoor Equipment Inc. sells tents, sleeping bags and camping stoves across the United States. It buys finished goods from suppliers and keeps them in its own warehouse before they are shipped to customers.

In the earlier Cost Management sessions, Kestrel’s cost organization, cost book, valuation structure, cost profile and inventory items were set up in Oracle Fusion. Purchases are now being received, but the finance team cannot yet see what each receipt is worth, or which accounts it hits.

Kestrel now wants its purchase receipts accounted end to end: the right accounts derived, a standard cost in place for each item, and the receipt and inventory accounting reviewed before anything is posted to the ledger.

Key Business Requirements

Concept explain how Oracle Fusion meets it. Hands-on configure it in your practice instance.

  1. ConceptKestrel’s finance controller wants to know when a purchase first affects the books, and which accounts are hit at each point. Explain the accounting impact, with the debit and credit side, at each of these points:
    • The purchase order is approved, and the supplier sends an advance shipment notice
    • The goods arrive in the receiving area
    • The goods are moved from receiving into the warehouse subinventory
    • The supplier invoice is entered

    Hint:00:08:41 to 00:10:55, and 01:02:49 to 01:05:54, and 01:06:11 to 01:07:09 for the invoiceSee solution

  2. ConceptKestrel’s controller also asks which team owns which of these accounts, and which part of Oracle creates the receipt entries and which creates the delivery entries.

    Hint:01:10:12 to 01:10:59See solution

  3. ConceptKestrel sells two product families, camping gear and apparel, and wants each family to post to a different account. What can derive an account from a value on the transaction, and is it always needed?

    Hint:00:12:19 to 00:14:25, and 00:23:52 to 00:24:03 on when it is neededSee solution

  4. Hands-onEvery purchase order delivered into Kestrel’s inventory organization must post its inventory value to one inventory valuation account, chosen by inventory organization. Create a mapping set named with your initials, for example AB_KESTREL_INV_VAL_MS, that:
    • returns a complete account combination
    • takes the Inventory Organization Code as its input, for the purchase order delivery to inventory event class
    • uses the US chart of accounts
    • maps the code of your own inventory organization to an inventory valuation account

    Hint:00:14:26 to 00:16:01, and 00:16:52 to 00:18:21, and 00:20:16 to 00:20:59, and 00:22:07 to 00:23:52, and 01:12:57 to 01:13:52 on the organization codeSee solution

  5. Hands-onThe inventory valuation account must come from that mapping set. Create an active account rule named with your initials, for example AB_KESTREL_INV_VAL_AR, on the US chart of accounts, that derives the complete account combination from your mapping set.

    Hint:00:24:48 to 00:26:33, and 00:26:33 to 00:27:09, and 00:27:10 to 00:28:21, and 00:28:21 to 00:29:10, and 00:30:34 to 00:30:42See solution

  6. ConceptAn account rule does nothing on its own. Explain where Kestrel’s account rule must be attached so that cost transactions use it, and where that setup is then assigned for Kestrel’s ledger.

    Hint:00:30:45 to 00:31:04, and 00:47:11 to 00:47:50, and 00:47:51 to 00:49:10See solution

  7. Hands-onKestrel values its items at standard cost, and nothing can be costed without one. Give your own inventory item a standard cost of 250, Material cost element only, effective from tomorrow, in a cost scenario named with your initials, for example AB_KESTREL_CS, in your cost organization and cost book. The cost must be published.

    Hint:00:50:02 to 00:50:34, and 00:50:41 to 00:50:55, and 00:52:42 to 00:53:41, and 00:53:54 to 00:55:13, and 00:55:32 to 00:56:46, and 01:01:12 to 01:01:34See solution

  8. ConceptKestrel’s cost accountant has three questions about standard costs:
    • A new standard cost has been entered in a cost scenario. Will transactions use it straight away?
    • A wrong standard cost was published by mistake. How can it be corrected?
    • The price on a purchase order differs from the item’s standard cost. Where does the difference go?

    Hint:00:58:48 to 00:59:13, and 01:55:27 to 01:56:13 for correcting a cost, and 02:05:17 to 02:05:53 for the price differenceSee solution

  9. Hands-onKestrel’s buyer orders your standard-costed item from a supplier. Create the purchase order in your business unit, submit it so that it reaches Open status, then receive the full quantity directly into a stores subinventory of your inventory organization.

    Hint:01:15:07 to 01:15:36, and 01:15:41 to 01:16:17, and 01:18:14 to 01:18:32, and 01:21:32 to 01:21:53, and 01:21:57 to 01:22:48, and 01:22:53 to 01:24:15See solution

  10. ConceptThe receipt is in Oracle, but no accounting has appeared yet. Explain why, and name the scheduled processes that must run, in order, for receipt accounting and for cost accounting.

    Hint:01:25:04 to 01:28:36See solution

  11. Hands-onKestrel’s accountant wants to see the accrual for your receipt, first as draft accounting so that mistakes can still be corrected. Create the receipt accounting distributions for your business unit, check the entries for your purchase order, and create draft accounting for Receipt Accounting in the US primary ledger.

