Subledger Accounting

White Paper on Multi Period

Accounting (MPA) in R12
Author: Sanjay Prasad and Sriram Ramanujam
Creation Date: February 2, 2011
Last Updated: March 16, 2011
Version: 1.1
Status: FINAL

Subledger Accounting: Multi Period Accounting (MPA)

Page 1 of 37

Table of Contents
1. OBJECTIVE .......................................................................................................................................................... 3
2. SCOPE/OUT OF SCOPE ....................................................................................................................................... 3
3. OVERVIEW OF THE MULTI PERIOD ACCOUNTING FEATURE ............................................................................... 3
3.1 AN EXAMPLE OF A BUSINESS CYCLE WHERE MULTI PERIOD ACCOUNTING FEATURE CAN BE USED...........................................4
3.2 MAPPING OF THE BUSINESS SCENARIO IN ORACLE APPLICATIONS ......................................................................................5
3.3 OVERVIEW OF EXAMPLE FOR MPA CONFIGURATION .......................................................................................................6
3.4 STEPS TO BE PERFORMED TO MAP THE BUSINESS SCENARIO .............................................................................................7
4. STEP BY STEP GUIDE TO MAP BUSINESS SCENARIO EXAMPLE ............................................................................ 8
4.1 INVOICE LINE FLEX FIELD (DFF) CONFIGURATION............................................................................................................8
4.1.1 Define Invoice Line DFF ................................................................................................................................8
4.1.2 Define Values for Value Set ..........................................................................................................................9
4.2 SUBLEDGER ACCOUNTING METHOD (SLAM) CONFIGURATION .......................................................................................10
4.2.1 Define Accounting Derivation Rule (ADR) ..................................................................................................10
4.2.2 Define Journal Line Type (JLT) .................................................................................................................... 11
4.2.3 Define Journal Line Definition (JLD) ............................................................................................................17
4.2.4 Define Application Accounting Definition (AAD) ........................................................................................25
4.2.5 Define Sub Ledger Accounting Method (SLAM) .........................................................................................28
4.2.6 Attach SLAM to Ledger definition ..............................................................................................................30
5. SAMPLE TRANSACTION TO TEST MPA CONFIGURATION .................................................................................. 32
5.1 AP INVOICE CREATION ............................................................................................................................................32
5.2 INVOICE ACCOUNTING .............................................................................................................................................35
6. REFERENCES ..................................................................................................................................................... 37

Subledger Accounting: Multi Period Accounting (MPA)

Page 2 of 37

1. Objective
To provide:
a) An overview of the Multi Period Accounting (MPA) feature in R12
b) A Step by step guide to configure the Multi Period Accounting Feature
c) An explanation of MPA configuration for a business transaction
2. Scope/Out of Scope
This paper will cover
a) The need to have a Multi Period Accounting Feature
b) A Step by step guide to setup Multi Period Accounting
c) Explaining creation of an invoice that uses Multi Period Accounting
d) Accountings of Transaction showing accrual and recognition accounting over
multiple periods
Note: Oracle does not seed any Subledger Accounting Method (SLAM) with Multi Period
Accounting. This feature is available and customer / consultant can use this feature and setup
the system accordingly.
3. Overview of the Multi Period Accounting Feature
Multi Period Accounting enables users to create accounting for a single accounting event for more than
one GL period. The functionality is primarily used to recognize revenue or a prepaid expense or revenue
across multiple GL periods.

Subledger Accounting: Multi Period Accounting (MPA)

Page 3 of 37

Multi Period Accounting Process Flow

3.1 An Example of a Business Cycle Where Multi Period Accounting Feature Can Be Used
There can be multiple business scenarios where MPA can be used; one of them is a business cycle of an
Insurance premium payment. Normally an insurance premium is paid Quarterly, Half Yearly, Annually
and so on. A premium paid annually is an advance payment of insurance for 12 months. When we pay
the premium, at that time actual expense does not occur, rather it occurs as and when the month for
which insurance is paid completes.
This can be explained with the following example:

Subledger Accounting: Multi Period Accounting (MPA)

Page 4 of 37

Lets say every year on 20-Dec, the Insurance premium (amount USD 1200) for next year (Jan-Dec)
becomes due.
1) On 20-Dec an Invoice is created. Accounting of this invoice should not hit the actual expense
account due to the following reasons:
a. The Invoice is created for an advance payment
b. Insurance service is yet to be availed. It will be availed during Jan Dec of next year
2) On 31-Jan of next year, insurance service for one month is availed. So expense should be booked
with respective amount (prorated insurance premium) to the actual expense account.
3) At the end of the next month (28/29-Feb) again insurance service for one month is availed. So
expense should be booked with respective amount (prorated insurance premium) to the actual
expense account. This kind of actual expense recognition will keep on happening until 31-Dec.
Accounting entry in Books for event (1), Accounting date 20-Dec
Prepaid expense
Dr USD 1200
Liability
Cr USD 1200
Accounting entry in Books for event (2), Accounting date 31-Jan
Insurance expense Dr USD 100
Prepaid expense
Cr USD 100
=> There can be different methods to calculate the accounted amount (here we are assuming the
basis of Calculation is monthly. We will be discussing different options for calculations in the
coming section.
Accounting entry in Books for event (3), Accounting date 28/29-Feb
Insurance expense Dr USD 100
Prepaid expense
Cr USD 100
and so on until 31-Dec.
A point to note here, this complete set of accounting is a result of ONE transaction only.

