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51126590-How-Do-You-Account-for-That-Oracle-Payables-11i[1].pdf

51126590-How-Do-You-Account-for-That-Oracle-Payables-11i[1].pdf

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Published by Majda Mohamad
Oracle AP Accounting
Oracle AP Accounting

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Published by: Majda Mohamad on Mar 25, 2013
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© Copyright 2000, by Oracle Corporation
How Do You Account for That? - Oracle Payables 11
Lauren Scott
Oracle Corporation
Introduction
In release 11
i
, Oracle Payables introduces a newaccounting model to support the creation and retentionof accounting entries in the Payables subledger. Thispaper discusses why this change was made, and how itaffects the accounting and period close processes inPayables. This paper is primarily an overview of thenew functionality, however, a review of thefunctionality in previous releases is provided as a basisfor reference. Examples of the accounting entriescreated by the new model in release 11
i
are provided. Abrief technical overview of the key data model changesis provided at the end of this paper.This paper should be most useful to current users of Oracle Payables who are interested in understandingthe accounting changes made in release 11
i
and whowant to plan for their upgrade to the new release.
Scope of This Paper
This paper describes accounting in the Oracle Payablessubledger and integration with Oracle General Ledger.Accounting transactions where Oracle Payablesintegrates with other subledgers are not in the scope of this paper. Transferring accounting data to non-Oraclegeneral ledgers is not in the scope of this paper. A goodfamiliarity with the Oracle Payables product is assumedas features referenced are not described in detail unlessthey are new to the accounting model.This paper assumes accrual basis accounting for itsdiscussion. Where relevant, a mention of theaccounting impact for cash basis accounting isincluded, but only where specifically noted.Other features which have accounting impact but areoutside of the scope of this paper include:
.
Encumbrance accounting
.
Automatic Offsets
.
Accrual on receipt
.
Tax accounting
.
Future dated paymentsWhere relevant, a mention of the accounting impact of one of these features may be made, but only wherespecifically noted.
How Do You Account for That? - BusinessReasons Behind the Change
The new accounting architecture that Oracle Payableshas introduced with release 11
i
allows for moreflexibility as new features are introduced in futurereleases. However, these changes in 11
i
were not made just for the purpose of improving the productarchitecture. There were many functionalenhancements in the area of accounting which OraclePayables development had been asked to make, andmany of them were not possible without this kind of architectural foundation.For example, there were desired enhancements in thearea of prepayment functionality that needed to bemade. Prior to release 11
i
, the application of aprepayment created some less than desirable accountingsuch as creating an accounting entry for the cashaccount. This and other problems could be addressedwith the new accounting model.Another area which needed enhancement was thefuture dated payment functionality. Issues included theinability to cleanly account for the maturity of a futuredated payment, and the inability to simultaneously usethe future dated payment feature and create accountingwhen a payment was cleared or reconciled.General improvements needed to be made to theaccounting that Payables created. For example, inrelease 11
i
, there is now a single accounting entrycreated to accounts such as liability, cash clearing,cash, and discount (if system level). Prior to thisrelease, one accounting entry was created to theseaccounts corresponding to each invoice distribution.This was somewhat cumbersome and madereconciliation more difficult for users.Another business reason behind the change was thesupport of improvements in accounting for currencygains and losses. Some countries needed to be able toaccount for gain or loss only at the time of paymentclearing. Prior to the new accounting model in release11
i
, this would have been very difficult to support.Another enhancement in this area is support for thecalculation of gain or loss at the desired level. Oracle
 
