Accounting for all modules

PJM

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Content

Introduction................................................................................................iv Purpose................................................................................................iv Scope....................................................................................................iv Structure...............................................................................................v Related documents...............................................................................v Oracle Payables.........................................................................................vi Assumptions.........................................................................................vi Events...................................................................................................vi Accounts..............................................................................................vii Accounting entries..............................................................................viii Notes.....................................................................................................x Oracle Receivables.....................................................................................xi Assumptions.........................................................................................xi Events...................................................................................................xi Accounts..............................................................................................xii Accounting entries..............................................................................xiv Notes..................................................................................................xix Oracle Inventory, Purchasing and Order Entry..........................................xx Assumptions........................................................................................xx Events..................................................................................................xx Accounts.............................................................................................xxi Accounting entries..............................................................................xxi Notes................................................................................................xxiv Oracle Fixed Assets.................................................................................xxv Assumptions ...................................................................................xxvii Events ............................................................................................xxviii Accounts ...........................................................................................xxx Accounting Entries ....................................... ...................... ............ ...... ......xxxii xxxii Notes ................................................................................................xli Oracle Project Accounting........................................................................xlv Assumptions.....................................................................................xlvii Events...............................................................................................xlvii Project Project AutoAccounting AutoAccounting functions functions and processes............................xlviii processes............................xlviii Accounting entries...........................................................................xlviii Notes......................................................................................................l Encumbrance Encumbrance Accounting......... Accounting................. ................ ................ ................ ................ ..................................li ..........................li Assumptions..........................................................................................li Events...................................................................................................li Accounts...............................................................................................lii Accounting entries................................................................................lii Notes...................................................................................................liv Open en closed..........................................................................................lv Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Oracle Payables

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Oracle Payables




Introduction While implementing Oracle Applications there is often a need for an integrated functional overview on journal entries. This need is especially felt when setup discussions are on with the customer and decisions have to be made. The customer enters the discussions from a functional point of view. The available Oracle information and an d documentation is fragmented and detailed. For each module or application separate manuals exist. These manuals are focused on descriptions of windows and specific functions. As part of the Practice Development project of Oracle The Netherlands a document is created that covers the accounting issues in Oracle Applications in an integrated way. This is the result.

Purpose The purpose of this thi s document is to create an overview of the accounti ng entries in Oracle Applications in a such a way that: 1. the determination determination of the system system accounts takes takes place in a structured structured way. In practice, as part of the implementation, the customer will determine the chart of accounts. Often system accounts are not taken into account. 2. the document document can be used as project project documentation documentation and information information to explain setup decisions. This is also the case for FastForward implementations for which all decsions already have been made.

Scope This document covers the following f ollowing applications: appl ications: General Ledger, Receivables, Payables, Cash Management, Fixed Assets, Project Accounting, Purchasing, Order Entry en Inventory. Other E-Business applications are not in the scope of this document. Cash Management is covered as part of Payables and Receivables. Purchasing, Order Entry and Inventory are handled in one chapter. For each Application assumptions are made concerning the setup. These are made on base of best practices in The Netherlands. This document is focused focu sed on setup related options that affect the content and structure of journal entries. Other topics that are not in the scope of this document: 1. New developments developments in future relea releases ses are not taken taken into account. account. This document is solely based on Release 11.5/ 11i. 2. The setup setup of the accountin accounting g flexfield. flexfield. 3. Reporting Reporting issues and tools tools like FSG and Oracle Oracle discoverer. discoverer. Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference Reference source not found )

Oracle Payables




4. Specific interco intercompany mpany and consolidatio consolidation n issues. issues. 5. Technical Technical specifications specifications of tables and and programs that that support the the accounting process in Oracle Applications.

Structure For each application you will find a separate chapter. Each chapter has the following content: 1. Each chapter starts starts with with assumptions assumptions that have been made. Most Most assumptions are made on base of best practice in The Netherlands. 2. In the second second part the events events of the application application are are described. described. An event is a trigger that causes a journal entry in General Ledger. The events will be used to categorize the accounts and journals that are described in the next parts. 3. The third part part gives an overview overview of the accounts accounts that that are part of of the setup of the application. For each account a relation is made to one or more events. A second table, with the same accounts, gives an overview in which forms the setup of that account has to take place. 4. The fourth part part shows for each event the the structure structure and content of the journal. This information i nformation is presented presen ted in a table. 5. Finally each each chapter chapter ends with with notes. notes. A separate chapter is introduced to cover encumbrance accounting. Encumbrance accounting is related to Purchasing, Oracle Payables and General Ledger.

Related documents

1. Fast Fast Forwa Forward rd doc docum ument ents s 2. Account Accountingfl ingflow ow in Oracle Oracle R11I voor voor Canon Canon Consumer Consumer Imaging Imaging Group by Luuk de Kok. Version 1, dated 21 augustus 2001. 3. Ora Oracle cle Payabl Payables es User Guide, Guide, Releas Release e 11i, january january 2000. 2000. 4. Unlockin Unlocking g the Mystery Mystery of Encumbra Encumbrance nce Accounti Accounting ng by Victoria Victoria Leavy.

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Oracle Payables




Oracle Payables In this chapter accounting issues are described for the application Oracle Payables. This application covers the purchase invoice and payment processes. To be able to reconcile the payments it is best practice to implement Cash Management as well. The accounting entries that are a result of reconciliation are processed by Oracle Payables. For encumbrance related issues see chapter Encumbrance Accounting.

Assumptions 1. The Account for Payment option is set to Both. This means accounting entries will be created at the time of payment (creation) and at the time of payment reconciliation by using Cash Management. In previous releases of Oracle Applications this feature was handled by the Allow Reconciliation Accounting option. 2. The Account for Gain/Loss option is set to Both as well. This means that foreign currency losses and gains are recorded at the moment of the payment issue and at the moment of the payment clearing. 3. Automatic Withholding Tax Payables is not used. 4. The accounting method is set to Accrual Basis Accounting. This means you create accounting entries for invoices and payments by using the liability account. (Cash Basis Accounting only creates accounting entries for the payment) 5. The Automatic Offset Method is set to Balancing. This means the liability accounts will have the same balancing segment value as the accounts that are entered in the invoice distributions. 6. The pooled bank account option is set on yes. This means the bank account is shared by multiple balancing segment values. 7. Interest Invoicing makes it possible to create an interest invoice for an overdue invoice at the time of payment. Separate accounts are used to record the accounting entries. This feature is not commonly used in the Netherlands and therefor not recorded as an event in this chapter. 8. Tax and freight are included.

Events

AP Even t nr.

Event name

GL Source

GL Category

Notes

1

Invoice

Payables

Purchase Invoice

When adjusting or cancelling an invoice the same accounts are used. Only debit / credit will be reversed.

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Oracle Payables




AP Even t nr.

Event name

GL Source

GL Category

Notes

2

Prepayment

Payables

Purchase Invoice

3

Prepayment application

Payables

Purchase Invoice

4

Payment

Payables

Payment

5

Payment maturity

Payables

Payment

6

Reconciliation

Payables

Reconciled Payment

When adjusting or cancelling a prepayment the same accounts are used. Only debit / credit will be reversed. When unapplying a prepayment the same accounts are used. Only debit/ credit will be reversed. When adjusting or voiding a payment the same accounts are used. Only debit/ credit will be reversed. This event takes only place when the Account for Payment When Payment is Issued option is enabled. When unreconciling a payment the same accounts are used. Only debit/ credit will be reversed.

Type

1

4

Liability Expense Asset Asset Revenue Expense Expense Revenue Expense Expense Expense Expense

X X

Accounts

Liability Expense Prepayment Future dated payment PO rate variance gain PO rate variance loss Discount Realized gain Realized loss Rounding Freight Intrest invoice expense Intrest invoice liability Cash clearing Cash Bank charges Bank errors Tax

Liability Asset Asset Expense Expense Asset

Financia ls options

Liability * Expense** Prepayment Future dated payment * PO Rate variance gain PO Rate variance loss

2

3

X

X

X

X

5

6

X

X X X X X X X

X

X

X X X X

X

Payable options

Supplie r /Site

X

X

X X

X X

Bank accou nt

Payables document s

Tax

Invoice

X X X

X

X X


Oracle Payables



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Discount * Realized gain * Realized loss * Rounding */*** Freight Interest invoice expense Interest invoice liability Cash clearing * Cash * Bank charges * Bank errors * Tax

Payable options

Supplie r /Site

Bank accou nt

Payables document s

Tax

Invoice

X X X X X X

X X X

X X X X X

X X X X

X

*These are the accounts for which automatic offsets are created. **This account is generated by Account Generator when the invoice is related to a project. ***The rounding account will be used when: 1. You use multiple curencies and the payment currency does not round within the payment currency precision. 2. The functional currency amounts of payments do not equal the amount recorded as the liability. 3. You have enabled automatic offsets and the cash account is pooled, and you have rounding errors. Whether the future dated payment account is used from the supplier site or the payables document is defined by the Payables Option ‘Use Future Dated Payment’. 1

Accounting entries

AP-1 Invoice Accounting entry

Debit

Expense (or AP Accrual)* Tax Freight Liability PO rate variance gain/ loss** Invoice Price variance*

Credit X X X

(X) (X)

X (X) (X)

* This will be the AP Accrual account in case the AP invoice is matched to a Purchase Order and the item used on the Purchase order is an inventory item. The AP Accrual account is an organization parameter and is can be found in the Oracle Purchasing and Inventory Chapter.


