Financial Accounting Hub (FAH)

What is Financial Accounting hub (FAH)

The Financial Accounting Hub is an integration tool which enables customers to integrate data from Non-Oracle source systems or sub-ledgers such as Billing/Banking, any 3rd Party Accounting or Insurance systems.  Specific rules can be applied to the data as it passes through the hub into the Oracle General Ledger. Oracle Financials Accounting Hub enables the transformation of information from disparate systems into a centrally and consistently maintained accounting repository. The core strengths of Oracle Financials Accounting Hub include its ability to create a single source of accounting truth for multiple external and legacy systems using business user-defined accounting rules. 

Oracle Financials Accounting Hub allows the integration of External Application by centralizing the definition and maintenance of accounting rules in a business user orientated repository. Accounting journals are created with a rules transformation engine, validated, and stored in an auditable format in a single location.  FAH acts as the accounting engine for any sub-ledger (Oracle or non-Oracle), create adjusting journal entries, and provide drill back from General Ledger (GL) to FAH,

How Does FAH Works:

FAH is an uptake of SLA. It is basically standalone Subledger Accounting (SLA), it allows to use Oracle SLA and GL to perform the accounting for third party / External applications.

Using Accounting Method Builder (AMB) Tool, FAH Efficiently Create Accounting for Multiple Heterogeneous Source Systems Oracle Financials Accounting Hub provides a flexible rules builder for business users to create accounting rules once and deploy them many times across different external and legacy systems. Legacy systems that do pre-accounting can pass journals through the hub to validate and store the accounting in the accounting repository for a single, reliable, enterprise wide view.

Financial Accounting Hub (FAH) V/S Sub-Ledger Accounting (SLA)

• The Financial Accounting Hub (FAH) is very similar to the Subledger Accounting product (SLA). In fact, looking merely at the functionality, there's no difference between FAH and SLA.
• The only distinction between both products is that with SLA you get seeded event models for all Oracle Subledger modules that require accounting and if desired one can use the components from these seeded event models to create your own customized Subledger Accounting Method.
• While with a FAH organizations get the possibilities to register external applications as Subledger, from which they can build their own event model, and use the SLA functionality to create accounting for the events originating from their external applications.

FAH Event Model:

FAH/SLA uses an Event Model consisting of Event Entities with underlying Event Classes, and at the lowest level we have the Event Types which in their turn belong to the Event Classes.

The accounting is entirely event-driven meaning that for each Event Type you can define how you would like the accounting to be created. This is done using Journal Line Types, Journal Entry Descriptions and Account Derivation Rules which tie together in a Journal Lines Definition. Conditions can be applied at various levels, and optionally you can use Mapping Sets and/or Supporting References.

For each Event Type such a Journal Lines Definition can be build. These Journal Lines Definitions roll up into an Application Accounting Definition.  The Application Accounting Definitions are grouped together under a Subledger Accounting Method, which is the component that gets tied to the ledger (In R12 a ledger consists of calendar, currency, chart of accounts and Subledger Accounting Method).

FAH transaction Flow:

FAH allows to use Oracle SLA and GL to perform the accounting for third party applications. Using Accounting Method Builder (AMB) Tool, The Application Accounting Events, Accounting events of source External application are mapped and stored in the SLA tables. External/Source Application’s accounting event’s for, accounting attributes and transactions supporting references are kept in FAH transactions objects.  When user submits accounting program,

• Accounting program fetches the applicable accounting events from SLA Tables depending the External application and Event model.
• The Configured Accounting definition rules are then applied and Loaded FAH transactions objects
• journal entries for the External Application are then created and stored in the SLA Tables.
• SLA journal entries for External application are transferred to GL using standard Oracle Transfer to GL Program.

Integrated Procurement - Repository Contracts Solution

The Evolving Contract and Procurement Processes

With rapidly growing Global Footprint of Organizations and increasing interactions between their Subsidiaries and Trading Partners on multiple operational fronts; there is an increasing need of streamlining the traditional contract processes and Come up with better coordination between Legal and Procurement teams for improved Contract Management and Contract reference on purchasing documents.

Sample Business Scenario:  An Organization may have a Supplier who sells materials and also provides Services; Same Supplier may also be a Customer as well.

More and More Organizations are trying to streamline their contract processes; While evolving the contract processes there is also need to store and maintain old Contracts references and Terms with advance search capabilities.

