Accounts Receivables Accounting Flow

Accounts Receivables Accounting Flow

Receivables creates default accounts for revenue, receivable, freight, tax, unearned revenue, unbilled receivable, finance charges, and AutoInvoice clearing (suspense) accounts using the information specified in your AutoAccounting structure.

AR Transactions

When a regular AR invoice is entered, Receivables creates the following journal entry:

        DR Receivables

                       CR Revenue

                       CR Tax (if you charge tax)

                       CR Freight (if you charge freight)

AR Receipt

When cash is received, Receivables creates the following journal entry:

        DR Cash

                       CR Receivables

Other Scenarios for Accounts Receivables Accounting Are

Bill in Arrears

If you enter an invoice with a Bill in Arrears invoicing rule, Receivables creates the following journal entry:

In the first period of Rule:

        DR Unbilled Receivables

                       CR Revenue

In all periods of Rule, for the portion that is recognized:

        DR Receivables

                       CR Unbilled Receivables

                       CR Tax (if you charge tax)

                       CR Freight (if you charge freight)

Bill in Advance

If you enter an invoice with a Bill in Advance invoicing rule, Receivables creates the following journal entries.

In the first period of the rule:

        DR Receivables

                       CR Unearned Revenue

                       CR Tax (if you charge tax)

                       CR Freight (if you charge freight)

In all periods of the rule for the portion that is recognized.

        DR Unearned Revenue

                       CR Revenue

Accounts Receivables Credit Memos

When you credit an invoice, debit memo, or chargeback, Receivables creates the following journal entry:

        DR Revenue

        DR Tax (if you credit tax)

        DR Freight (if you credit freight)

                       CR Receivables (Credit Memo)

        DR Receivables (Credit Memo)

                       CR Receivables (Invoice)

When you credit a commitment, Receivables creates the following journal entries:

        DR Revenue

                       CR Receivables

Commitments

When you enter a deposit, Receivables creates the following journal entry:

        DR Receivables (Deposit)

                       CR Unearned Revenue

When you enter an invoice against this deposit, Receivables creates the following journal entries:

        DR Receivables (Invoice)

                       CR Revenue

                       CR Tax (if you charge tax)

                       CR Freight (if you charge freight)

        DR Unearned Revenue

                       CR Receivables (Invoice)

When you apply an invoice to a deposit, Receivables creates a receivable adjustment against the invoice. Receivables use the account information you specified in your AutoAccounting structure to create these entries.

When cash is received against this deposit, Receivables creates the following journal entry:

        DR Cash

                       CR Receivables (Deposit)

Receipts

When you enter a receipt and fully apply this receipt to an invoice, Receivables creates the following journal entry:

        DR Cash

                       CR Receivables

When you enter an unapplied receipt, Receivables creates the following journal entry:

        DR Cash

                       CR Unapplied

When you enter an unidentified receipt, Receivables creates the following journal entry:

        DR Cash

                       CR Unidentified

When you enter an on-account receipt, Receivables creates the following journal entry:

        DR Cash

                       CR On-Account

When your receipt includes a discount, Receivables creates the following journal entry:

        DR Receivables

                       CR Revenue

        DR Cash

                       CR Receivables

        DR Earned/Unearned Discount

                       CR Receivables

Receivables uses the default Cash, Unapplied, Unidentified, On-Account, Unearned, and Earned accounts that you specified in the Remittance Banks window for this receipt class.

When you enter a receipt and combine it with an on-account credit (which increases the balance of the receipt), Receivables creates the following journal entry:

        DR Cash

                       CR Unapplied Cash

To close the receivable on the credit memo and increase the unapplied cash balance, Receivables creates the following journal entry:

        DR Receivables

                       CR Unapplied Cash

When you enter a receipt and combine it with a negative adjustment, Receivables creates the following journal entries:

        DR Cash

                       CR Receivables (Invoice)

        DR Write-Off

                       CR Receivables (Invoice)

Set up a Write-Off account when defining your Receivables Activity.

When you enter a receipt and combine it with a positive adjustment, Receivables creates the following journal entries:

        DR Cash

                       CR Receivables (Invoice)

        DR Receivables (Invoice)

                       CR Write-Off

When you enter a receipt and combine it with a Chargeback, Receivables creates the following journal entries:

        DR Cash

                       CR Receivables (Invoice)

        DR Receivables (Chargeback)

                       CR Receivables (Invoice)

        DR Chargeback

                       CR Receivables (Chargeback)

Set up a Chargeback account when defining your Receivables Activity.