Oracle Payables




** These accounting entries can only be created when an invoice is matched to a purchase order.

AP-2 Prepayment Accounting entry

Debit

Prepayment Liability

Credit X X

AP-3 Prepayment Application Accounting entry

Debit

Prepayment Liability

Credit X X

When applying an invoice to a prepayment, the prepayment has to be paid. Only then the prepayment is available.

AP-4 Payment Accounting entry

Debit

Liability Cash clearing Discount Realized gain/ loss

Credit X

(X)

X X (X)

In case of a future dated payment the future dated payment account is used instaead of the cash clearing account. At time of maturity the future dated payment is credited. Discount and realized gain/ loss is recorded at the time of maturity.

PA-5 Payment maturity Accounting entry

Debit

Future dated Payment Cash clearing Discount Realized gain/ loss

Credit X

(X)

X X (X)

PA-6 Reconciliation Accounting entry

Debit

Cash Cash clearing Realized gain/ loss Bank charges Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Credit X

X (X) X

Oracle Payables

(X)



Doc Ref: Error: Reference source not found Accounting entry

Debit

Bank errors

Credit X

Notes 1. Automatic offset only efects the accounts that are marked with *. Other accounts can only be balanced by manual entries in Oracle General ledger. 2. Automatic offset is only relevant when more than one balancing segment value is used in an Operating Unit. 3. Automatic offset does not support Interest invoicing. However Interest invoicing is not common practice in The Netherlands. 4. The pooled bank account option is only relevant when more than one balancing segment value is used in an Operating Unit. 5. Future dated payments are not common practice in The Netherlands. This functionality makes a difference between issuing of a payment and the moment a payment is mature. Only when a payment is mature (status of the payment is Negotiable) it is possible to clear the payment by using Cash Management. To use this feature the option Use Future Dated Payment Account has to be set to Payment Document or Supplier Site. 6. Never change accounting options in the payment Accouting Payables Options form. This could create inconsistent accounting entries in the system. 7. The PO Rate Variance Gain and Loss accounts are only used in case you match an invoice with a purchase order that involves inventory items. 8. The expense clearing account in previous releases of Oracle Applications does not exist anymore in Release 11i.


Oracle Payables




Oracle Receivables In this chapter accounting issues are described for the application Oracle Receivables. This application covers the sales invoice and collection processes. To be able to reconcile the receipts it is best practice to implement Cash Management as well. The accounting entries that are a result of reconciliation are processed by Oracle Receivables. Two main types of receipts can be distinguished: 1. Cash receipt. This is a receipt that potentially is linked to an outstanding item. When the outstanding item (and the related liability account) can not be found a default liability account will be used. 2. Miscellaneous receipt. This is a receipt that is not related to an outstanding item. Instead of using a liablity account, any type of account can be used. These account are related to receivable activities.

Assumptions 1. Clearance method = By Matching 2. The accounting method is set to Accrual Basis Accounting. This means you create accounting entries for transactions and receipts by using the liability account. (Cash Basis Accounting only creates accounting entries for the receipt) 3. No unallocated receipts are recorded. 4. Receipt remittance by using the Factoring method is not in the scope.

Events

AR Even t nr.

Event name

GL Source

GL Category

1 2

Invoice (regular) Bill in arrears invoice

Receivables Receivables

Sales Invoices Sales Invoices

3

Bill in advance Invoice

Receivables

Sales Invoices


Oracle Payables

Remarks

Determined by the invoicing rule that is used in the more tab of the transactions window. The revenue recognition program creates the accounting entries. Determined by the invoicing rule that is used in the more tab of the transactions window. The revenue recognition program creates the accounting entries. 9 of !Undefined Bookmark, SEC1



AR Even t nr.

Event name

GL Source

GL Category

4 5

Debit memo Credit memo


Debit Memos Credit Memos

6

Receivables

7

Apply credit memo to invoice On-account credit

Receivables

Credit Memo Applications Credit Memos

8

Adjustment

Receivables

9

Deposit

Receivables

10

Invoice applied to deposit

Receivables

11

Guarantee

Receivables

12

Invoice applied to guarantee

Receivables

Sales Invoices

13

Applied receipt

Receivables

Trade Receipts

14 15

Unapplied receipt Unidentified receipt


Trade Receipts Trade Receipts

16

Receivables

Trade Receipts

Receivables

Trade Receipts

18

Change from unidentified to unapplied Change from on account to applied On account receipt

Receivables

Trade Receipts

19

Miscellaneous receipt

Receivables

Misc Receipts

20 21

Receipt with discount Receipt (to be remitted)


Trade Receipts Trade Receipts

22 23

Remittance of the receipt Reconciliation of the remitted receipts


Remittance

17

Remarks

This event takes place by using the Credit transactions windows.

On account credits are credits that are not applied to a specific transaction. This event takes place by using the Credit transactions windows or by applying a receipt. This event takes place when using a separate window. It can be positive or a negative adjustment. A deposit is being created by using the Transactions window. Application takes place by filling out the field Commitment in the Transactions window. A guarantee is being created by using the Transactions window. Application takes place by filling out the field Commitment in the Transactions window. This is event includes a discount. Also valid for receipts on a deposit and guarantee.

Sales Invoices

This is the case when a (cash) receipt has no customer. These can not be applied.

This is the case when a (cash) receipt has a customer but cannot be related to a specific transaction. This receipt is not matched to an invoice. The revenue account is derived from the receivable activity. Create a receipt that needs to be remitted by the bank (‘incasso tape’) Using Cash Management

Accounts

Type

1

2

3

Realized gain Revenue Realized loss Expense Unallocated Revenue Revenue Cross currency Expense rounding Header rounding Expense Cash Asset Bank charge Expense Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

4

5

6

7

8

9

10

11

12

13

14

X X

X X

Oracle Payables


X X


Doc Ref: Error: Reference source not found Type

Receipt confirmation Remitted receipt Factored receipt Short term debt Unapplied receipt Unidentified receipt On account receipt Receivable Revenue Clearing Unbilled receivable Unearned revenue Tax Freight Earned discount Unearned discount Adjustment (write-off) Bank Error Finance Charge Misc. Cash

Asset Asset Asset Asset Revenue Asset Revenue Revenue Liability Revenue Revenue Revenue Expense Expense Revenue Revenue

3

4

5

6

7

8

9

10

11

12

13

14

X

X

X X

X X

X X

X X

X X

X

X X

X

X

X X

X

X X X

X X X

X X

X X X

X X

X X

X X X X

X

X X X X

X X

X

X

1 5

16

17

18

19

20

X X

X

X

21

22

23

Revenue Expense Revenue Expense Expense Asset Expense Asset Asset Asset Asset Asset Asset Asset Revenue Asset Revenue Revenue Liability Revenue Revenue Revenue Expense Expense Revenue Revenue

System options

Realized Gain Realized Losses Unallocated Revenue Cross currency rounding Header rounding Cash

2

Asset Asset Asset

Type

Realized gain Realized loss Unallocated Revenue Cross currency rounding Header rounding Cash Bank charges Receipt confirmation Remitted receipt Factored receipt Short term debt Unapplied receipt Unidentified receipt On account receipt Receivable Revenue Clearing Unbilled receivable Unearned revenue Tax Freight Earned discount Unearned discount Adjustment (write-off) Bank error Finance Charge Misc. cash

1

X X

X X

X

X X

X

X

X X

X

X

X X

X X

X

X X X

X X

Bank accounts

Trans. Types

Custo mer Site

Sales Rep

Tax

Receivable activity

X X X X X X


Oracle Payables



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Bank charges Confirmed receipts Remitted receipts Factored receipts Short term debt Unapplied receipts Unidentified receipts On account receipts Receivable * Revenue * Clearing * Unbilled receivable* Unearned revenue* Tax * Freight * Earned discount Unearned discount Adjustment (write-off) Bank Error Finance Charge Misc. Cash

Bank accounts

Trans. Types

Custo mer Site

Sales Rep

Tax

Receivable activity

X X X X X X X X

X

X X X X X X X

X X X X X X X

X X

X X X X X X X X

* These are accounts that can be managed by Auto Accounting. 1

Accounting entries

AR-1 Invoice regular Accounting entry

Debit

Receivable Revenue Tax Freight

Credit X X X X

AR-2 Bill in arrears invoice Accounting entry

Debit

Unbilled Receivable Revenue Tax Freight

Credit X X X X

Depending on the Bill in arrears rule the revenue will be taken in different periods and the journal entry above will be generated each time.

