8.4 Balancing, Accruals and Year-End Activities in Payables
Key Takeaways
Without automatic offsets, an invoice has one liability line; if its expenses span several balancing segment values, General Ledger intercompany or intracompany rules must balance the entry.
Intercompany balancing rules can be defined at the primary balancing segment, legal entity, ledger and chart of accounts levels, and the most specific applicable rule is used.
Inventory items always accrue at receipt; expense items accrue at receipt or at period end according to the Common Options setting, which can be changed on the PO schedule.
For period-end accrual, Create Uninvoiced Receipts Accruals makes a reversing journal with Incomplete status, and Create Accrual Reversal Accounting completes it and transfers it to the general ledger.
Year-end Payables work includes 1099 exceptions and reporting against the 2026 $2,000 threshold, escheatment review, budgetary control carry-forward, and permanent closing.
This section covers the accounting housekeeping that turns the Payables close into a clean ledger close. It is still part of Understand the Accounts Payable Analysis, Reporting, and Period Close process.
Keeping Payables entries balanced
An invoice can charge expenses to several primary balancing segment values, for example companies 10 and 20, while its liability sits in company 10. Oracle offers two ways to balance the journal:
- Automatic offsets in Common Options (section 3.1).
- Primary balancing segment builds a liability line for each balancing segment.
- All segments, except natural account builds a liability line for every distinct combination.
- Offsets also affect payments: cash for pooled accounts, discounts, realized gain or loss, bills payable, and withholding taken at payment.
- General Ledger intracompany and intercompany balancing rules.
- With offsets set to None, Payables creates one liability line, and the journal is balanced when it reaches the ledger.
- Oracle's guidance: if you expect invoices that cross balancing segments, select another method or set up intracompany or intercompany rules in General Ledger.
- If you enable additional balancing segments in the chart of accounts, you must define intracompany or intercompany rules.
Intercompany balancing rules (Manage Intercompany Balancing Rules) can be defined at four levels:
- the primary balancing segment;
- the legal entity;
- the ledger;
- the chart of accounts.
The most specific rule that applies is used. Each rule gives the intercompany receivables and payables accounts.
Example
An invoice in company 10 charges USD 6,000 to company 10 and USD 4,000 to company 20, with offsets set to None. Payables credits liability 10-2100 for USD 10,000. When the entry is balanced, the rules add:
- Dr Intercompany receivable (company 10) 4,000
- Cr Intercompany payable (company 20) 4,000
Each company then balances on its own. With Primary balancing segment offsets, Payables would instead create liability lines of USD 6,000 in company 10 and USD 4,000 in company 20, and no intercompany lines would be needed.
Payment-side centralization is different. A payment business unit paying invoices of other business units groups them into one payment per supplier and site but honors each invoice business unit's setup (section 6.1). For reconciliation, use the ledger level (section 8.2).
Accruals at period end
Oracle sets accrual behavior by item type:
- Inventory items always accrue at receipt.
- Expense items follow Accrue expense items in Common Options: At receipt or Period end. A receipt default can be changed to period end on the PO schedule.
| Perpetual (receipt) accrual | Period-end accrual | |
|---|---|---|
| At receipt | Receipt debits receipt inventory and credits uninvoiced receipts (accrual) | No accounting |
| At delivery to final destination | Receipt inventory is cleared and the material or expense account is debited | No accounting |
| Invoice accounting | Dr accrual, Cr liability | Dr expense, Cr liability |
| Period close | Nothing extra to run | Run Create Uninvoiced Receipts Accruals for receipts not yet invoiced |
For period-end accrual, Oracle says Create Uninvoiced Receipts Accruals generates the accrual and a reversing journal with an incomplete status. You must run Create Accrual Reversal Accounting to make the journal Complete and transfer it to the general ledger. Without that step, the reversal never posts and the accrual is counted twice in the next period.
Receipt accruals that won't be invoiced, for example short shipments the supplier will never bill, stay on the accrual account. Review them and clear them in Receipt Accounting rather than in Payables. Matching receipts closely (section 3.3) and using final match keep these balances small.
Year-end activities
US 1099
- Run the US 1099 Invoice Exceptions and US 1099 Supplier Exceptions reports. Correct the income tax types and regions, using Update and Report Income Tax Details where needed, and request missing TINs with Tax Information Verification Letters.
- From tax year 2026, the IRS minimum for most 1099-NEC and 1099-MISC payments is $2,000, up from $600. Review the report thresholds and supplier communications with that in mind (section 7.3).
- Produce US 1099 Forms, US 1096 and US 1099 Electronic Media. Oracle's 26A update covers tax year 2025: golden parachute payments move to 1099-NEC box 3, and the combined filing states changed.
Escheatment
Review checks that are still negotiable after the Minimum days to initiate escheatment (Manage Payment Options). Escheat them so the amounts move to the Unclaimed Fund distribution, then create the invoice that pays the escheatment authority.
Budgetary control and encumbrances
If budgetary control is enabled, year end includes carrying forward open purchase order obligations into the new budget year, using the Budgetary Control carry-forward processes. Final matches and credit memos during the year will already have released funds (sections 3.3 and 4.3).
Locking the year
After the audit, set the year's Payables periods to Permanently Closed (section 8.1). This can't be reversed.
A combined month-end example
At month end a shared-services team:
- resolves holds and validates invoices;
- runs Create Accounting with transfer and runs Post Journal Entries to General Ledger;
- runs Create Uninvoiced Receipts Accruals and Create Accrual Reversal Accounting for period-end accrual items;
- sweeps two disputed invoices to the next open period;
- closes the Payables period and reviews the exceptions report;
- runs Prepare Payables to General Ledger Reconciliation by ledger, because it uses centralized payment processing.
Intercompany lines generated by GL balancing rules appear in the ledger and must be included when the AP and intercompany accounts are reconciled.
Offset segments in Common Options are set to None. An invoice's liability is in company 10, and its expense lines charge companies 10 and 20. How is the journal kept balanced by balancing segment?
Payables automatically splits the liability by company, regardless of the offset setting
General Ledger intercompany or intracompany balancing rules add the balancing lines
Validation places a Dist Variance hold until the clerk splits the invoice
The payment process creates a separate payment for each company to balance them
A business unit uses period-end accrual for expense items. At month end the team runs Create Uninvoiced Receipts Accruals. What else must happen so the reversal reaches the general ledger?
Nothing; the reversing journal is posted automatically on the first day of the next period
Run the Payables Unaccounted Transactions and Sweep Report with Sweep Now set to Yes
Run Create Accrual Reversal Accounting, which completes the reversing journal and transfers it
Enable perpetual accrual on each PO schedule and receive the goods again
Which items always use receipt (perpetual) accrual in Oracle Fusion, whatever the Accrue Expense Items option says?
Expense items charged to projects
Inventory items
Services matched by amount
Items on blanket agreements
Sections you finish are checked off in the contents.