Understanding Change Document Transactions

Do you ever look at the accounting transactions for a change document and wonder how amounts were determined?

Here is the formula the programs use to determine what to post. The formula is done for each account. Payments that use an account that did not appear on the original order or the change document will not be included in the formula.

Remaining Encumbrance + Payments Made – New Amount on Change Order = Amount to Post

Note: If processing the change document as a renewal, this formula does not apply; the full amount entered in the account section will be posted. For more information, see the Handbook of Business Procedures 7.10.1. POINT Plus Purchase Order Changes.

For our examples, let's start with an order for $1200.00. Suppose a change is needed to increase the quantity of an item, bringing the total amount to $1600.00.

Example 1

Prior to the change, a VP1 was done to disencumber and pay $800.00:

Remaining Encumbrance + Payments Made – New Amount on Change Order = Amount to Post

$400.00 + $800.00 – $1600.00 = -$400.00 (encumbrance)

Example 2

No disencumbrances or payments have been made prior to the change:

Remaining Encumbrance + Payments Made – New Amount on Change Order = Amount to Post

$1200.00 + $0.00 - $1600.00 = -$400.00 (encumbrance)

Example 3

Prior to the change, a VP1 was done to disencumber $1200.00 but pay only $800.00:

Remaining Encumbrance + Payments Made – New Amount on Change Order = Amount to Post

$0.00 + $800.00 - $1600.00 = -$800.00 (encumbrance)

Note: This assumes a previous excess disencumbrance, and will therefore basically re-encumber.

Example 4

Prior to the change, a VP1 was done to disencumber $1200.00 but pay $1600.00:

Remaining Encumbrance + Payments Made – New Amount on Change Order = Amount to Post

$0.00 + $1600.00 - $1600.00 = $0.00 (no transaction needed, since full payment was already made)

Example 5

Prior to the change, a VP1 was done to disencumber $1200.00 but pay $1700.00:

If we use the stated formula:

Remaining Encumbrance + Payments Made – New Amount on Change Order = Amount to Post

$0.00 + $1700.00 - $1600.00 = +$100.00 (disencumbrance)

In this case, since the payment amount exceeds the amount shown on the face of the order, we substitute the payment amount with the document amount. So in fact, our formula will be: $0.00 + $1600.00 - $1600.00 = 0.00 (no transaction needed). This allows for charges which are not explicitly stated in the order, but which are valid, such as shipping and copier overage charges.

When is a Purchase Order Change required?