Accounting entry

Debit

Unbilled Receivable Revenue Tax Freight Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Credit X X X X

Oracle Payables




Debit

Unbilled Receivable Receivable

Credit X X

At the final period the unbilled Receivable is transferred to Receivable. At that time the sales invoice will be generated and send to the customer. The amount of the Receivable entry is the total of all the Unbilled receivable entries that have been recorded in the previous periods.

AR-3 Bill in advance invoice Accounting entry

Debit

Credit

Receivable Unearned revenue Tax Freight

X

Unearned revenue Revenue

X

X X X

X

At the first period the total receivable amount is recorded and an invoice is sent to the customer. The revenue will be recorded in the coming periods as it is defined in the Bill in advance invoicing rule.

Accounting entry

Debit

Unearned revenue Revenue

Credit X X

AR-4 Debit memo Accounting entry

Debit


Credit X X X X

Receivable Finance charge

X X

AR-5 Credit memo Accounting entry

Debit



Credit X X X X

Oracle Payables




AR-6 Apply credit memo to invoice Accounting entry

Debit

Receivable Receivable

Credit X X

AR-7 On-account credit Accounting entry

Debit

Receivable Revenue

Credit X X

An on-account credit can be a credit on Revenue, Tax or Freight. The journal entry above is a credit on Revenue.

AR-8 Adjustment Accounting entry

Debit

Receivable Adjustment

Credit X X

The entry above is a postive adjustment. Adjustment must be seen as a write-off. Adjustment entries can be made in combination with receipts.

AR-9 Deposit Accounting entry

Debit

Receivable Unearned revenue

Credit X X

AR-10 Invoice applied to deposit Accounting entry

Debit


Credit X X X X

Unearned revenue Receivable

X X

AR-11 Guarantee Accounting entry

Debit

Unbilled receivable Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Credit X

Oracle Payables




Debit

Credit

Unearned revenue

X

AR-12 Invoice applied to guarantee Accounting entry

Debit


Credit X X X X

Unearned revenue Unbilled receivable

X X

AR-13 Applied receipt Accounting entry

Debit

Cash Bank charge Bank error Realized gain/ loss Receivable Unapplied receipt Unapplied receipt

Credit

X X X (X)

(X) X

X X

The moment of creating this journal entry is dependent on the setting Clearance Method in Receipt classes. When the method is set to Directly the entry is created at the time of processing the receipt. If the method is set to By Matching the entry is created at the time of clearing the receipt by Oracle Cash Management.

AR-14 Unapplied receipt Accounting entry

Debit

Cash Bank charge Bank error Unapplied receipt

Credit X X X X

AR-15 Unidentified receipt Accounting entry

Debit

Cash Bank charge Bank error Unidentified receipt

Credit X X X X

AR-16 Change from unidentified to unapplied


Oracle Payables




Debit

Unidentified receipt Unapplied receipt

Credit X X

AR-17 Change from unidentified to unapplied Accounting entry

Debit

Receivable Unapplied receipt

Credit X X

AR-18 On account receipt Accounting entry

Debit

Cash Bank charge Bank error On account Unapplied receipt Unapplied receipt

Credit X X X X X X

AR-19 Miscelleneous receipt Accounting entry

Debit

Cash Misc. cash

Credit X X

A miscelleneous receipt is a receipt that is not related to an outstanding item.

AR-20 Receipt with discount Accounting entry

Debit

Credit

Cash Receivable

X

Receivable Revenue

X

X

X

Receivable Discount (earned/ unearned)

X X

AR-21 Receipt (to be remitted) Accounting entry

Debit

Receipt confirmation Unapplied receipt Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Credit X X

Oracle Payables




Debit

Unapplied receipt Receivable

Credit X X

AR-22 Remittance of the receipt Accounting entry

Debit

Remitted receipt Receipt confirmation

Credit X X

AR-23 Reconciliation of the remitted receipts Accounting entry

Debit

Cash Remitted receipt

Credit X X

Notes 1. The profile option AR: Use Invoice Accounting for Credit Memos determines the way accounting entries for credit memos are generated. If this option is set to Yes then Receivables credits the original transaction. When the option is set to No, Receivables uses AutoAccounting to determine the accounts. 2. When entering a credit memo you have to choose a Ruling Method and a Split Term Method. The options for both are FIFO, LIFO and prorate. These rules do not effect the journal entries themselves. The methods determine what element of the invoice has to be credited. 3. The accounts Factored receipt and Short term debt are only used for remittances when using the factoring method. 4. The journals AR-20, AR-21 and AR-22 are related to the “Incasso” functionality. This is common practice in the Netherlands.


Oracle Payables




Oracle Inventory, Purchasing and Order Entry In this chapter accounting issues are described for Oracle Purchasing and Inventory. Only actual journal entries are included in this chapter. Encumbrances are handled in a separate chapter.

Assumptions 1. Inventory is not used in a manufacturing environment. Goods are received, moved between organizations and sold. 2. Receiving of goods is done in two steps. The first step is receiving the goods for inspection. The second step is to deliver the goods to the inventory or other department .

Events

INV Even t nr.

Event name

GL Source

GL Category

Remarks

1

Receipt of inventory item

Purchasing

Accrual/ Receiving

Purchasing

Accrual/ Receiving

The category depends on the way receipt accounting is handled. The category accrual is used when the method is period end. Receiving is used when the receipt journal is generated directly. The same.

Purchasing Purchasing

Accrual/ Receiving Accrual/ Receiving

The same. The same.

Purchasing

Accrual/ Receiving

The same.

Inventory

Inventory

Inventory

Inventory

Inventory

Inventory

Inventory Inventory

MTL MTL

2 3 4

5 6 7 8 9 10

Receipt of expense item Deliver Return to vendor (goods not in stock) Return to vendor (goods in stock) Sales order shipment Cycle count adjustment Miscelleneous Transfer Interorg. Transfer Subinventory Transfer


Oracle Payables




Accounts

Type

Receiving Inspection Purchase Price Variance Receivable Payable Intrasit Inventory Material Outside Processing Material Overhead Overhead Resource Expense Invoice Price Variance Inventory AP Accrual Sales Cost of Goods Sold (COGS) Cost Variance Account Cycle count adjustment Scrap

Asset Expense Asset Liability Asset Asset Asset Asset Asset Asset Expense Expense Liability Revenue Expense

2

X

3

X X

X

X

4

5

6

7

8

9

10

X X

X

X

X

X

X X X X

X

X X

X

X

X X

Expense Expense

X

Expense

Other

Receiving Inspection Purchase Price Variance Receivable Payable Intrasit Inventory Material Outside Processing Material Overhead Overhead Resource Expense Invoice Price Variance Inventory AP Accrual Sales Cost of Goods Sold Cost Variance Account Cycle count adjustment Scrap

1

X

X

Organizatio n

Subinvento ry

X X

X

X X X X X X X X X X X X X X

X X X X X X X X

X X

Accounting entries INV-1 Receive to Inspect


Oracle Payables




Debit

Receiving inspection Inventory AP Accrual*

Credit X X

* This account will be posted Debit when matching an AP Invoice to the related Purchase order.

INV-2 Deliver to Inventory Accounting entry

Debit

Material* Receiving inspection Purchase Price Variance

Credit X

(X)

X (X)

* In case of the use of an expense item on the related Purchase order, this account will be an expense item.

INV-3 Return to Vendor (Goods not in stock)

Accounting entry

Debit

Inventory AP Accrual Receiving inspection

Credit X X

INV-4 Return to Vendor (Goods in stock)

Accounting entry

Debit

Inventory AP Accrual Receiving inspection

Credit X X

Accounting entry

Debit

Receiving inspection Material Purchase Price Variance

Credit X

(X)

X (X)

INV-5 Receive an Expense Item Accounting entry

Debit

Expense account Inventory AP Accrual

Credit X X

INV-6 Sales Order Shipment


Oracle Payables




Debit

COGS Material

Credit X X

INV-7 Cycle count adjustments Accounting entry

Debit

Cycle count adjustment Material

Credit

(X) (X)

(X) (X)

INV-8 Misc. transfer Accounting entry

Debit

Scrap Material

Credit X X

INV-9 Interorg transfer

Accounting entry

Debit

Material (Organization A) Material (Organization B)

Credit X X

Accounting entry

Debit

Receivable (Organization B) Transfer Cost

Credit X X

Accounting entry

Debit

Intransit Payables (Organization A)

Credit X X

INV-10 Subinventory transfers

Accounting entry

Debit

Material (A) Material(B)


Credit X X

Oracle Payables




Notes


Oracle Payables




Oracle Fixed Assets Before we go into the details of Events, Assumptions, Accounts en Accounting Entries, this chapter gives a global introduction of the terminology used within assets concerning functionality that influences the construction of journal transactions. CIP versus Capitalized transactions.

