ORACLE CORPORATION Oracle Receivables AutoAccounting White Paper

Author: Karen Iafratto

Creation Date: 05/24/2002

Last Updated:

Version: 1.0

Contents

Overview..................................................................................................................................1 Autoaccounting Setup.....................................................................................................2 Types Of Accounts used in Autoaccounting ...............................................................3 Autoaccounting Segments – Tables or Constants .......................................................4 Example.............................................................................................................................6 Freight Processing ...........................................................................................................7 Credit Memo Processing.................................................................................................8 Validation of Accounts....................................................................................................9 Troubleshooting.............................................................................................................10

ii

Overview

This document will discuss the setup of Autoaccounting and how the various General Ledger accounts are derived in Receivables.

Autoaccounting is used by Oracle Receivables to derive the segment values for the GL accounts. Autoaccounting is called when creating transactions manually or through Autoinvoice. It is used for Invoices, Credit Memos and Debit Memos. Autoaccounting is the process that builds the full accounting flexfield account for the various GL accounts used in Receivables.

Types of Accounts:

�� Receivable

�� Revenue

�� Freight

�� Tax

�� Unbilled Receivable

�� Unearned Revenue

�� Autoinvoice Clearing

Autoaccounting is used in conjunction with the GL Accounting Key Flexfield. The accounting flexfield is the full account number. It is comprised of multiple segments, such as Company, Account and Department. Each segment is based on either a constant value or a value based on a table.

Types of Tables :

�� Transaction Type

�� Salesreps

�� Standard lines

�� Taxes

�� Bill-to (Release 11.5 only)

The key to deriving full account combinations is to ensure the tables you base your segments on contain GL accounts and that the account combination that Autoaccounting derives will pass validation.

1

Autoaccounting Setup

The number of segments you define in your GL Accounting Flexfield structure will match the number of segments that you define in your Autoaccounting setup. The number of segments is based on your specific business needs and must be determined at setup time. Once you set up your Accounting Flexfield structure, the number of segments cannot be changed. You might want to set up an extra segment for future use and base it on a constant.

In the Autoaccounting setup, you may change the values the segments are based on after implementation. The setup can be changed to look at a different table or to be a constant. But keep in mind this will not change any of your existing transactions unless you manually make a change to the transactions via the form.

To set up your Autoaccounting, Menu: Setup > Transactions > Autoaccounting. Here is where you would create each autoaccounting segment and pick either a table or constant. The Segments should match your GL Accounting Flexfield Structure. This should be setup first. To set up your GL Accounting Flexfield Structure, Menu: Setup > Financials > Flexfields > Key > Segments. Query on Flexfield Title = Accounting Flexfield When you set up your Accounting Flexfield you must enable and display all the segments.

The following table is one example of an account setup in autoaccounting. It contains three segments. The first segment of the account is Company and is a constant of 00, the second segment is Account and is based on Transaction Type, the third segment is Department and is based on Standard Lines.

Segment Table Constant

Company 00

Account Transaction Type

Department Standard Lines

2

Types Of Accounts used in Autoaccounting

Receivables uses the following types of accounts when creating transactions:

Receivable Account – This account is used to specify your receivable amounts. This account cannot be based on your inventory item or tax code.

Revenue Account – This account is used to specify your revenue amounts. This account cannot be based on tax code.

Freight – This account is used to specify your freight amounts. This account cannot be based on tax code. Note: If you choose standard item, the Revenue account that you specify in the setup window is used. Also, if you choose standard item you will not be able to import invoices with header level freight though Autoinvoice.

Tax – This account is used to specify how you want Receivables to determine the account for your sales tax lines.

Unbilled Receivable – This account is used for transactions with invoice and accounting rules. If your accounting rule recognized revenue before your invoicing rule bills it, this amount will be posted to your unbilled receivable account. This account cannot be based on tax code.

Unearned Revenue – This account is used for transactions with invoice and accounting rules. If your accounting rule recognized revenue after your invoicing rule bills it, this amount will be posted to your unearned revenue account. This account cannot be based on tax code.