Accounts Receivables Auto Accounting

Accounts Receivables Auto Accounting:

Define Auto Accounting to specify how you want Receivables to determine the general ledger accounts for transactions that you enter manually or import using Auto Invoice. Receivables create default accounts for revenue, receivable, freight, tax, unearned revenue, unbilled receivable, finance charges, bills receivables accounts, and Auto Invoice clearing (suspense) accounts using this information. When you enter transactions in Receivables, you can override the default general ledger accounts that Auto Accounting creates. You can control the value that Auto Accounting assigns to each segment of your Accounting Flex field, such as Company, Division, or Account. You must define Auto Accounting before you can enter transactions in Receivables.

To define Auto Accounting:

1. Navigate to the Automatic Accounting window.

2. Enter the Type of account to define. you may Choose from the following to configure the type of Account you wish to setup the rule for

Auto Invoice Clearing: The clearing account for your imported transactions. Receivables use the clearing account to hold any difference between the specified revenue amount and the selling price times the quantity for imported invoice lines. Receivables only use the clearing account if you have enabled this feature for the invoice batch source of your imported transactions.

Bills Receivable: The bills receivable account for your transaction. Receivables use this account when you exchange transactions for bills receivable.

Factored Bills Receivable: The factored bills receivable account for your bills receivable transactions.

Freight: The freight account for your transaction.

Receivable: The receivable account for your transaction.

Remitted Bills Receivable: The remitted bills receivable account for your bills receivable transactions.

Revenue: The revenue and finance charges account for your transaction.

Tax: The tax account for your transaction.

Unbilled Receivable: The unbilled receivable account for your transaction. Receivables use this account when you use the Bill In Arrears invoicing rule. If your accounting rule recognizes revenue before your invoicing rule bills it, Receivables uses this account.

Unearned Revenue: The unearned revenue account for your transaction. Receivables use this account when you use the Bill In Advance invoicing rule. If your accounting rule recognizes revenue after your invoicing rule bills it, Receivables uses this account.

Unpaid Bills Receivable: The unpaid bills receivable account for your bills receivable transactions.

For each segment, enter either the table name or constant value that you want Receivables to use to get information. When you enter an account Type, Receivables displays all of the segment names in your Accounting Flexfield Structure. Segments include such information as Company, Product, Department, Account, and Sub–Account. Receivables let you use different table names for different accounts. Choose one of the following table names:

Bill To Site: Use the bill–to site of the transaction to determine this segment of your revenue, freight, receivable, Auto Invoice clearing, tax, unbilled receivable, and unearned revenue account.

Drawee Site: Use the site table to determine this segment of your bills receivable, factored bills receivable, and remitted bills receivable and unpaid bills receivable account.

Legal Entity in R12

Legal Entity:

Legal Entity represents a legal company for which Fiscal and Tax reports are prepared. A Legal Entity can Model to an Enterprise, a Designated Legal unit which is recognized by legal authorities in a country. Legal entity is a business entity that is known to exist to the outside world. Internal organizations or divisions are not legal entities themselves, but are just part of it. In the Multi Organization structure various legal entities could share the same ledger. Both legal entities and operating units are associated with the ledger and the relationship between the legal entity and operating unit is derived based on the ledger.

A legal Entity can be associated to Single Ledger, Multiple Legal Entities can be Associated to a Ledger.

A Legal Entity can be defined using two different Navigations.

• Legal Entity pages of Accounting Setup Manager
• Legal Entity pages in Legal Entity Configurator

The only difference between the above two is that Balancing Segment Value can be assigned to legal entities using Accounting Setup Manager.

How Legal Entity Is Mapped to Different Functionalities in Oracle Application R12:

• Accounting Structures --> Legal Entity is mapped to Balancing Segment Values and Ledgers
• E Business Tax --> Legal entity is used to identify the Jurisdiction and the parties and where they are registered or located to determine the Tax applicability
• Bank Accounts --> In Oracle Applications R12 Legal Entity is the Owner of the particular bank account be it a Internal or Remittance bank account. And can be used by The Operating Unit which shares the same ledger as that of the Owning Legal entity.
• Payables and Receivables -->  the Legal Entity is stamped on the transactions and used to identify the Legal Owner for Legal reporting as well as Tax calculation. The transactions exists within an OU and that OU has a ledger which will account the transactions, if a transaction has more than one LE associated with it then a hierarchy of LE derivation is used to default an LE. Ideally The Legal entity is the owner of that transaction.
• Intercompany Accounts and Intercompany Processing Rules --> Intercompany journals involve balancing segment values that map to different legal entities. These journals are balanced for each legal entity by using their intercompany accounts.