Assets supports three types of Assets, “Capitalized”, “CIP” and “Expensed”; every Assets has a corresponding status. 1. “Expensed” has no Asset journals as a result; the cost of assets has been taken (as expenses in the P&L) in the period the purchase invoice was distributed in general Ledger. 2. “CIP” Assets are not Yet depreciated; 3.

And “Capitalized”

Assets support the following Events: for, “Capitalized” and “CIP” transactions; •

Additions ;

•

Depreciation ;

•

Adjustments ;

Transfers ;

•

•

Reclassifications ;

•

Revaluation’s ;

•

Retirements and ;

Tax accounting.

•

Depending on the type of an Asset, the transaction will be a CIP transaction or a Capitalized transaction. In the third part of this chapter where we will describe the journal transactions. For “Additions” the journals for “CIP” and “Capitalized” will be discussed separately , for all other events Capitalized type will be described. The big difference with CIP is that CIP assets will not depreciate, and has no “accumulated deprecation” to account for in all other events. Asset “Corporate”, “Tax” and “Budget” books types You cannot allow general ledger posting for your budget books. Asset books of the Type “Tax” and “Corporate” produce journal lines if you allow G/L Posting for this Asset Book.


Oracle Payables




Expensed versus Amortized Adjustments;

An adjustment might influence the historical depreciation calculation in retrospect. The correction can be taken (expensed) in the current asset period, or can be spread over the remainder of an asset life (amortized). Both Adjustments types are part of the Dutch’s best practice. The difference is not really the journal (witch accounts are hit), but the difference is the way the amounts are calculated. The only difference in the accounts that are hit is the depreciation journal. Depreciation journals for Expensed adjustments have one extra journal line; The depreciation expense (adjustment) line which represents the part of the depreciation expense that is a result of the adjustment. It is the depreciation expense for the current period as a result of the adjustment on top of the normal periodic depreciation. Prior period transactions versus Current Period transactions;

Any transaction can be relevant for depreciation as of the period the transaction was made in. But it can also influence the depreciation of any number of prior periods in the same fiscal year. If a transactions is subject to prior period effect. It does not influence the journal from the prior period addition , adjustment, transfer, reclassification or retirement itself, but the depreciation transaction as a result of a prior period transaction is different as a depreciation transaction as a result of current period transaction


Oracle Payables




Assumptions Not all functionality of Oracle Fixed Assets is will be discussed in the remainder of this chapter. For the Dutch best practice the following assumptions are made: Depreciation Method Set up: depreciate an asset in the year it is retired is set to Yes Depreciation Books > Calendar Set up: depreciate assets in their first year of life is set to  No Depreciation Books > Accounting rules Set up: Allow Amortize changes is set to  Yes Allow Revaluation is set to  Yes Revalue accumulated Depreciation =  Yes , because the “No”-option will transfer the accumulated depreciation to the revaluation reserve on every revaluation. Amortization of Revaluation Reserve or Retire Revaluation reserve = Yes, there are not both no. revaluation of fully reserved asset is not limited; (empty) Depreciation Books > Natural Accounts Set up: Every account field, has a separate value; only exception is the gain and loss account for COR = (Cost of removal) it can be 1 value. The same goes for POS (Profit of Sale) and NBV (Net Book Value) retired. Intercompany Receivables and Payables clearing account numbers are specific accounts for Assets, they can have the same value. The default Account generator Account is a balance sheet account with al other segment set to zero value (not applicable); Tax-book setup there are no Tax books defined; Investment Tax Credits are not used; life extension factor = (1,0) ; and no life extension ceiling ; No Asset cost, Depreciation, Revaluation and Expense Ceilings are used Deferred Income Tax Liability; is not used no Adjustment Current Earnings depreciation rules and Books are used. •

•

• • •

•

• •

•

•

• • •

•

• •


Oracle Payables




Events The Asset accounts for General Ledger transactions are a result of the recognized Events, Assumptions made in previous paragraphs, and the Account generator set up. Per Event FA-1, FA-2 ext, the most common variations of the relevant accounting entries a mentioned in the Remark section of the table below.

Event number

Event name

GL Category

Payables, Project and third party create Mass Additions. Asset Mass Addition Line Deletions



Additions



Remark

Prefix=FA

1

2

3

 

Purchase Invoice Projects User defined

Different originate from  Payables; Create Mass Additions  Projects; Create Mass Additions ???  SQL-loader  PS This event is mentioned because it specifically has no GL transaction as a result. The transaction should be made manually or be avoided by only deleting Mass addition lines if you also delete a corresponding Mass addition credit line.

Addition CIP Addition

Different Journals for Additions because of: (3a) Capitalized and (3b) CIP Additions   Current and Prior period additions;  (3c) Single and merged Additions  (3d) is the prior period effect of this transaction Different Journals for capitalization because of: Capitalization’s (4a) in the period and (4b)  After the period the asset was added.  Change Asset type to CIP (4c) Decapitalization; PS (It can only be don as a current period transaction) Different Journals for Depreciation because of: (5a) Depreciation for Assets without  adjustments and amortized adjustments, or  (5b) with Expensed adjustments;  (5c); Depreciations for Revaluated Assets and Parameter: Amortize Revaluation Reserve = Yes Different Journals for Additions because of:  6a) Expensed adjustment of recoverable cost ;  6b) Amortized adjustment of recoverable cost ; 6c) Transfer of Source lines from assets  added in a prior period witch result in transfer of cost, transfer of depreciation, and transfer of expense.  (6d) Transfer of Source lines from assets added in the current periods or  (6e) Adding mass addition lines to an existing Asset. Ps. Depreciation Method, Life Adjustments, Rate Adjustments and capacity Adjustments do not directly result in journal transactions. Depending on the effect they have on the depreciation the will influence the amounts of the depreciation transaction (amortized or Expensed) Different Journals for Additions because of:  (7a) The transfer between cost centers results in transfer of cost and depreciation for current period transfers;  (7b) for the prior period expense part in a

N/a



4

Capitalization of CIP Assets

CIP Addition

5

Periodic Depreciation

Depreciation

6

Adjustments

Adjustments CIP Adjustment

7

Transfer  As a assignment transfer  Or as number

Transfer CIP transfer


Oracle Payables


Error: Reference source not found Event number

Event name

Doc Ref: Error: Reference source not found GL Category

Remark

Prefix=FA

of unit adjustment

prior period transfer. (7c)The transfers between balancing segments Different Journals for Reclassification because of: (8a) Current Reclassification, and   (8b) Prior period Reclassification’s; 

8

Reclassification

Reclass & CIP Reclassification

09 A

Retirement

Retirement CIP Retirement

09 B

Reinstatements

Retirement CIP Retirement

10

Revaluations

Adjustments ??? CIP Adjustments ???




Different Journals for Retirement because of:  Whether Cost of removal and Proceeds of sale amount are entered on retirement: 9a) for expensing the Net book value retired Gain (9b) for clearing the COR clearing account, (9c) for clearing the POS clearing account, (9d) for retiring a revaluation reserve  (9b) entries for retirement gain an loss accounts on 1 P&L account;  (9c) Retire Revaluation Reserve = Yes/no Different Journals for Reinstatements because of:  (10a) Number of periods since Retirement (10b) entries for retirement gain an loss  accounts on 1 P&L account;  (10c) Retire Revaluation Reserve = Yes/no Different Journals for Depreciation because of:  (11b) Revalue Accumulated Depreciation = Yes (NO = move the accumulated Depreciation to the Revaluation reserve on revaluation’s. (11c)  Retire Revaluation Reserve = Yes/no (look at the retirement transaction)

Oracle Payables




Accounts Asset uses modifiable Account generator definitions to generate all the required account code combinations (CCID’s) . Ass et Boo k

possible Asset Accounts

Ass et Cate gory

Ass et

Mas s Addi tion Line

Retrieved through Account Generator (*1) definitions

Category Account Names Asset Cost Asset Clearing

X X

CIP – Cost CIP – Clearing

X X

Depreciation Reserve Revaluation Amortization Revaluation Reserve

X X X

Yes

X

No. At leased not always: 

For manual additions, Oracle Assets gets the clearing account from the category (Account Generator)



For mass additions, the clearing account comes from your source system.



