Things to consider when creating a budget

Before you can create budgets, you must define your General Ledger structure. The options you choose in the General Ledger application setup will determine how budget data is organized in a particular company, accounting unit and account, accounting period, budget number, and fiscal year.

Chart of accounts

If you plan to use budget editing in the Budgeting application, then you will need to set up a chart of accounts. A chart of accounts is a defined set of summary and detail accounts for a company that you will use to perform budget edits.

Summary accounts are used for reporting and inquiry. Detail accounts are used to post journal entries. Detail accounts roll up into summary accounts to provide totals. A detail account consists of an account number of up to six digits and, optionally, a subaccount number of up to four digits. Subaccount numbers let you further define a detail account.

You can perform budget edits at the detail or summary level. See Processing commitments, encumbrances, and budget edits.

See the General Ledger User Guide to learn more about setting up a chart of accounts.

Company

The company is the highest organizational element in the General Ledger application. It can represent any business or legal entity of an organization, such as a corporation, holding company, division, or region.

Structure your company to match your business needs. You must decide if you will need a single company or multiple companies. See the information about company structure in the General Ledger User Guide.

After you set up the General Ledger company, the details used by the Budgeting application include:

Accounting unit

An accounting unit represents a location within a General Ledger company, such as a division, department, region, or store. By defining accounting units at different levels, you build a structure that resembles your organizational chart. You can define two types of accounting units:

  • Posting accounting units are used to post journal entries. These accounting units are the lowest level of organization in a general ledger company.

  • Summary accounting units are used to summarize the activity of lower level accounting units for consolidation and reporting.

Number of periods

A period represents an amount of time within a company's fiscal year. Each company can have as few as 1 period or as many as 13 periods in which to define and maintain budget journal entries. You can define budget amounts for as many periods that are defined for the company on Company (GL10.1).

For example, consider how the Budgeting application used period 13. If you spread an annual budget amount, for a company that is defined to use 13 period in Company (GL10.1), then it is spread evenly over 13 periods.

Commitments and encumbrance processing

Commitment and encumbrance processing creates records during normal operating processes, which you can use to perform budget edits. Budget editing uses current transactions as well as existing commitments, encumbrances, and posted transactions to arrive at an accurate remaining balance of your budgeted funds. The commitments, encumbrances, and posted transactions are compared to the budget detail record to prevent you from exceeding the budgeted amounts. See Processing commitments, encumbrances, and budget edits.