Oracle Fusion Accounts Payables (AP): Automatic Offset Accounting

For an AP invoice, there could be multiple expense/ distribution accounts
And
corresponding liability account accounted is the default account picked from the Supplier site or the one defaulted at Invoice header level.

However, there may be scenarios where a business entity is using the same Operating Unit to make purchases against multiple balancing segments. In such cases, it would be imperative to have different liability accounts booked against each of the different distribution accounts.
So, If you enter an invoice for expenses or asset purchases for more than one balancing segment, you might want to use automatic offset method to keep your payables transaction accounting entries balanced.

For example, you have below accounts defined:
Distribution Accounts:
Bal_SEG1.111.Dist_Acc1                  dr         100
Bal_SEG2.222.Dist_Acc2                  dr         50
Liability Account:
Bal_SEG9.999. Liability_Acc9         cr         150





Below are two options to enable balancing as automatic offset:

Primary balancing segment “or Balancing in R12”: Choosing the “Balancing” option would mean that the default liability account will be used with balancing segment values changed as per the distribution accounts.
Means the balancing segment got replaced from distribution accounts to divide the liability and rest segments are same “original liability account will only be used except the balancing segment”. System will post the accounting entries as below:

Bal_SEG1.111.Dist_Acc1                  dr         100
Bal_SEG2.222.Dist_Acc2                  dr         50
Offset Accounts: “Only Balancing segment taken from distribution”
Bal_SEG1.999.Liability_Acc9          cr         100
Bal_SEG2.999.Liability_Acc9          cr         50

All segments, except natural account “or Account in R12”:  Choosing the “Account” option would mean that only the natural account will be used from the default liability account at invoice header level and all the segments will be copied from the invoice distributions.
Distribution Accounts:
Bal_SEG1.111.Dist_Acc1                  dr         100
Bal_SEG2.222.Dist_Acc2                  dr         50

Offset Accounts: “Only liability account retained, rest all segments copied from distribution”
Bal_SEG1.111. Liability_Acc9         cr         100
Bal_SEG2.222. Liability_Acc9         cr         50

Please note that the changes will not be reflected on the invoice screen. The changes will be seen once the invoice is accounted for and posted and will be visible in GL journals/ View Accounting for the invoice.

None : The liability account is taken from invoice header. That means nothing will be offseted at any segment in the accounting code combination. Then this will be an inter-company transaction.

Nutshell:
If you do not use Automatic Offsets, Payables creates a single liability accounting entry for invoice transactions (if you use accrual basis accounting) and a single cash type accounting entry for payment transactions.

When you use Automatic Offsets, Payables automatically creates balancing accounting entries for your transactions. The GL account that each of the offsetting accounting entry is charged to depends on which method you use, Balancing or Account.