© Copyright 2000, by Oracle CorporationPayables can now support the calculation at thepayment level or the payment line level.This is not an exhaustive overview of all the businessreasons for the introduction of this new accountingarchitecture, but it should serve to point out that thereare some important benefits to users of the OraclePayables product. This change is also consistent withthe future direction of Oracle Financials. In futurereleases all of the subledgers which create accountingwill move to this new subledger accounting model.Oracle Payables development will also be doing morework in this area to improve and enhance thearchitecture it now has in release 11
i
.
Review of Accounting in Prior Releases
A review of the way accounting works in Payables priorto release 11
i
is included here to serve as a basis forunderstanding the new accounting model discussed inthe following sections. When there are references tospecific forms, fields, reports, or programs, they are therelease 11 names.Before 11
i
, there is no accounting in the Payablessubledger. Accounting information is inherent in aPayables document, but there is not always a way to seethe information (for example, an invoice price variancefor a purchase order matched invoice). Accounting forPayables transactions is created by a concurrent process- the Payables Transfer to General Ledger program.This is a very complex program which pullsinformation out of the transaction tables, createsaccounting entries, and places them in the gl interface.From there the general ledger process Journal Importcreates journal entries and imports them as unposted journal entries into Oracle General Ledger.There are some setup options to point out which controlvarious aspects of the accounting which is created.In the Accounting region of the Payables Options setupwindow there are two options in the Cash Clearingregion. The first is called “Allow ReconciliationAccounting”. If this is enabled, it means that if OracleCash Management is used to clear and/or reconcilepayments, accounting entries are created for thosereconciled payments.The other is called “Allow Future Payment Method”. Itis not possible to select both of these options becausefuture dated payments use the account setup as the cashclearing account. Although future dated payments areoutside the scope of this paper this is worth pointingout since this is not the case in 11
i
. In 11
i
a separateaccount is supported for future dated payments so thisoption is not needed.Also worth noting in this Accounting region is thesetup area called “Journal Entry Creation”. This setupcontrols defaults for the submission of the PayablesTransfer to General Ledger process for how it createsentries in the gl interface. For the accounts in this setupregion it is possible to specify an “Audit” or “NoAudit” option. The Audit option means that theaccounting information is created in detail in the glinterface, and this in turn means that drill down isavailable from the journal entries in Oracle GeneralLedger back to the details in the Payables subledger.The No Audit option creates summary entries, and drilldown is not available. (Note that there is a setup step inOracle General Ledger to enable drill down. TheImport Journal References option must be enabled inthe Journal Sources window for Payables.)Although the drill down functionality provides somegood accounting detail there is not the oppositefunctionality in Payables. That is, it is not possible toinquire on a particular transaction and easily see theaccounting for that transaction.The process to close an accounting period has alsochanged in release 11
i
, so a review of that process isalso provided here. The rules to close a period inPayables prior to release 11
i
are:
.
All payment batches must be confirmed
.
All invoices must be transferred to general ledger
.
All payments must be transferred to general ledgerBefore invoices can be transferred to general ledgerthey must be approved by the Payables Approvalprocess. Before payments can be transferred to generalledger they must pass through the Confirm process.Typical steps to close a period in Payables are:
 
© Copyright 2000, by Oracle Corporation
.
Import all invoices and/or expense reports frominterface tables
.
Run Approval
.
Review the Posting Holds Report to identify invoiceswhich cannot be transferred to general ledger
.
Correct the invoice transactions; rerun Approval
.
Review the Expense Distribution Detail Report(Some users review this report for particular accountsbefore they close a period; they can identify andcorrect any issues prior to their close)
.
Confirm any outstanding payment batches
.
Run the Payables Transfer to General Ledgerprogram
.
Optionally run the Unposted Invoice and PaymentSweep (some accounting rules allow this - others donot)
.
Close the Payables period
.
Reconcile
How Do You Account for That? -Overview of New Accounting Model in 11
i
Now in release 11
i
, Oracle Payables creates and storesaccounting entries in the subledger. Accounting entriesare created based on a particular accounting event, forexample, the creation of an invoice, or the payment of an invoice. These accounting entries are available forview and analysis even before they are transferred tothe general ledger. There is a new program to createthe accounting entries - the Payables AccountingProcess.The Payables Transfer to General Ledger is a newprogram. Although it retains the same name, it is anew, much simpler program. It is now truly just atransfer program. It takes the accounting entries createdin Payables and transfers them to the general ledgerinterface, with the capability of doing summarization if desired. The general ledger Journal Import processremains the same.There is some new and some changed setup for how theaccounting controls and options work in release 11
i
.New forms are provided to view the accounting in thesubledger and to correct accounting creation errors if necessary. Details on all of these new and changedfeatures are provided in the following sections.
Setup
Oracle Payables has some new and some changed setupwhich controls how accounting works in release 11
i
.The core of the changes is in the Payables Options formin three regions: Accounting Methods, Transfer to GL,and Payment Accounting.
Accounting Methods
This region corresponds to the Accounting region inrelease 11. Notice that the section with the accountaudit options has been removed. With the newaccounting model, these options are no longer needed.When the accounting entries are transferred to the glinterface, a link is automatically created. This meansthat full drill down to the payables accounting entries isalways available from Oracle General Ledger, nomatter the level of summarization. (Note that the sameImport Journal References option in Oracle GeneralLedger must be enabled to allow drill down.)The upgrade from a prior release to 11
i
retains thesetup in place for the accounting method/s.
Transfer to GL

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