    Hint:01:28:44 to 01:29:32, and 01:29:58 to 01:30:35, and 01:31:54 to 01:32:35, and 01:33:32 to 01:34:22, and 01:34:22 to 01:36:02, and 01:37:30 to 01:37:53See solution

  12. Hands-onFinally, the warehouse stock must be valued. Create the cost accounting distributions for your cost organization, check the entries and costing status for your purchase order, create draft accounting for Cost Management in the US primary ledger, and find your item’s inventory value.

    Hint:01:37:54 to 01:38:55, and 01:38:56 to 01:40:16, and 01:40:26 to 01:41:23, and 01:41:57 to 01:42:45, and 01:44:21 to 01:45:10, and 01:45:28 to 01:46:19, and 01:48:14 to 01:49:27See solution

Your Task

  • For each Concept requirement, write a short solution: which Oracle Fusion feature meets it and how. Nothing needs to be set up in the instance for these in this session.
  • For each Hands-on requirement, configure it in your practice instance. Start your setup names with your own initials, for example AB_KESTREL_INV_VAL_MS, so they do not clash with other learners in the shared instance.
  • Seeded mapping sets, account rules and transaction account definitions are shared by everyone in the practice instance. Look at them, but never change them.

Solution hints are hidden so you can attempt the case first. Ready to check your approach? Show solution hints

Solution by Requirement

  1. ConceptNothing is accounted when the purchase order is approved or when the supplier sends the advance shipment notice. Accounting starts at receipt: 00:08:41 to 00:10:55
    • Receipt into the receiving area: debit Receiving Inspection, credit Accrual. Receiving Inspection holds the value until the goods are put away; the accrual records that Kestrel now owes the supplier.
    • Delivery into the subinventory: debit Inventory Valuation, credit Receiving Inspection, which clears it. 01:02:49 to 01:05:54
    • Supplier invoice: debit Accrual, credit the supplier liability. The invoice replaces the accrual with the actual amount owed. 01:06:11 to 01:07:09

    Back to question 1

  2. ConceptThe cost management consultant owns Receiving Inspection, Accrual and Inventory Valuation. The Payables and finance team owns the supplier liability and the payment and bank accounts. The receipt entries (Receiving Inspection and Accrual) are created by Receipt Accounting; the delivery entries (Inventory Valuation and Receiving Inspection) are created by Cost Accounting. 01:10:12 to 01:10:59

    Back to question 2

  3. ConceptA mapping set. It takes an input value from the transaction, here the item category, and returns an output: one segment, such as the natural account, or the complete account combination. Each product family is mapped to its own account. 00:12:19 to 00:14:25

    A mapping set is optional. You need one only when a segment or the whole account must be derived from a transaction value. 00:23:52 to 00:24:03

    Back to question 3

  4. Hands-on

    Create the mapping set 00:14:26 to 00:16:01

    Navigation Setup and Maintenance > Manage Mapping Sets (Cost Accounting, scope Cost Management)

    • Open the seeded Inventory Valuation mapping set to see its input sources. Do not change it. 00:16:01 to 00:16:52
    • Click Create. Enter your name and short name, and set Output Type to Account Combination. 00:16:52 to 00:18:21
    • Add the input source Inventory Organization Code, selecting the event class for purchase order delivery to inventory. 00:20:16 to 00:20:59
    • Select the US chart of accounts, add a mapping row with your inventory organization code and an inventory valuation account, then Save. 00:22:07 to 00:23:52
    • Use your own inventory organization code: a code with no inventory organization behind it is never matched. 01:12:57 to 01:13:52

    The recording first adds Inventory Category as a second input, and that later blocks activation. It is rebuilt with Inventory Organization Code only. 00:39:14 to 00:41:10

    Back to question 4

  5. Hands-on

    Create the account rule 00:24:48 to 00:26:33

    Navigation Setup and Maintenance > Manage Account Rules (Cost Accounting)

    Back to question 5

  6. ConceptThe account rule is assigned to the account it derives, here Inventory Valuation, in a transaction account definition 00:30:45 to 00:31:04 or in an accounting method. 00:47:11 to 00:47:50 That setup is then selected for the ledger in Manage Subledger Accounting Options, application Cost Management, under Edit Accounting Options. 00:47:51 to 00:49:10

    Note: Oracle documents the transaction account definition option in Cost Accounting for the periodic average cost method. With standard cost, the account rule reaches the journal entries through the accounting method when Create Accounting runs.

    The seeded transaction account definition cannot be edited, and the recording’s attempt to activate a new one ends in an error, so this case study does not ask you to build one.