Autoinvoice Clearing – This account is used to specify the clearing account for your imported transactions. This was formerly referred to as the suspense account. Oracle Receivables uses this clearing account to hold any difference between the specified revenue amount and the selling price times the quantity for imported invoice lines. Oracle Receivables will use this feature if you have enabled this for the batch source of your imported transactions. To set this up for the batch source, Menu: Setup > Transactions > Sources > Autoinvoice Options Tab. You will see a check box called Create Clearing.

3

Autoaccounting Segments – Tables or Constants

Autoaccounting will build a code combination for each account on your transaction based on your autoaccounting setup. How your GL accounts are created in Receivables can be based on either tables or constants. For example, to build your revenue account, you might have setup your Accounting Flexfield to contain 3 segments. You would then base each of the 3 segments on either a table or constant. You could use a constant for the company segment, default the account segment from the invoice transaction type and default the department segment fro the item being invoiced.

The following explains how the different values are derived for an account segment:

�� Transaction Types - This will take the account segment from the Transaction type that is populated on the Transaction. When you choose this table, make sure to enter the corresponding accounts for you transaction types. To set these up Menu: Setup > Transactions > Transaction Types and enter valid accounts for Receivable, Revenue, Freight, Tax, Unbilled Receivable and Unearned Revenue.

�� Salesreps – This will take the account segment from the Salesperson attached to your transaction. When you choose this table, make sure to enter the corresponding revenue and receivable accounts in the Salesperson form. To set these up Menu: Setup > Transactions > Salespersons. When you query the Salesperson, the accounts can be seen in the ‘Receivables’ tab. When you create your transaction if you do not have a salesperson attached your autoaccounting will fail if your autoaccounting is based on salesperson. Note: A Salesperson will only have a receivable and revenue accounts. If you choose Salesperson for your Autoinvoice Clearing, Tax or Revenue accounts, then autoaccounting will use the Revenue account associated with the Salesperson. If you choose Salesperson for your Unbilled Receivable account, then autoaccounting will use the Receivable account associated with the Salesperson.

�� Standard Lines – This will take the account segment from the inventory item or the standard memo line item. This account cannot be used for the Receivable account. For the other accounts the revenue account of the inventory item or sales account from the standard memo line will be used for the account segment. To set up the sales accounts for an inventory item, Menu: Setup > Transactions > Items > Define Items > Invoicing Tab. To set up the revenue accounts for the standard memo line, Menu: Setup > Transactions > Memo Lines Note: For the unbilled receivable account and unearned revenue accounts, the revenue account that is setup in your system options will be used for standard lines.

4

�� Taxes – This will take the account segment from the tax code or in the case of a location based tax code, the tax location.

First a default tax code is set up in the System Options form. Menu: Setup > System > System Options > Accounting Tab. This default tax account will be used to derive the account segment if no tax account is assigned to the tax code or tax location.

If a tax code is used on a Transaction, the account segment will be derived from the account that you enter on the tax code form. Menu: Setup > Tax > Codes > More Tab.

If a location based tax code is used on a Transaction, the account segment will be derived from the account on the Tax Location and Rates form. Menu: Setup > Tax > Locations.

The ship-to address of the transaction will be used to determine which location to pull the tax account from the Tax Location and Rates window. The tax account flexfield qualifier is used to determine which ship-to location (state, county or city) to pull the segment from.

It is a recommended accounting practice to ensure that the sales tax liability owed to each state is uniquely identifiable within the General Ledger. You would need to set up a different tax account for each state. To accomplish this you would need to assign the tax account flexfield qualifier to the state segment. This is the default for the seeded structures of State, County, City and State, City structures. If you set up a customized one, please sure to check the tax account flexfield qualifier on the state segment.

To set up the tax account flexfield qualifier. Menu: Setup > Financials > Flexfields > Key > Segments. Query on Flexfield Title = Sales Tax Location Flexfield Click on the structure that is assigned in your System Options. (Ex. State, County, City) Click on Segments. Click on State. Click on Flexfield Qualifiers. You should see the enabled box checked for Tax Account.