Designing Accounts Receivables Interface

Designing Accounts Receivables Interface

Designing a Receivables interface is a very important task of any Oracle Applications Receivables Implementation. Hence it is always required to create a Receivables Interface.

In Oracle Application R12 the Receivables Invoice Interface has two level of details, which are

AR Invoice transaction Lines

Transaction lines can be used for populating the Majority of details in the AR invoice interfaces. And hence this is the most important table to insert the data in.

AR invoice Transaction Distribution

Though the Distributions are used for deriving the accounting of an AR transaction, and this can directly be done using the AR Auto accounting rules, data can be inserted in this table for Recevables and Revenue Accounting if Accounting required on lines is more complex than Auto Accounting rules and cannot be managed there.

Below is a Insert script which can be leveraged for Inserting records in AR Invoice transaction Lines

RA_INTERFACE_LINES_ALL

AR Invoice transaction Lines Interface Insert

INSERT INTO Apps.ra_interface_lines_all

(

INTERFACE_LINE_ID,

INTERFACE_LINE_CONTEXT,

--INTERFACE_LINE_ATTRIBUTE1,

--INTERFACE_LINE_ATTRIBUTE2,

INTERFACE_LINE_ATTRIBUTE3,

BATCH_SOURCE_NAME,

SET_OF_BOOKS_ID,

LINE_TYPE,

DESCRIPTION,

CURRENCY_CODE,

AMOUNT,

CUST_TRX_TYPE_NAME,

CUST_TRX_TYPE_ID,

--TERM_NAME,

TERM_ID,

ORIG_SYSTEM_BILL_CUSTOMER_ID,

ORIG_SYSTEM_BILL_ADDRESS_ID,

CONVERSION_TYPE,

CONVERSION_DATE,

CONVERSION_RATE,

TRX_DATE,

TRX_NUMBER,

-- LINE_NUMBER,

UOM_CODE,

UOM_NAME,

ORG_ID

)

VALUES

(

AR.RA_CUSTOMER_TRX_LINES_S.NEXTVAL,

<INTERFACE ATTRIBUTE CONTEXT 9IF ANY),

'GL|98765432|8',

<AR INVOICE SOURCE>,

1002,

'LINE',

'KTEST FOR NBL IC AR INV 090208- with DIST',

'USD',

111,

<AR TRANSSACTION TYPE>,

11920,

--NA

4,

<CUSTOMER ID>,

<CUTOMER SITE ID>,

'User',

TRUNC(SYSDATE),

1,

TRUNC(SYSDATE),

<AR INVOICE NUMBER>,

--NA

'EA',

'EA',

<ORG_ID>

);

Below is a Insert script which can be leveraged for Inserting records in AR Invoice transaction Distribution

RA_INTERFACE_DISTRIBUTIONS_ALL

AR Invoice transaction Distribution Interface Insert

INSERT INTO Apps.RA_INTERFACE_DISTRIBUTIONS_ALL

(

INTERFACE_DISTRIBUTION_ID,

INTERFACE_LINE_ID,

INTERFACE_LINE_CONTEXT,

INTERFACE_LINE_ATTRIBUTE3,

ACCOUNT_CLASS

,AMOUNT

,PERCENT

,CODE_COMBINATION_ID

,SEGMENT1

,SEGMENT2

,SEGMENT3

,SEGMENT4

,SEGMENT5

,SEGMENT6

,SEGMENT7

,ORG_ID

)

VALUES

(

AR.RA_CUST_TRX_LINE_GL_DIST_S.NEXTVAL,

AR.RA_CUSTOMER_TRX_LINES_S.CURRVAL,

<ATTRIBUTE CONTEXT if required>,

'GL|98765432|8',

'REV' (DEFINE THE DISTRIBUTION TYPE “REV” FOR Revenue and “REC” for receivables)

,111

,100

,20798 <code combination id derived on the basis of Code> this is over written if you pop[ulate the actual segment values.>

,'<SEGMENT1>'

, <SEGMENT2>

, <SEGMENT3>

, <SEGMENT4>

, <SEGMENT5>

, <SEGMENT6>

, <SEGMENT7>

,ORG_ID

);

Deep Dive in AP/AR Netting In R12

Deep Dive in AP/AR Netting In R12

Prior to Release 12, there were several netting solutions in the eBusiness Suite:

Contra-Charging

This Globalization feature was originally a solution for Germany in Release 11, but then it became a Regional Globalization feature in Release 11i.

