Encumbrance & Pre- Encumbrance (Commitment Accounting AX2012)
When the encumbrance process is enabled, we can create purchase order encumbrances that are recorded in the general ledger when a purchase order is confirmed.
Encumbered amounts on a purchase order are relieved when a vendor invoice is confirmed to spend all or part of the encumbered amount. Relieved amounts are subtracted from the amount of the purchase order encumbrance.
A pre-encumbrance is a request to reserve funds for planned expenditures i.e., purchase requisition. The funds have been requested, but have not yet been approved for a purchase order. If the pre-encumbrance process is enabled, you can create purchase requisitions with a pre-encumbered amount for the planned expenditure.
The pre-encumbrance amount will be relieved and transferred to purchase order once the purchase requisition is approved and converted to purchase order.
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With 13 years of experience in ERP, specialising in AX functionality across versions , Solution designing ,Project Management and delivery.
Rohan also has special interests in reading about new business processes and features along with understanding their viability. He also enjoys spreading this message across through his blogs.