(for details exceptions on Account generator rules) Asset Manual, chapter Accounting

Yes

X

No. At leased not always ; ( Identical to the Asset clearing account). Yes Yes Yes

Asset Account Names Depreciation Expense

X

Yes, but not on Reclassification (for details exceptions on Account generator rules) Asset Manual, chapter Accounting

Book Account Names Depreciation Adjustment Net Book Value Retired Gain Net Book Value Retired Loss Proceeds of Sale Gain Proceeds of Sale Loss Proceeds of Sale Clearing Cost of Removal clearing Cost of Removal Gain Cost of Removal Loss Intercompany Accounts Payable Intercompany Accounts Receivable Revaluation Reserve Retired Gain Revaluation Reserve Retired Loss Deferred Depreciation Expense Deferred Depreciation Reserve

X X X X X X X X X X X

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

X

Yes

X

Yes

X X

Yes Yes

(*1) Account generator

Account generator uses a Two-step generation process to generate all the required segment values using 4 Sources, for the potent ional 23 different accounts per asset; The Account generator workflow process is divided into 3 parts using 3 different account name groups .


Oracle Payables




Account name groups

Every one of the 23 account names belongs to only 1 Account name group this results in: • •

The Category Accounts names. Asset Account Name, and Book Account names. •

Sources

Seeded there are 3 specific rules that generate all the segments of the 23 account names. The sources used in these rules are: •

•

•

•

specific natural account values per account name located on the Asset book definition; specific account-code-combinations per account name located on the Asset category definition per account book; a specific account-code-combinations Located on the Asset assignment definition; and default Account generator values located on the Asset book definition.

Generation of asset CCID segments in a nutshell

Seeded the generation works as described below; • •

•

the balancing segment (it is always retrieved from the Asset level) the Natural Account uses a different source per account name (as described in the All other segments get their value sourced from the default Account generator values located on the Asset book definition. Account name - Depreciation Expense – works different, all segments are retrieved from the Asset Assignment definition.

Two-step procedure

The derivation for asset Accounts is a two-step procedure. •

•

The fist time any account is needed for the accounting of a particular asset. account generator will generate the account and store these values per asset/per account name in an interim table for assets ; Every time accounting event for an asset after this first generation Asset will use the stored CCID values from the interim table.


Oracle Payables




Accounting Entries If an asset is depreciated, “Depreciation expense” is always a part of the accounting entry for a particular asset in a given asset period. To make the examples easier to understand the “Depreciation expense” line is excluded of the Accounting entries below. If you look into the examples in the Asset User guide, chapter accounting, the “Depreciation expense” lines are always there. For the ease of comprehension of the entries you will not miss the “Depreciation expense” line. It will only disturb the comprehension process. When you will check the accounting entry against the system or the manual you will notice the difference. Please note that the system and manual are correct, we took the liberty of skipping this line to simplify the examples.

1 ) Relevant non Asset transaction FA-1 Create Mass addition lines Accounting entry

Debit

Asset Clearing Payables or CIP projects

Credit X X

This transactions is a result of Payabl es or Project “Create Mass Addition lines” programs. If you are feeding the Mass addition lines through the Mass addition open interface from a third party system you will have to influence the credit account in this transaction to fit your needs in the flow of your financial transactions.

2 ) Delete Mass Additions transaction FA-2 Delete Mass addition lines Accounting entry

Debit

N/a N/a

Credit X X

This Asset transaction has no GL effect (no GL - transactions as a result). So if you do delete asset within the Mass Addition functionality, Make sure you delete a debit and credit line from mass additions for the same amount. So have Payables (AP) or Project (PA) reverse incorrect transactions so can delete both the debit and the credit line in Asset Mass Additions. If you delete mass addition lines in asset without the reversal in AP and PA your “Asset Clearing account” will not balance at period end. Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Oracle Payables




3) Additions FA-3a Capitalized Addition Accounting entry

Debit

Asset Cost Asset Clearing

Credit X X

This is the normal situation, an automated addition through Mass additions (from Payables, Projects or third party software) or a manual additions (detailed or quick) through the additions forms of the Asset Menu. FA-3b Construction in Progress Addition Accounting entry

Debit

CIP Cost CIP Clearing

Credit X X

Idem As for 3a, but now the asset has the status CIP. FA-3c Capitalized Addition (as a result of Merged Mass addition Lines) Accounting entry

Asset Asset Asset Asset

Debit

Cost Clearing (mass addition line 1) Clearing (mass addition line 2) Clearing (mass addition line 3) *1)

Credit X X X X

Idem As for 3a, but now the capitalized asset has been merged within Mass Additions. PS this can also be in the case for a CIP Asset. (1) For “Addition” journals from mass additions. the Accounting entry will always hit the clearing account as mentioned in the Mass addition Line, no matter what Account generator has defined. FA-3d Addition (prior period effects) Accounting entry

Debit

Depreciation Expense (Adjustment) Depreciation Reserve

Credit X X

This entry occurs when the date placed in service is in a period witch lies before the current Assed period. The missed depreciation is expensed in the financial that corresponds with the current asset period.


Oracle Payables



4 ) Capitalization’s


(status Asset changes from CIP tot Capitalized)

FA-4a Capitalization (in the same FA-period the CIP Asset was added as CIP) Accounting entry

Debit

Asset Cost CIP Clearing

Credit X X

Financially, in GL It is as if the assed has never had the status CIP. The CIP Cost Account is not hit this event. CIP Clearing must be hit because payable has hit this account as well. FA-4b Capitalization (in a FA-period after the CIP Asset was added as CIP) Accounting entry

Debit

Asset Cost CIP Cost

Credit X X

When you capitalize an asset in a period after the period you added it, Oracle Assets creates journal entries that transfer the cost from the CIP cost account to the asset cost account. The clearing account has already been cleared. No further corrections needed because Assets are not depreciated until there capitalized. FA-4c De-Capitalization (in the period the asset was entered) Accounting entry

Debit

CIP Cost Asset Clearing

Credit X X

5) Depreciations There are 4 different depreciation accounting entries: (FA-5a) depreciation entries for assets without adjustments or for assets with amortized adjustments. (FA-5b), depreciation entries for assets with expensed adjustments. Both type’s can be with or without (FA-5c) for the amortization of a revaluation reserve. FA-5a Depreciation (for Asset without or Amortized adjustments ) Accounting entry

Debit

Depreciation Expense Depreciation Reserve

Credit X X

The amount of this journal is influenced by a large number of setting (Asset setup) but the only setting that influence the journal structure is expense/or amortization of adjustments. If there are amortized adjustments the adjustment will be spread over the remainder of the asset live.


Oracle Payables




FA-5b Depreciation (for Asset with Expensed adjustments ) Accounting entry

Debit

Depreciation Expense Depreciation Expense (adjustment) Depreciation Reserve

Credit X X X

If adjustments are expensed the adjustment will influence the P&L in the period the adjustment was made, this on top of normal depreciation. FA-5c Amortizing revaluation reserve Accounting entry

Debit

Revaluation Amortization Revaluation Reserve

Credit X X

Is only possible if the asset is revaluated and the Asset depreciation book checkbox “Amortize Revaluation Reserve” is set to yes.

6) Adjustments There are 4 different accounting entries for the many different possible adjustments to an asset Cost, Method, Life rate an capacity Adjustments. They all result in the same accounting entries. A cost adjustment includes any adjustment that affects the recoverable cost, i.e., a change in cost, salvage value, depreciation, or depreciation expense,. The (4) are • • • •

(FA-6a) - manually performed cost adjustment in the Books window; (FA-6b) - Transfer of Source Lines entered in prior periods; (FA-6c) - Transfer of Source Lines entered in the current period. (FA-6d) - cost adjustment by adding a mass addition to an existing asset using Mass Additions.