US Federal Financials Netting

This solution specifically addresses the needs of US requirements. In Release 12, AP/AP Netting has become "core" functionality and is the only netting solution available, which means Contra-Charging and US Federal Financials Netting are all replaced by this solution. Each of those features has a migration path to the Release 12 Netting

How does it work in R12?

Here is the conceptual diagram behind the Netting Engine.

What is AP/AR Netting

What is AP/AR Netting

Oracle AP/AR Netting allows you to net your Payables invoice balances against your Receivables invoice balances for those Customers who are also your Suppliers.

For example, If you have a customer who is also your supplier, then rather than him paying you and then you paying him, AP/AR netting allows you to pay the net difference between how much you owe the supplier and how much he owes you. After establishing a netting agreement with such trading partners, you set up the agreement and the rules associated with it in eBusiness Suite and you can then start to net AP and AR transactions.

Below is a conceptual diagram of how this works.

AP AR Netting Business Process

Netting Business process

Important Accounts Receivables Database Tables

Important Accounts Receivables Tables

In an Accounts Receivables implementation, Support or trouble Shooting it is very important to have information about relevant Database tables, These details come very handy while any analysis of an issue or even technical architecture / solution designing, sharing some of the AR database Tables for reference

AR invoice Transactions

RA_CUSTOMER_TRX_ALL Transaction Header table
RA_CUSTOMER_TRX_LINES_ALL Transaction Lines table along with Tax lines.
RA_CUST_TRX_LINE_GL_DIST_ALL Distribution for Transaction Lines

Transaction Interface Tables

RA_INTERFACE_LINES_ALL Transaction Lines interface
RA_INTERFACE_SALESCREDITS_ALL Transaction Sales credit information
RA_INTERFACE_DISTRIBUTIONS_ALL Transaction Distribution information
RA_INTERFACE_ERRORS_ALL Transaction errors table

Receipt Interface Tables

AR_PAYMENTS_INTERFACE_ALL Interface table to import receipts
AR_INTERIM_CASH_RECEIPTS_ALL Lockbox transfers the receipts that pass validation to the interim tables
AR_INTERIM_CASH_RCPT_LINES_ALL Lockbox transfers the receipts that pass validation to the interim tables


Receipts tables
AR_CASH_RECEIPTS_ALL Cash Receipt Header tables
AR_RECEIVABLE_APPLICATIONS_ALL stores Receipt Application details
AR_PAYMENT_SCHEDULES_ALL This table is updated when an activity occurs against an invoice, debit memo, chargeback, credit memo, on-account credit, bills receivable
AR_CASH_RECEIPT_HISTORY_ALL This table stores all of the activity that is contained for the life cycle of a receipt.

• Each row represents one step.
• The status field for that row tells you which step the receipt has reached.
• Possible statuses are Approved, Confirmed, Remitted, Cleared, and Reversed.


Customer Tables

HZ_PARTIES A party is an entity that can enter into a business relationship.
HZ_CUST_ACCOUNTS This table stores information about customer/financial relationships established between a Party and the deploying company.
HZ_PARTY_SITES This table links a party (HZ_PARTIES) and a location (HZ_LOCATIONS) and stores location-Specific party information such as a person’s mail stops at their work address.
HZ_CUST_ACCT_SITES_ALL This table stores information about customer/financial account sites information.
HZ_CUST_SITE_USES_ALL This table stores information about the business purposes assigned to a customer account site
HZ_LOCATIONS A location is a point in geographical space described by an address and/or geographical Indicators such as latitude or longitude.


Accounts Receivables Setup tables

RA_CUST_TRX_TYPES_ALL This table stores information about each transaction type for all classes of transactions, for example, invoices, commitments, and credit memos.
AR_RECEIPT_CLASSES This table stores the different receipt classes that you define.
AR_RECEIPT_METHODS This table stores information about Payment Methods, receipt attributes that you define and assign to Receipt Classes to account for receipts and their applications