�� Bill-to Site - This will take the account segment from the transactions bill-to customer location. Make sure the bill-to location for the customer has accounts define. Navigate: Customers > Standard >

�� Constants - The constants can be entered as alphanumeric. To force these to be entered as an numeric or a certain range, you would need to define this in your Accounting Flexfield. A validation set can be attached to the account segment. A range can be set up on the value set.

5

Example

First determine the set of your Accounting Flexfield.

Menu: Setup > Financials > Flexfields > Key > Segments. Query on Flexfield Title = Accounting Flexfield

Note the number of segments that are defined.

In this case we have 3 segments, Company , Account and Department.

Then, setup your autoaccounting to be based on three segments.

Menu: Setup > Transactions > AutoAccounting.

Let’s set up the Revenue Account as an example:

For the Company Segment , enter a Constant value of 01. For the Account Segment enter the table name of Transaction Type and for the Department Segment enter the table name of Standard Lines.

Note: The size of the segment will be determined by the maximum size that you set up in the value set for the segment when you define your Accounting Flexfield. In this case let’s assume that it is a maximum size of 2.

Autoaccounting will determine the revenue account on your invoices as follows:

For the first segment , it is a constant of 00.

For the second segment, it is based on the Transaction Type. Menu: Setup > Tranasactions > Transaction Types Query on the Transaction type that you are using on your invoice. Note the Revenue account. In this case 01-04-78. That means the second segment of 04 will be used.

For the third segment , it is based on Standard Lines. If the invoice contains an item that you have defined. Menu: Setup > Transactions > Items > Define Items Query your inventory item. Go to the invoicing tab and note the Sales Account. In this case 02-04-08. This means that the third segment of 08 will be used.

Autoaccounting would build the following account for revenue on your invoice: 00-04-08.

The account or code combination of 00-04-06 must be valid in GL and must be enabled and postable.

6

Freight Processing

Freight and Standard Lines:

Menu: Setup-->Transactions-->Autoaccounting, Freight

When freight autoaccounting is based on standard lines it will only use this when freight is entered against a line. An error will be raised if freight is entered at the header level.

When you setup freight's autoaccounting as standard lines it builds the freight revenue account from the item on the line. If the freight is entered at the header level autoaccounting will not be able to build the account since it is not attached to a line. You will have to manually enter the account or change your autoaccounting setup for freight. If you are using autoinvoice and you are importing freight at the header level then you cannot setup your autoaccounting to derive the freight based on standard lines.

If the transaction has a line type of “LINE” and the inventory item of type freight “FRT”, then Autoaccounting will use the accounts from the freight type of autoaccounting rather than the revenue account.

Freight and Revenue Account:

Menu: Setup-->Transactions-->Autoaccounting, Revenue

When you base your autoaccounting on Standard Lines for the Revenue account, normally the revenue account is pulled from the sales account of the item. However when this is freight the account is pulled from the Freight account that you setup in autoaccounting.

Profile Options

Tax: Invoice Freight as Revenue

If you are using Oracle Order Management, this profile option determines how freight amounts are passed to Receivables during AutoInvoice. If this option is Yes, a line item of type 'LINE' will be created for the freight amount. When Receivables prints the invoice, the freight amount will be printed last with the invoice lines under the heading 'Freight.' Receivables will use the Freight AutoAccounting rule to determine the freight amount. If this option is No, Receivables will create a line item on the invoice using the inventory item name.

7

Credit Memo Processing

There are two types of credit memos, Applied Credit Memos and On-Account Credit Memos.

Applied Credit Memos:

For Credit Memos applied to an invoice, the autoaccounting depends on the profile option “AR: Use Invoice Accounting for Credit Memos”. If you set this profile to YES, Receivables will credit the accounts of the original transaction. If this profile is set to NO, Receivables will use Autoaccounting to determine the accounts for the credit memo.

On-Account Credit Memos:

When you create an on-account credit memo, the accounts will be determined by autoaccounting, but they may be manually overridden in the form.

What Happens When You Apply an On-Account Credit Memo to an Invoice?

It would now use the receivable account from the invoice. It would debit the receivables account using the on-account credit memo receivable account and credit the receivable account that is on the invoice.

Credit Memos with No Line Items and Autoaccounting is Based on Standard Lines:

If your autoaccounting revenue segment is based on standard lines and you do not enter an item, this will cause an error message when you create a credit memo.