    Back to question 6

  7. Hands-on

    Define and publish the standard cost 00:50:41 to 00:50:55

    Navigation Supply Chain Execution > Cost Accounting > Cost Scenarios

    • Create the scenario: name, your cost organization, cost book and effective date, roll up for all items. 00:52:42 to 00:53:41
    • Actions > Standard Cost: add your item and valuation unit, cost element Material, unit cost 250, then Create. 00:53:54 to 00:55:13
    • If the item already has a published cost for the date, Oracle rejects the new one: move the scenario’s effective date to tomorrow. 00:55:32 to 00:56:46
    • Actions > Update Standard Cost to publish. 01:01:12 to 01:01:34
    • Expected result: status Completed successfully and Cost Published. 01:01:12 to 01:01:34

    Back to question 7

  8. ConceptAnswers:
    • No. A cost in a scenario is used only after it is published with Update Standard Cost. Until then transactions for the item cannot be costed. 00:58:48 to 00:59:13
    • If no transaction has used it yet, run Undo Cost Update on the scenario. Once transactions have been costed with it, publish a corrected cost in a scenario effective from a later date. 01:55:27 to 01:56:13
    • Inventory is valued at standard cost, and the difference between the purchase order price and the standard cost goes to Purchase Price Variance. 02:05:17 to 02:05:53

    The recording also mentions cost adjustments. Oracle documents cost adjustments for perpetual average cost, so for a standard cost item use Undo Cost Update or a new cost from a later date.

    Back to question 8

  9. Hands-on

    Create and approve the purchase order 01:15:07 to 01:15:36

    Navigation Procurement > Purchase Orders > Tasks > Manage Orders

    Receive the purchase order 01:21:57 to 01:22:48

    Navigation Supply Chain Execution > Inventory Management > View All Actions > Receive Expected Shipments

    • Search your order number, select it and click Receive. Show the received quantity, select a stores subinventory, then Create Receipt and Submit. 01:22:53 to 01:24:15

    Back to question 9

  10. ConceptCost Management has no transactions of its own: receiving and inventory transactions must first be transferred to costing, then distributed. Run, in order: 01:25:04 to 01:28:36
    • Transfer Transactions from Receiving to Costing, then Create Receipt Accounting Distributions, for receipt accounting
    • Transfer Transactions from Inventory to Costing, then Create Cost Accounting Distributions, for cost accounting

    In production these processes run on a schedule agreed with the business, not by hand.

    Back to question 10

  11. Hands-on

    Create and review receipt accounting 01:28:44 to 01:29:32

    Navigation Navigator > Tools > Scheduled Processes > Schedule New Process

    • Submit Transfer Transactions from Receiving to Costing. 01:28:44 to 01:29:32
    • When it succeeds, submit Create Receipt Accounting Distributions for your business unit. 01:29:58 to 01:30:35
    • Supply Chain Execution > Receipt Accounting > Review Receipt Accounting Distributions: search by your bill-to business unit and order number. 01:31:54 to 01:32:35
    • Expected result: transaction type Receipt into Receiving Inspection, debit Receiving Inspection and credit Accrual for your amount. 01:33:32 to 01:34:22
    • Submit Create Accounting: subledger application Receipt Accounting, your US primary ledger, accounting mode Draft. 01:34:22 to 01:36:02
    • Expected result: journal entries for your receipt on the distribution. 01:37:30 to 01:37:53

    Draft accounting does not update balances, so errors can still be fixed before final accounting.

    Back to question 11

  12. Hands-on

    Create and review cost accounting 01:37:54 to 01:38:55

    Navigation Navigator > Tools > Scheduled Processes > Schedule New Process

    • Submit Transfer Transactions from Inventory to Costing for your cost organization. 01:37:54 to 01:38:55
    • Supply Chain Execution > Cost Accounting > Create Cost Accounting Distributions: find the run control for your cost organization and cost book, and check its cutoff date. 01:38:56 to 01:40:16
    • Submit Create Cost Accounting Distributions with that run control. 01:40:26 to 01:41:23
    • Review Cost Accounting Distributions: search your cost organization and order number. 01:41:57 to 01:42:45
    • Expected result: costing status Fully costed, debit Inventory Valuation and credit Receiving Inspection at 250 per unit. 01:44:21 to 01:45:10
    • Submit Create Accounting: subledger application Cost Management, your US primary ledger, mode Draft. Your transaction then shows Draft Accounted. 01:45:28 to 01:46:19
    • Open Inventory Valuation in Cost Accounting, select your cost organization and valuation unit, and find your item’s inventory value. 01:48:14 to 01:49:27

    Use the run control that already exists for your cost organization and cost book. Do not change run controls that belong to other learners.

    Back to question 12

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Chapter Markers
0:01 – 1: Case Study and Assignment Review
8:47 – 2: Purchase Order Accounting Flow
12:20 – 3: Configuring Mapping Sets
24:42 – 4: Defining Account Rules
30:44 – 5: Transaction Account Definition Setup
50:03 – 6: Defining Item Cost Scenarios
54:49 – 7: Defining Item Cost Elements
59:25 – 8: Manufacturing Roll Up Costs
1:02:40 – 9: Purchase Order Accounting Flow
1:11:07 – 10: Verifying Transaction Account Definitions
1:24:21 – 11: Receipt Accounting Distribution Processes
1:33:27 – 12: Reviewing Receipt Accounting Journals
1:38:16 – 13: Running Cost Accounting Distributions
1:46:32 – 14: Monitoring Inventory Valuation Fluctuations
1:50:34 – 15: Reviewing Cost Distributions and Draft Accounting
1:52:13 – 16: Q&A Session
2:20:54 – 99: Video is Complete
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