Why Need a Comprehensive Procurement / Repository Contract Solution

Most Businesses have manual and Isolated Process of managing Contract and correlating the Master Agreements and Child Documents and managing appropriate Terms and Conditions which resulted in below Challenges.

Challenges faced by Legal and Supply chain teams

·        Inability to create/Manage Link between Master Agreement and Child Purchasing Documents, Hence lot of communication time spend between, Buyers (Procurement) and Contracts (Legal)  teams.

·        Difference in Terms and Condition between Master Agreement and Child Purchase documents, Potential Legal Challenge.

·        No standard terms and Conditions template, multiple version of Draft template causing confusion.

·        Manual Process of updating terms and condition on Stand Alone Purchasing Documents, Resulting in reconciliation issues, and lack of transparency for legal team.

·        Time consuming means of Master Agreement review for Buyers.

·        Inability to maintain relationships between Contracts.

·        No effective Master Agreements Search mechanism, resulting in Time Consuming, ineffective Search of Contracts.

Solution Approach:

The Integrated Procurement / Repository Contract solution will leverage the Oracle Purchasing, Procurement Contracts and Repository contract Modules of Oracle application as the Core of Solution, extensions will be developed to achieve additional requirements and meet the GAPs.

Procurement and Repository Contracts Integration - Benefits:

·        Ability to create and manage the Contracts within Oracle and maintain a Link with Content Management tool (Eg: File Net, Share point Etc.).

·        Ability to reference the Master Contracts on Child Purchasing Documents.

·        Ability for the Buyers to View the Contracts in Read only mode, for better understanding while creating Purchase order.

·        Accurate Visibility to Historical Amendments, Notes and reference of a Contract and Improved Version management.

·        Ability to Capture and manage Important Contractual / Legal milestones with Effective Notification / Reminder system

·        Effective Expiry and Approval notification mechanism.

·        Manage Relation Ship / hierarchies/ Cross references within different Contracts.

·        Better and Accurate Reporting and Dashboard for Existing Contracts.

·        Ability to manage Internal and Supplier Contacts, relevant to Contract.

·        Ability to Upload Historical Contracts in the System using an automated and Easy to use Import mechanism.

·        Effective Management of Contract Templates, for Initiating Draft Contracts and potential Redlining capabilities.

·        Robust Access Control.

·        Effective Keyword/ Advance Search capabilities for contracts. Big time saving for respective teams.

·        Capability to Tag and Monitor High Risks Contracts.

·        Ability to Upload Historical Contracts in the System using an automated and Easy to use Import mechanism.

·        Effective Management of Contract Templates, for Initiating Draft Contracts and potential Redlining capabilities.

·        Contracts Authoring and Clause Management.

·        Capability to Automate Contract Routing procedures in Approval workflow in Future.

·        Ability to Author Contract with in oracle, and Modify the standard / Non Standard Clauses.

·        XML Publisher reports, for Contracts and all relevant Child documents.

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.

The Trial Balance and its Significance in the Accounting Process

The Trial Balance and its Significance in the Accounting Process

Trial Balance is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements. The report is primarily used to ensure that the total of all debits equals the total of all credits, which means that there are no unbalanced journal entries in the accounting system. Ledger balances are segregated into debit balances and credit balances. If all accounting entries are recorded correctly and all the ledger balances are accurately extracted, the total of all debit balances appearing in the trial balance must equal to the sum of all credit balances.

Trial balance ensures that for every debit entry recorded, a corresponding credit entry has been recorded in the books in accordance with the double entry concept of accounting. If the totals of the trial balance do not agree, the differences may be investigated and resolved before financial statements are prepared.

Ledger accounts are closed at the end of each accounting period by calculating the totals of debit and credit sides of a ledger. The difference between the sum of debits and credits is known as the closing balance. This is the amount which is posted in the trial balance


If there are subsidiaries in an organization that report their results to a parent company, the parent may request an ending trial balance from each subsidiary, which it uses to prepare consolidated results for the entire company.


Types of Trial Balance

Un-Adjusted trial balance
When the trial balance is first printed, it is called the un-adjusted trial balance.

Adjusted trial balance
Then, when the accounting team corrects any errors found and makes adjustments to bring the financial statements into compliance with an accounting framework (such as GAAP or IFRS), the report is called the adjusted trial balance.

Post-closing trial balance
The adjusted trial balance is typically printed and stored in the year-end book, which is then archived. Finally, after the period has been closed, the report is called the post-closing trial balance.