Changes to assets that have not been depreciated and changes to CIP assets do not result in “Adjustment” entries since no depreciation has been taken. If you change financial information after you have run depreciation, you must choose whether to expense or amortize the adjustment. For both situations you could get the extra adjusting journal entry. Expensed Adjustment For expensed adjustments, Oracle Assets recalculates depreciation using the new information and expenses the entire adjustment amount in the current period. Expensing the adjustment results in a one–time adjusting journal entry. Amortized Adjustment For amortized adjustments, Oracle Assets spreads the adjustment amount over the remaining life or remaining capacity of the asset. You can set up your amortized adjustments to have a retroactive start date by changing the default amortization start date(usually the system date) to a date in a previous period. Any adjustment amount missed since the amortization start date is taken in the current period. Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Oracle Payables




FA-6a Recoverable cost Adjustment Accounting entry

Debit

Depreciation Expense Depreciation Expense (adjustment *1) Depreciation Reserve

Credit X X X

(1) This line is only there if the adjustment is expensed. Or Amortized with a retroactive date. FA-6b adding mass addition to an existing asset using Mass Additions Accounting entry

Debit


Credit X X

FA-6b Adjustment (transfer of source lines of assets added in prior period) Accounting entry

Asset

Asset Cost Asset Cost Depreciation Expense Depreciation Expense Depreciation Expense (adjustment) *2 Depreciation Reserve Depreciation Reserve

New *1 Old New Old New

Debit

Credit X X X X X

New Old

X X

This could be the case if additions ended up with an incorrect asset. And these lines are transferred to the appropriate assets that have had depreciation in prior asset periods. (1) New and Old refer to the source and destination Asset, Asset generates accounting entries for both assets. (2) This line is only there if the adjustment is expensed. Or Amortized with a retroactive date. FA-6c Adjustment (transfer of source lines of assets added in the current period Accounting entry


Debit

(destination Asset) ( source Asset)

Credit X X

This could be the case if additions ended up with an incorrect asset. And these lines are transferred to the appropriate asset that has no depreciation.


Oracle Payables




7) Transfers FA-7a Transfer (between Cost Centers) Accounting entry

Asset Cost Depreciation (*1) Depreciation Asset Cost Depreciation Depreciation (*2 ) Depreciation

Cost center

New New

Expense Reserve Reserve expense

New Old Old New

expense

Old

Debit

Credit

X X X X X X X

(1) Depreciation for the new cost center in the current period (2) The realized expenses in the past are optionally transferred to the new balancing segment (=prior period effect). The transfer has to be realized as a prior period transaction. FA-7b Transfer (between Balancing Segments) Accounting entry

Balancin g Segmen t

Asset Cost Depreciation Expense (*1) Depreciation Reserve Intercompany Accounts Payables ( *2) Intercompany Accounts Receivable Asset Cost Depreciation Reserve Depreciation expense ( *3 ) Depreciation expense

New New

Debit

Credit

X X

New New

X X

From

X

From From New

X X

X

From

X

(1) Depreciation for the new balancing segment in the current period (2) This journal hits the “Asset Intercompany Account Payables” and “Asset Intercompany Account Receivables” to create a journal transaction that is in balance per Balancing segment. (3) The realized expenses in the passed are optionally transferred to the new balancing segment (=prior period effect). The transfer has to be realized as a prior period transaction

8) Reclassifications FA-8 Reclassifications Accounting entry

Asset Cost Depreciation Reserve Asset Cost Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Categor y

Old Old New Oracle Payables

Debit

Credit

X X X




Categor y

Depreciation Expense (this period) Depreciation Reserve (-/- this period)

Debit

Old

Credit

X

New

X

Oracle Assets does not adjust for prior period expenses when you reclassify Assets

9) Retirements And Reinstatements FA-9A Retirements (*1) Accounting entry

Debit

(1) *1 Asset Cost (1) Depreciation Reserve (1) Depreciation Expense

Credit X

X

*2 )

(1) Net Book Value Retirement (Gain) (1) Net Book Value Retirement (Loss) (2) Proceeds of Sale Clearing

*3 ) *3 )

(2) Proceeds of Sale (Gain)

*3 ) *3 ) *3 ) *3 )

(2) Proceeds of Sale (Loss) (3) Cost of Removal (Gain) (3) Cost of Removal (Loss) (3) Cost of Removal Clearing

(X) (X)

*4 ) *4 ) *4 ) *4 ) *4 ) *4 )

(4) Revaluation Reserve (4) Revaluation Reserve Retired (Gain (4) Revaluation Reserve Retired (Loss)

X

*3 ) *3 )

(X)

(X) (X)

(X) (X) (X) (X)

*5 ) *5 ) *5 )

(X)

X (X) (X)

(1) This accounting entry is build from four separate parts: • • • •

Retirement of Asset Book Value, Expense the proceeds of sale, Expense the cost of removal, Retirement of the value of the Revaluation reserve

(*2) The Depreciation expense will be reversed from retirement date up the current period if it is a prior period retirement. (*3) (part 1-4) The (Gain) accounts will be hit, if the sum of the P&L elements is a positive revenue. The (Loss) accounts are hit if the sum is a negative result; The P&L elements are ( NBV retired, Revaluation reserve retired, cost of removal and proceeds of sale) . If all Gain and loss account have the same value (= the same account) Assets will summarize retirement P&L accounts to one line. If not separate lines will be account for 4 different account names.


Oracle Payables




(*4) (Part 2-3) The accounting for proceed of sales (POS) and Cost of removal (COR) depend on the amount mentioned for POS and COR fields in the retirement FORM; => ( No amount = no transactions) (*5) (Part 4)This accounting entry is only possible if the asset is revaluated and the Asset depreciation book checkbox “Retire Revaluation Reserve” is set to yes.


Oracle Payables




FA-9B Reinstatements ( reversal of retirement *1) (*1) Accounting entry

Debit

(1) *1 Asset Cost (1) Depreciation Reserve (1) Depreciation Expense

Credit

X X

*2 )

(1) Net Book Value Retirement (Gain) (1) Net Book Value Retirement (Loss) (2) Proceeds of Sale Clearing

*3 ) *3 )

(2) Proceeds of Sale (Gain)

*3 ) *3 ) *3 ) *3 )

(2) Proceeds of Sale (Loss) (3) Cost of Removal (Gain) (3) Cost of Removal (Loss) (3) Cost of Removal Clearing

(X) (X)

*4 ) *4 ) *4 ) *4 ) *4 ) *4 )

(4) Revaluation Reserve (4) Revaluation Reserve Retired (Gain (4) Revaluation Reserve Retired (Loss)

X

*3 ) *3 )

(X)

(X)

(X) (X) (X) (X) (X)

*5 ) *5 ) *5 )

(X) X

(X) (X)

(1) All remarks on retirements are also relevant for Reinstatements (remarks FA-9A (1 trough 5). But the accounting entries have switched Debit and Credit with the transactions FA-9A for Retirements. (2) Depreciation Expense will also be hit if there are periods in between retiring and reinstating. (For the depreciation of missed periods)

10) Revaluation FA-10 Revaluation Accounting entry

Debit

Asset Cost Depreciation Reserve Revaluation Reserve (*1)

Credit X

X X

(1) This journal is as presented her only when the Asset Book checkboxes Revaluation allowed, and revalue “Depreciation Reserve” are both set to yes. (2) For other variation of revaluation journals look at the examples made in “Journal entries for revaluations” in the chapter Accounting of the Asset user Guide.


Oracle Payables




Notes FA-1) Setup requirements in Fixed Assets Relevant to Accounting entries from Assets FA-2) Common setup choices that influence “FA Account generator”; FA-3) Common customizations on for FA Account generator”; FA-4) Customized Account generator definitions; FA-5) Asset Accounting Gotcha’s FA-6) How do Asset journals, end up in General ledger; FA-7) Recoverable cost, versus other adjustments; FA-8) Tax accounting

FA-1) Setup requirements in Fixed Assets Relevant to Accounting entries from Assets If you want to create journal entries from your tax book, your tax book must have the same account structure, general ledger calendar, and functional currency as the associated corporate book. And you must enter a different set of books for your tax book and the associated corporate book. You cannot create journal entries from your budget book. The create mass additions process only imports mass addition lines for Assets charged to accounts that are already set up in your asset categories. And are defined as an Asset account (Account type). So the clearing account you use in Payables must be used in the asset Setup as clearing account on one of the Asset categories. And asset-clearing accounts must be set op in GL as an Asset account-type. If You are working with more than 1 SOB an more than 1 Operating Unit Payables must be tied to the same general ledger set of books as the corporate Asset book for which you want to create mass additions in Oracle Assets, and You cannot create mass additions for tax books. •

•

•

•

FA-2) Common setup choices that influence “FA Account generator”;

The setup choices mentioned below are common in a Dutch implementation: •

•

•

All Potential Asset Accounts have their own value in the flex field segment natural Account. Default account combination has “00000-0000-xxxxx-00000” on all segments except company and account. The natural account (xxxxx) is a balance sheet account. Common Modifications are the adjustment to the Asset book account into two type (P&L) and (Balance sheet), where the balance sheet accounts have no Cost center, and all the (P&L) Accounts do have a cost enter, as for depreciation expense.


Oracle Payables




FA-3) Common customizations on for FA Account generator”;

The customizations mentioned below are common in a Dutch implementation: • •

•

The Cost center is derived from the asset Expe nse Account The Balance sheet accounts are generated separately forms P&L Accounts in the Account generator process for book control accounts (because of the required value “n/a” on balance sheet accounts. And the “Cost center value” for all P&L accounts. Standard derivation from account generator By default, Oracle Assets creates journal entries without o cost center level detail, except for depreciation expense. Using the default assignments, it creates journal entries o using the balancing segment from the distribution line in the Assignments window and the account segment. The Account Generator gets the other segments from the o default segment values you entered for the book. You can modify the default Account Generator process so o that Oracle Assets creates journal entries to a different detail level.