If you enter a manual credit memo without any items, you just enter adescription, unit price and quantity. There is no way for the system to determine these segments from the inventory item table since there are no items.

The system cannot just default these segments to zero, since this can result in the wrong accounts being generated. The error message Please correct revenue account assignment is a warning to the user so that the revenue account can be correctly entered at time of input.

8

Validation of Accounts

Once the code combination is built based on your autoaccounting setup, it is then validated to ensure it is a valid code combination. Combinations are all your segments combined together, such as Company, Account and Department.

Autoaccounting will check the code combination and ensure that it is a valid combination, has not been disabled and is within the start and end dates if any. This combination must exist in GL and be enabled and postable.

The code combination is stored internally as a CCID on the Receivable and GL tables. The General Ledger account number that is displayed in the forms or on the reports is the exploded value from the Key Accounting flexfield. This value is stored in the tables as the code_combination_id from the GL_CODE_COMBINATIONS table. You have to set up the code combinations in GL first, unless you are using dynamic insertion. Menu: Setup > GL Account Combinations

In order to use the account in Receivables you would need to check the enabled box and the allow posting box.

In this case, you would set up validation rules. These validation rules such as cross validation and security must be passed in order for the code combination to be valid. Dynamic insertion only refers to the dynamic creation of valid combinations of values; it must still be a valid combination in GL.

Dynamic insertion is an Accounting Flexfield feature where by you can allow users to create new combinations upon entering a flexfield combination. For every new flexfield combination entered, a unique code combination id is also created which is used to enter and retrieve data. You may enable or disable this Accounting Flexfield feature at any time, on the Accounting Flexfield form. Menu: Setup > Financials > Flexfields > Key > Segments.

Query on Flexfield Title = Accounting Flexfield Allow Dynamic Inserts is a check box on this form.

9

Troubleshooting

Please correct the account assignment or Invalid account assignment messages:

When Autoinvoice or manual transactions give these errors, it will show the account with the missing segment(s) either on the Autoinvoice Validation Report or in the form.

Verify the following: Menu: Setup > Transactions > Autoaccounting, Query up the account in question and note what the missing segment(s) are based on.

If it is based on Transaction type: Menu: Setup > Transaction > Transaction Types, verify that all accounts are populated.

If it is based on Salesperson: Menu: Setup > Transactions > Salespersons, verify that all accounts are populated.

If it is based on Standard Lines: For an Inventory Item, Menu: Setup > Transactions > Items > Inventory Items, and verify that the 'Sales Account' is populated in the ‘Invoicing’ tab.

For a Memo Line, Menu: Setup > Transactions >Memo Lines, and make sure that 'Revenue Account' is populated.

If it is based on Taxes: Menu: Setup > Tax > Codes and verify that account is populated in 'Tax' column under the 'More' Tab.

If the tax code is location based tax, Menu: Setup > Tax > Locations and verify that the ship-to location has a valid tax account. Check the tax account flexfield qualifier to determine what segment to check, the default for State, County, City would be the State segment. Make sure this is checked.

Naviagate to Setup > Financials > Flexfields > Key > Segments. Query on Flexfield Title = Sales Tax Location Flexfield Click on the structure that is assigned in your System Options. (Ex. State,County,City) Click on Segments. Click on State. Click on Flexfield Qualifiers. You should see the enabled box checked for Tax Account.

Once you verify that all these accounts are setup correctly, the code combination that autoaccounting creates must be valid in GL.

Menu: Setup > GL Account Combinations In order to use the account in Receivables you would need to check the enabled box and the allow posting box.

10

11

Copyright © 2001 Oracle Corporation. All rights reserved. Oracle is a registered trademark of Oracle Corporation. Various product and service names referenced herein may be trademarks of Oracle Corporation. All other product and service names mentioned may be trademarks of their respective owners. Disclaimer: This document is provided for information purposes only and the contents hereof are subject to change without notice. Oracle Corporation does not warrant that this document is error-free, nor does it provide any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. Oracle Corporation specifically disclaims any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without the prior written permission of Oracle Corporation.