Difference between expense item and inventory item

Those Item that needs to maintain stock and tracking are inventory Items. Creating unique Item coding for each SKU's

Non-Stock able Items that is direct IN & OUT, are expense items. For such items no need to create Item code for all. Only few codes can be created and in PR & PO description can be change

For example

Inventory items: Machine parts, Raw Materials, Any Trading Items etc

Expenses Items: Assets, services, Projects, consumables (Office Stationery) etc.

You cannot define an item as expense and inventoried at the same time. But you can define the item as inventory item.

And when you want to use it as expense, move it to an expense subinventory.

We need to uncheck the attribute "Asset Subinventory" in the specified subinventory.

You should uncheck the asset flag for that subinventory. Make sure that the subinventory accounts are setup correctly.

The terminology of items is rather confusing from an Purchasing/Inventory point of view:

For easy understanding these will be referres to as A , B and C,

A - Expense Items

B - Inventory Expense Items

C - Inventory Asset Items

A - These items have attributes checked

a - Purchasable

b - Purchased

B - These tems have the following attributes checked

a - inventory item = YES

b - stockable

c - transactable

d - Inventory Asset Value = NO

e - Costing Enabled = No

C - These items have the following attributes checked

a - inventory item = YES

b - stockable.

c - transactable

d - Inventory Asset Value = YES

e - Costing Enabled = YES

As you know "procure to pay" Business Flow start Purchasing requisition till paying to vendors and most important, in all the case the purchase is made for basic element called Items.

As you know there are three types of items:

• Inventory Expense Item
• Inventory Asset Item
• Expense item

Definition of above Items used in Purchasing can be best understood as:

Asset flag means means it is an asset and the items value will show in your inventory valuation.

Inventory Item

Expense Item

These are one which is used for consumable items purchase for your organization. More importantly , for creating an expense item you have to perform following setup doing in the Master Item form.Go to same path in oracle inventory

Oracle Inventory -> Items -> Master Items

When master items form open Go to Inventory Menu you need to tick followings

1. Inventory item
2. Stock able
3. Transactble
4. Resolvable

And you can also setup in Costing and purchasing menu account code as per your requirement.

Asset Item

As discussed above , the following attributes need to be enabled for such an item.

• Inventory item
• Stock able
• transact able
• Costing flag
• Inventory asset value

For entering on purchase orders
It should have purchased and purchasable flags enabled and you have to make sure you are assigning this item to the Purchasing org which you have defined at

Oracle Purchasing > Setup > Organizations >
Financial Options > 'Supplier-Purchasing' alternate region 'Inventory Organization' field.

The accounting can be best described for such kind of items is;

Is there any effect on Step 5 in all three cases, that mean do matching have different accounting entry?

The answer is no; as per my understanding purpose of setting the PO to a 2way, 3 way or 4 way match is to ensure that the corresponding hold is generated on the invoice.

The holds are basically designed for control purposes, they do not have any accounting effects.

1. What is the setup for expense item?

    Ans: Disable the asset and costing flags in Item master costing tab

2. Significance of Purchasable & Purchased option?

   Ans:  Purchasable is an item defining attribute, it tells that item can be purchased from external  Suppliers

Purchased is an item status attribute, item can be purchased in this status

3. Significance of Customer Ordered & Customer Orders enabled?

Ans: CO: Item defining attribute

COE: item status attribute