FA-5) Asset Accounting Gotcha’s FA-5.1) Period names of Asset Calendar must map identically to the defined GL calendar names. So check the GL calendar definition before defining an Asset depreciation calander!!!

FA-5.2) Customized Account generator definitions Patches can overwrite customized Account Generator definitions, If you do not notice this, you’re Asset accounting is incorrect!!!

•

•

•

Make sure you have tested and approved all transaction before you go in production. (See remark “Account generator determines General ledger accounts only ones for every asset.”) Save a copy of the approved and accepted “Workflow definitions: for FA Account generator” on a local ore common disk, (not only in the database), before you go in production. Applying Patches can overwrite workflow definitions. Re-save the your customized “Workflow definitions: for FA Account generator” after every alteration

FA-5.3) Account generator determines General ledger accounts only ones for every asset.

The values are generated only ones; Account Generator is a two-step process. In the first step (the initial “Generate accounts” run), the accounts are generated for every new Asset). Account generator stores


Oracle Payables




the result of the process in FA_DISTRIBUTION_ACCOUNTS; fixed assets will use these accounts. So you must get the initial run correct. Correcting the Accounts generated in a production situation is not a simple task. !!!

Changes to Account Generator have no effect on the existing Asset distributions, it does influence new asset (distributions). To change the GL accounting for assets you need to force re-generation of the asset Accounts: So Make sure you’re customized Account generator process is saved in the production database before you run the “Asset depreciation run” or “Generate Accounts” for the first time. !!! •

•

Production environment (Database) ; Force Oracle Assets to create new distribution o lines (rows in; FA_DISTRIBUTION_ACCOUNTS) by. “Mass Transfers”. Test and implementation environments (Database); TRUNCATE FA_DISTRIBUTION_ACCOUNTS, and o rerun Generate Accounts process.

FA-6) How do Asset journals, end up in General ledger;

The Generate Account, and "Create Journal" programe's that are a part of the Depreciation run, generate, create and transfer the Asset Journal transactions to GL. Up to Release 11i Asset was/is a little different from other modules. The journal does not have to be imported in General ledger. The accounting entries end up unposted General Ledger without having to “Import any asset transactions” in GL. FA-7) Recoverable cost, versus other adjustments (Life time-; Depreciation Method-, Rate- and Capacity Adjustments.)

Recoverable cost Adjustments Adjustments to the “Asset recoverable cost (1)” can be a result of an asset cost adjustment in an Asset form and the transfer of source lines (2) from one asset to the other. But it can also be a cost adjustment by adding a “Mass addition line” to an existing Asset. All these “Recoverable Cost Adjustments” result in a different Asset Cost and the resulting journal transactions all hit the Asset Cost Account of the relevant Asset Category. All other adjustments Other Adjustments (depreciation method, depreciation rate or capacity adjustments) do not result in a different journal. But the adjustments influence the outcome of the depreciation calculation.

1

Recoverable cost Adjustments is the amount that needs to be recovered by depreciation (ea. The recoverable cost is the portion of the asset cost that can be depreciated. It is the current cost less the salvage value. 2 Transfer of source lines = is the transfer of lines that initiated the value (Asset Cost) of the asset; (ore part of this value). Source line transfers change the asset cost, depreciation reserve and expense of old and the new asset. Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Oracle Payables




FA-8) Tax accounting

Tax Accounting is not an issue for the majority of Dutch companies because they will account the depreciation in their “Company Asset Depreciation Books” in a manner that will be accepted by the Dutch fiscal authorities. Therefore usually Tax-books will not be required. As a result we will not discuss the influence of tax related functionality for the asset journal transactions. •

•

•

•

There is no regulation for Asset cost-, Depreciation-, Revaluationand Expense Ceilings; Functionality as “Investment Tax credits” are not used since the “WIR” regulated is abandoned in Holland. Adjustment Current Earnings depreciation rules and Books are not used in Holland; There is no regulation that would introduce the use of life extension factor; or life extension ceilings; Revaluation of fully reserved asset is not common practice; Deferred Income Tax Liability; is sometime used because there are some regulations for accepted economic life, but these rules are also common practice for the commercial valuation of assets. •

•


Oracle Payables




Oracle Project Accounting In this chapter accounting issues are described for the application Oracle Project Accounting. Before getting to the assumptions and a description of the accounting entries it is important to know the basic elements of Project Accounting. Elements that influence the generation of accounting entries are described below. Project Type

The project type determines how Oracle Projects processes costs (expenditure items) for a project. It provides defaults for and controls project entry and processing. You must associate each project type with a project type class: 1. Use the Indirect project type class to collect and track expenditure item costs and labor hours for overhead activities. 2. Use a Capital project type class to collect and track costs and labor hours for asset development activities that you plan to capitalize as one or more assets. 3. Use a Contract project type class to collect and track costs, labor hours, revenue, and billing for services performed for and reimbursed by a client

Distribution Rule

The project type determines which revenue distribution rule appears as the default value for this field. It also determines which other revenue distribution rules you can choose from. Oracle Projects predefines the following revenue distribution rules: 1. Cost/Cost Accrue revenue and bill using the ratio of actual cost to budgeted cost. 2. Cost/Event Accrue revenue using the ratio of actual cost to budgeted cost , and bill based on events. 3. Cost/Work Accrue revenue using the ratio of actual cost to budgeted cost , and bill as work occurs. 4. Event/Event Accrue revenue and bill based on events. 5. Event/Work Accrue revenue based on events, and bill as work occurs. 6. Work/Event Accrue revenue as work occurs, and bill based on events. 7. Work/Work Accrue revenue and bill as work occurs. Costing

Costing is the processing of expenditures to calculate their cost to each project and determine the GL accounts to which the costs will be posted. Costing is performed for the following types of expenditures: Error: Reference source not found File Ref: 127736526.doc (v. Error: Reference source not found )

Oracle Payables



Expenditure type


Remark

Labor Expense Reorts Usages Miscellaneous Transactions Burden Transactions Supplier Invoices from Oracle Payables Expenditures submitted from Self-Service Expenses/ Self-Service Time Imported expenditures Adjusted expenditures in Oracle Projects which need re-costing

Burdening (Cost Plus Processing)

Burdening (also known as cost plus processing) is a method of calculating the burden costs by applying one or more burden cost components to the raw cost amount of each individual transaction. Revenue–Based Cost Accrual

Cost accruals are the accounting transactions to account for expenses in the same accounting period in which revenue is generated. Cost accruals are also referred to as Cost of Goods Sold or Cost of Sale s. With cost accruals, you initially account for the costs incurred as an asset in a cost work in process (WIP) account. You determine whether you account raw or burdened cost as the cost WIP. When you accrue revenue, the costs are recognized as expense by using cost accruals. Cross–Charge

Allow charges from other operating units Intercompany Billing

Intercompany billing, a processing option within the cross charge feature, generates invoices for work performed between two organizations. Inter–Project Billing.

Inter–project billing generates invoices for work performed between two projects. Borrowed and Lent

The borrowed and lent method creates accounting entries to pass costs or share revenue without generating internal invoices. Events

Examples of events include an invoice reduction, a performance bonus, or a revenue write–off.


Oracle Payables




Autoaccounting

Oracle Projects creates many different accounting transactions throughout its business cycle (when posting labor cost debits and labor revenue credits, for example). You can use AutoAccounting to specify how to determine the correct general ledger account for each transaction. Account generator

When you enter project information in Purchasing and Payables, account generator create account code combinations for use in purchasing requisitions, purchase orders, and payables supplier invoices.

Assumptions 1. Capital Projects (integration with Oracle Fixed Assets) are not defined. Only projects with the type of Indirect (Overhead, internal projects) and the type of Contract are used. 2. The expenditure types Labor, Usage and Expense reports are used. Not used are Burden transactions, Cross Charging, WIP tranactions and Borrowed and Lent. 3. Concerning revenue accounting the revenue as well as the invoice are based on distribution rules. There is no revenue based on Cost accrual and percent complete. Borrowed and Lent is not used either.