Trial Balance Format
The initial trial balance report contains the following columns:
1. Account number
2. Account name
3. Ending debit balance (if any)
4. Ending credit balance (if any)
Each line item only contains the ending balance in an account. All accounts having an ending balance are listed in the trial balance;


Limitations of a trial balance
Trial Balance only confirms that the total of all debit balances match the total of all credit balances. Trial balance totals may agree in spite of errors. An example would be an incorrect debit entry being offset by an equal credit entry. Likewise, a trial balance gives no proof that certain transactions have not been recorded at all because in such case, both debit and credit sides of a transaction would be omitted causing the trial balance totals to still agree. Types of accounting errors and their effect on trial balance are more fully discussed in the section on Suspense Accounts.

How to prepare a Trial Balance
Following Steps are involved in the preparation of a Trial Balance:
1. All Ledger Accounts are closed at the end of an accounting period.
2. Ledger balances are posted into the trial balance.
3. Trial Balance is prepared and errors are identified.
4. Erred Entries may be posted to Suspense Account Unless Approrpiate Rectification is identified.
5. Errors identified earlier are rectified by posting corrective entries.
6. After the Posting the Adjustments are incorporated in Traila balance. They can be specifically noted in order to highlight the Adjustments.

Sub-ledger Accounting Configuration - Part 1

Sub Ledger Accounting method (SLAM):

SLA is a rule based accounting Engine that introduced the ability to define how transactions originating in Sub Ledgers can be Accounted. Hence in order achieve this high level of flexibility SLA is accommodated with lot of configurable and predefined components.

This article will talk about different Predefined and configurable components of SubLedger Accounting which are used to setup accounting rules in order to achieve various accounting requirement.

Below mentioned are Predefined Components of SLA. We will talk about their specific Examples as we move on.

Predefined Components of SLA:

Entities:

Entities in SLA represent a Specific Document category in the Application. For example an Invoice or Payment in Account Payables. 

Event Class:

Event Class in SLA represents a specific type of the entity for which the Corresponding accounting entry will be generated. For Example a Standard Invoice is a Type Of invoice there by Standard Invoice will be an Event class for the Entity AP Invoice.

Event Type:

Event type is an Action or an event which should be defined as trigger for the creation of accounting entries.

For example: in reference to a Standard accounting requirement an Standard Invoice should get accounted once it is validated. Hence the Event which will initiate the accounting for the invoice is Validation. So Standard invoice validation is the Event Type for Event Class Standard Invoice

In Order to explain the complete concept let’s take one more example.

There should be accounting entries generated for Cancellation of a credit memo. And hence Credit Memo is a Type of Account Payables invoice.

Entities à AP invoice

Event Class à Credit Memo

Event à Cancellation.

Sub-Ledger Accounting

Sub-Ledger Accounting

Sub ledger accounting traditionally had accounting rules spread across multiple Products and Sub ledger applications hence it was Difficult to keep the rules up to date and manage.

And if there used to be any requirement which requires a different Accounting treatment as per different geographies, Regulations  or entity it was extremely difficult to implement and many times the ultimate solution was to implement a customization or pass manual Adjustment entries.

The New Sub Ledger accounting feature of oracle E-business Suite R12 popularly known as SLA addresses such issues through a central accounting rule engine allowing among other things, Superior controller ship of definition of accounting rules.

SLA is a rule based accounting Engine that introduced the ability to define how transactions originating in Sub Ledgers can be Accounted. One of the significant benefits of SLA is the ability to generate multiple accounting representations (IFRS and local GAAP) for a single sub ledger transaction.

Hence in Simple words, Different from 11i where accounting Entries used to get created in respective Sub ledgers and then get transferred to GL, In R12 the Entries get created using SLA for all the Sub ledger applications and then gets transferred to GL. Hence it would be appropriate to say SLA is placed between different Sub ledgers such as AP, AR, CE, PA and General Ledger as mentioned in below. 

Sub Ledger Accounting Gives capability to Massage/ Change the accounting entries which gets generated as part of the Standard Sub Ledger application specific account so as to have the accounting entries posted to the desired accounts to address various geographies or entity specific accounting requirement

Above Example shows how the accounting String (A.B.C.D) generated by SubLedger Applications (Eg: AP, AR, CE) can be altered to A1.B1.C1.D1 to achieve specific Accounting requirement and then can be transferred to general Ledger.

