EPY: Commitment Accounting - a Case Study on Budgeting, Encumbrances, and Actuals (Doc ID 1346098.1)

The commitment accounting processes delivered in PeopleSoft HRMS enable customers to budget for payroll expenses and track actual payroll costs. Commitment Accounting in HRMS is part of the larger Commitment Control business process available in the core PeopleSoft Enterprise Financials product line.

The first step in employing commitment accounting is determining the budget. Budgets are a cap on expenditures and don't necessarily reflect your actual costs but rather the most you can spend. You can allow room in your budget for future expenses, such as new hires and salary increases.

After the budget is defined, you can encumber funds to cover salary expenses for the fiscal year, as you know them to be at any current time. For Human Resources costs, you should also encumber sufficient funds to cover employer-paid taxes and benefits, or fringe costs.

When payroll runs, actual salary expenses are incurred and encumbrances are liquidated accordingly.

The scope of this case study is an overview and walk-through of delivered HRMS Commitment Accounting business processes. The assumption is that PeopleSoft Financials module is in place and Commitment Control is in effect. This case study does NOT utilize any delivered Time & Labor distribution processes.