Events

PA Event number

Event name

GL Category

Remark

1

Create Timecards

Labor Cost

2

Create expense Reports Create Usage Logs

Through Expenditure batches or Import Through Self Service Time Distribute and Transfer to Accounts Payables

Usage Cost

3 4

5 6 7

Create Miscellaneous Transactions Breate Burden Transactions Create purchase Orders Create Adjustments

Miscellaneous Transactions Burden Cost Purchase Orders

Project Related information entered in Oracle Purchasing. Mass Adjustments functionality

8

Create Supplier Invoices

Purchase Invoices

The account is generated by Account Generator (Workflow builder)

9

Create Revenue/Invoices Create WIP

Revenue

The Invoice is transferred to Account Receivables and the revenue is transferred to GL

10

WIP


Oracle Payables




Project AutoAccounting functions and processes

Each accounting transaction is identified by an AutoAccounting function. AutoAccounting functions are components of programs that you submit to generate accounting entries. The Following functions are mostly used:

Funtion/ Account

Part of which processes

Remark

Labor Cost Account

-Distribute Labor Costs -Interface Labor Cost to GL

Labor Cost Clearing Account

-Distribute Labor Costs -Interface Labor Cost to GL

Determines cost account for all labor items, including straight time and overtime Determines clearing account for labor costs

Labor Revenue Account

-Generate Draft Revenue -Interface Revenue to GL -Interface Invoices to Receivables -Distribute Expense Reports Costs

Expense Report Cost Account Expense Report Liability Account Expense Report Revenue Account Misc Trans Clearing Account Misc Trans Cost Account Misc Trans Revenue Account Usage Cost Account Usage Cost Clearing Account Usage Revenue Account

Revenue and Invoice Accounts Supplier Invoice Cost Account Supplier Invoice Revenue Account Event Revenue Account

-Interface Expense Reports -Generate Draft Revenue -Interface Revenue to GL -Distribute Usage/Miscellaneous Costs -Interface Usage and Miscellaneous Costs to GL -Distribute Usage/Miscellaneous Costs -Generate Draft Revenue -Interface Revenue to GL -Interface Invoices to Receivables -Distribute Usage/Miscellaneous Costs -Distribute Usage/Miscellaneous Costs -Interface Usage and Miscellaneous Costs to GL -Generate Draft Revenue -Interface Revenue to GL -Interface Invoices to Receivables -Generate Draft Revenue -Interface Revenue to GL -Interface Invoices to Receivables -Distribute Supplier Invoice Adjustments Costs -Generate Draft Revenue -Interface Revenue to GL -Interface Invoices to Receivables -Generate Draft Revenue -Interface Revenue to GL -Interface Invoices to Receivables

Determines revenue account for labor items Determines cost account for expense report items Determines liability account for expense report costs Determines revenue account for expense report items Determines clearing account for Miscellaneous Transaction Items Determines cost account for Miscellaneous Transaction Items Determines revenue account for Miscellaneous Transaction Items Determines cost account for usage items Determines clearing account for usage costs Determines revenue account for usage items Determines accounts to track revenue and receivable Determines cost account for adjusted supplier invoice items Determines revenue account for supplier invoice items Determines revenue account for revenue events

Accounting entries


Oracle Payables




Below are some examples of accounting entries that can be made. Not all the transactions are descriped but the most common one’s. PA- Labor cost Account Accounting entry

Debit

Labor expense Payroll clearing

Credit X X

PA - Miscellaneous Transaction Accounting entry

Debit

cost account for Miscellaneous Transaction clearing account for Miscellaneous Transaction

Credit X X

PA - Burden Transaction Accounting entry

Debit

cost account for Burden Transaction clearing account for Project Burden Transaction

Credit X X

PA - cost account for usage Accounting entry

Debit

cost account for usage Usage Cost Clearing Account

Credit X X

PA – Expense account Accounting entry

Debit

Expense account Payables liability

Credit X X

PA – Event Revenue accounting Write on/manual/Automatic Accounting entry

Debit

Asset account revenue account

Credit X X

PA – Unbilled Receivable


Oracle Payables




Debit

asset account(unbilled receivables account) Revenue account

Credit X X

PA – Accounts Receivable Accounting entry

Debit

asset account (usually an accounts receivable account) unbilled receivables asset account or the unearned revenue liability account

Credit X X

PA – Unearned Revenue Account Accounting entry

Debit

receivables asset account liability account

Credit X X

Notes There are some functions which can hold more the one transaction. This can be usefull if you have different accounting rules for the same function. For example the Labor Cost Account function has multiple transactions: Indirect Private Labor, Indirect Public Labor, Private Billable Labor, Private Non–Billable Labor, Public Billable Labor, Public Non–Billable Labor, All Labor, All Capital, All Contract, All Indirect, Private Capital, Private Non–Capital, Public Capital, Public Non–Capital. If you only have one accounting rule for labor costs you can set up the “All Labor” transaction. However if you want to make an accountingdifference between “Indirect” and “Contract” projects you have to set up “ Contract, All” and “Indirect, All “ .


Oracle Payables




Encumbrance Accounting In this chapter encumbrance accounting issues are described. Encumbrance accounting is supported by Oracle Purchasing, Oracle Payables and Oracle General Ledger. Compared to actual accounting as described in the chapters before, almost no system accounts are involved. More complex is the encumbrance process itself. It is not just one journal at a certain point of time but a serie of moments at which encumbrance amounts are posted, liquidated and posted again.

Assumptions 1. It is possible to enter Encumbrance journals in Oracle General Ledger directly. However this is not common practice and will not be covered in this chapter as an event. Usually encumbrances are created from events in Oracle Purchasing and Payables. 2. Encumbrance journals are categorized by a type. It is common to define the type of Commitment for Requisitions and the type of Obligation for Purchase Orders and Invoices. When the types for Invoice and Purchase Order are the same no additional encumbrance journal will be generated at the time of approving a matched invoice. 3. The charge account and the budget account have the same value. In the Accounts and Accounting entries chapters these accounts are identified together as the expense account.

Events

Eve nt nr.

Event name

GL Source

GL Category

Encumbranc e Type

Remarks

1

Requisition

Purchases

Commitment

When reserving or approving a Requisition.

2

Cancel Requisition

Purchases

Commitment

3

Purchase order

Purchases

Cancel Purchase order

Obligation/ Commitment Obligation

When reserving or approving a Purchase Order.

4 5

Invoice (unmatched)

Purchasin g Purchasin g Purchasin g Purchasin g Payables

Invoice

When approving the invoice.

6

Invoice (matched)

Payables

7

Receipt

Purchasin g

Invoice/ Obligation Obligation

When posting the journals from AP to GL. When posting the journals from Purchasing to GL.

Purchases Purchase Invoice Purchase Invoice Receiving


Oracle Payables




Accounts

Type

Reserve for Encumbrance Expense

2

3

4

5

6

7

Asset

X

X

X

X

X

X

X

Expens e

X

X

X

X

X

X

X

Req/ PO/ Invoice

Reserve for Encumbrance* Expense**

1

Set of Books X

X

* This account is always generated in General Ledger when posting the journals. ** At a requisition and PO this account is generated by Account generator. When entering an invoice in AP this account is only generated by Account generator when a project is involved.

Accounting entries

ENC-1 Requisition Accounting entry

Debit

Expense (Commitment) Reserve for Encumbrance (Commitment)

Credit X X

ENC-2 Cancel requisition Accounting entry

Debit

Expense (Commitment) Reserve for Encumbrance (Commitment)


Oracle Payables

Credit X X




ENC-3 Purchase order Accounting entry

Debit

Expense (Obligation) Reserve for Encumbrance (Obligation) Expense (Commitment) Reserve for Encumbrance (Commitment)

Credit X X X X

ENC-4 Cancel Purchase order Accounting entry

Debit

Expense (Obligation) Reserve for Encumbrance (Obligation)

Credit X X

ENC-5 Invoice (unmatched) Accounting entry

Debit

Expense (Obligation) Reserve for Encumbrance (Obligation) Expense (Obligation) Reserve for Encumbrance (Obligation)

Credit X X X X

The debit entry of the Expense account takes place after the invoice is approved and the concurrent program Program – Create Journals is ran. The credit entry of the Expense account takes place when the program Transfer Journals to GL is ran.

ENC-6 Invoice (matched) Accounting entry

Debit


Credit X X

The debit entry of the Expense account has already taken place in Oracle Purchasing. Because the encumbrance type for Purchase orders and Invoices is both Obligation (Assumptions) no debit entry takes place when the matched invoice is approved.

ENC-7 Receipt


Oracle Payables




Accounting entry

Debit


Credit X X

This journal entry only takes place when receipt accounting is implemented.

Notes

1. To import encumbrance journals in Oracle General Ledger the program Create Journals has to be run. This is NOT the case for encumbrance journals that are triggered by the events Invoice (matched & unmatched) and Receipt. These are imported by the program Import Journals. The reason is that the timing of these journals is related to the actual journals. 2. An encumbrance journal will be balanced by the Reserved for Encumbrance Account. This happens when the journals are posted in General Ledger.


Oracle Payables


Accounting for all modules

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