Oracle Procure to Pay - Setup Steps for Encumburance Accounting

 For Enabling Encumbrance Accounting in Oracle Procure to pay (P2P) Cycle, Below mentioned setups are to be done in oracle General ledger and oracle Purchasing.
 In General Ledger

1) Enable budgetary control in your Set of Books:
Navigation: Setup->Financials->Books
Alternative Region : Budgetary Control Options Flag Enable Budgetary Control.

2) Create budgetary control groups:
Navigation: Budgets->Define->Controls
Create name, description and enter Budgetary control rules. e.g.. Add Purchasing as Source with category Purchases.
This control group has to be attached at the Site level or User level Profile Option (Budgetary Control Group) and this will control the behavior regarding the tolerance of budgetary control.

3) Define Budget:
In Budget, basically you set period boundary for your budget i.e. time frame.
Remember to open the periods for the budget by pressing the Open next year button.
NOTE: A prerequisite to the above step is that Encumbrance year should be open at Set of Books level.
Navigation: Setup->Open/Close

4) Define Budget Organization:
Navigation: Budget->Define->Organization
In this step you choose the accounts for which you want to have control and link it to your Budget defined in step 'c'. Complete Header of form and Navigate to Ranges and define your ranges for your organization.

5) Encumbrance types:
Navigation: Setup->Journals->Encumbrances.
Encumbrance types are defined so as to bifurcate the reservation of funds done at different levels i.e. Requisition, PO or Invoice level, it helps management people in having better financial control.

In Purchasing
6) Enable encumbrance: Encumbrance has to be enabled in Financial Options form in Purchasing modules.

Navigation: Setup->Organization->Financial Options (Alternative region Encumbrance)

Select different encumbrance types for different levels i.e. Requisition, PO and Invoice. Here you attach the types that you defined in step 1.e of GL setup.