WebADI Common Errors

WebADI Common Errors

Web ADI Configuration Error    

     BNE_UIX_PHYSICAL_DIRECTORY is not configured.

This error can occur under several conditions:

• Unable to open WebADI
• After running Autoconfig on nodes not able to upload files
• When selecting the 'Desktop Integrator' Responsibility the seeded menu options produces the error
• After installing Oracle E-Business suite R12 and attempting to create a hierarchy using the create spreadsheet functionality(WebADI)
• When creating a Layout as Trade Management Administrator
• When attempting to do an Import inside the activity screen in Marketing Online the error occurs

Some Helpful metalink Notes:

• WebADI - Web Applications Desktop Integrator BNE_UIX_PHYSICAL_DIRECTORY is not configured Error in Release 11i and R12.x (Doc ID 1312156.1)
• Error BNE_UIX_PHYSICAL_DIRECTORY Is Not Configured in R12 When Attempting to Use WebADI Spreadsheet to Create Hierarchies (Doc ID 430991.1)
• WebADI Create Layout In Trade Management Error: "BNE_UIX_PHYSICAL_DIRECTORY is Not Configured." (Doc ID 413289.1)
• BNE_UIX_PHYSICAL_DIRECTORY Is Not Configured Error (Doc ID 888386.1)

Accounts Payables Accounting Flow

Accounts Payables Accounting Flow

Below are few of the key concepts about Accounts Payables Accounting. Accounts Payables have multiple Flows which will be elaborated below. Even though the accounting engine has been moved to Sub Ledger accounting in r12, the Core Concepts of Payables accounting remain same.

Standard Accounts Payable Invoice/ Payment Accounting

One of the most commonly seen scenarios in Accounts payables is Standard Invoice and Payment. Below are the accounting entries for them

Standard invoice creation:

               Dr. Expense / Item Expense / Misc. Expense

                              Cr. Supplier / Liability

The “Expense / Item Expense / Misc. Expense” are derived from the Payables Invoice Distribution where as “Supplier / Liability” Account id derived from Supplier’s Site, from the liability account code combination on that particular site. Although the liability account is defaulted from Payables’ Financial Setup, but you can change the account code according to your need. We can even change the liability account code combination on the Invoice Workbench by enabling the Column from Folders option.

Payment of the Standard invoice:

               Dr. Supplier / Liability

                              Cr. Bank / Cash / Cash Clearing

Now comes the payment, the liability account is fetched from the supplier whose invoice is being paid, the cash clearing or cash account is fetched from the bank you select during the payment. This account is defined during the Bank Account Setup.

PREPAYMENTS / ADVANCES:

Prepayment Invoice creation:

Dr.  Prepaid Expense / Advance Paid

               Cr. Supplier / Liability

Prepayment invoice Payment:

               Dr. Supplier / Liability

                              Cr.  Bank / Cash / Cash Clearing

Standard Invoice creation:

               Dr. Expense / Item Expense / Misc. Expense

                              Cr. Supplier / Liability

Prepayment Application to Standard invoice

               Dr. Supplier / Liability

               Cr. Prepaid Expense / Advance Paid

INVOICES with “TRACK AS ASSETS”:

Track as Asset” is a functionality for moving the items from Oracle Payables to Oracle Assets. It is a check box on the Invoice Line TAB and can be enabled on Distribution Line using the Folder View option. When you check this box and run the “Mass Addition Create Report” from Payables, the items on invoice line or distribution line moves to Oracle Assets. 

Invoice creation:

Dr. Asset Clearing
                              Dr. Supplier / Liability

Invoice transferred to oracle Assets:

               Dr. Asset

                              Cr. Asset Clearing

INVOICE with WITHHOLDING TAX

In the Payables invoices with Withholding tax Scenarios, accounting entry for the WHT payables or Liability account is selected from the supplier defined as a Tax Authority. The WHT expense is picked from the WHT setup.

Taking an example of withholding at time of Payment

Invoice Creation:

Dr. Expense / Item Expense / Misc. Expense

                              Cr. Supplier / Liability

Payment with Withholding Tax 

               Dr. Supplier / Liability

                              Cr. Bank / Cash / Cash Clearing

                              Cr. Withholding Tax

WITHHOLDING TAX INVOICE

               Dr. WHT Expense

                              Cr. Withholding Liability