3.2 Mapping of the Business Scenario in Oracle Applications

The above mentioned scenario is mapped in Oracle Applications by configuring the Multi Period
Accounting feature. Referring to the example mentioned in section 3.1, after configuring MPA a single
standard AP invoice (valid for MPA) will have the following accounting entries:
Accounting entry in Books for event (1), Accounting date 20-Dec
Accrual
Dr USD 1200
Liability
Cr
USD 1200

Subledger Accounting: Multi Period Accounting (MPA)

Page 5 of 37

=> Here Accrual means a Journal Line Type enabled for MPA and having Accrual enabled as
Multi Period Accounting attribute in the Journal Line Type definition.
Accounting entry in Books for event (2), Accounting date 31-Jan
Recognition
Dr USD 100
Accrual
Cr USD 100
=> Here Recognition means a Journal Line Type enabled for MPA and having Recognition enabled as
Multi Period Accounting attribute in the Journal Line Type definition.

3.3 Overview of Example for MPA Configuration

Organization creates an AP Invoice of USD 36000 for the following insurance:
1) Insurance for Building (USD 12000)
2) Insurance for Vehicle (USD 24000)
Organization wants to account the above transactions as follows:
a) Accounting Date: 25-Dec-2010
Accrual
Dr
Liability
Cr

USD 36000
USD 36000

b) Accounting Date: 31-Jan-2011

Recognition (Insurance for Building)
Accrual

Dr
Cr

USD 1000
USD 1000

Recognition (Insurance for Vehicle)

Accrual

Dr
Cr

USD 2000
USD 2000

c) Accounting Date: 28-Feb-2011

Recognition (Insurance for Building)
Accrual

Dr
Cr

USD 1000
USD 1000

Recognition (Insurance for Vehicle)

Accrual

Dr
Cr

USD 2000
USD 2000

Dr
Cr

USD 1000
USD 1000

Dr
Cr

USD 2000
USD 2000

And so on for every month until Dec-2011

d) Accounting Date: 31-Dec-2011
Recognition (Insurance for Building)
Accrual
Recognition (Insurance for Vehicle)
Accrual

Subledger Accounting: Multi Period Accounting (MPA)

Page 6 of 37

Account codes:
Accrual: 01-000-1340-0000-000 (01 is Company, 1340 is Natural Account)
Liability: 01-000-2210-0000-000
Recognition (Insurance for Building):
Natural Account: 6501 and all other segments from Accrual account.
01-000-6501-0000-000
Recognition (Insurance for Vehicle):
Natural Account: 7420 and all other segments from Accrual account.
01-000-7420-0000-000
3.4 Steps to Be Performed to Map the Business Scenario

The following needs to be done to map the business scenario discussed above:
a) In the example discussed above, the requirement is to generate different Natural accounts for
Recognition line for Insurance for Building and Insurance for Vehicle. We must have an
identifier in the transaction to identify respective invoice lines. There can be different ways of
achieving this; we will be using Invoice line flex fields to capture identifiers for different kinds
of Insurance.
b) Sub Ledger Accounting Method (SLAM) configuration: Seeded SLAM does not come with an
MPA enabled Journal line type. So we need to copy seeded SLAM and do changes as per
requirement.
c) Invoice transaction and its accounting

Subledger Accounting: Multi Period Accounting (MPA)

Page 7 of 37

4. Step by Step Guide to Map Business Scenario Example

4.1 Invoice Line Flex field (DFF) Configuration
We will be defining an Invoice line flex field to capture to what kind of Insurance Payment the invoice
line belongs. Applicable values for the DFF will be configured to be picked from a value set.
4.1.1 Define Invoice Line DFF
Navigation: Payables Responsibility->Setup->Flexfields->Descriptive->Segments
Query for: Application: Payables

Title: Invoice Lines

Select the Global Data Elements code and click on the Segments Button

Subledger Accounting: Multi Period Accounting (MPA)

Page 8 of 37

Select the Actual_Expense Segment Name and Click on Value Set

4.1.2 Define Values for Value Set

Subledger Accounting: Multi Period Accounting (MPA)

Page 9 of 37

4.2 Subledger Accounting Method (SLAM) Configuration

To map the business scenario we need to have SLAM which has Journal Line Type (JLT) enabled for MPA.
Remember seeded SLAM does not come with MPA enabled JLT. To achieve this we will be defining the
following in Sequence:
1) Accounting Derivation Rule (ADR)
2) MPA enabled Journal Line Types (JLT)
3) Journal line definitions (JLD) containing MPA enabled JLT
4) Application Accounting Definition (AAD)
5) Sub Ledger Accounting Method (SLAM)
6) Attach SLAM to Ledger definition
4.2.1 Define Accounting Derivation Rule (ADR)
To meet the requirement of generating account codes (for Recognition line type) based on the kind of
insurance line, we need to define a rule to derive the Account.
Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup>Accounting Methods Builder->Journal Entry Setup->Account Derivation Rule
Define ADR AP_MPA_RECOG_ADR

Subledger Accounting: Multi Period Accounting (MPA)

Page 10 of 37

Click on Mapping Set button to define the Mapping Set AP_MPA_RECOG_ADR_MAP. Once the
mapping set is defined attach the same to the ADR.
Input source: Invoice Line Flexfield Segment. This means based on the value for Invoice line flexfield in
the transaction, the mapping set will derive the value for the Account segment.

4.2.2 Define Journal Line Type (JLT)

As discussed earlier there are 2 types of Journal Line Types which are required in case of MPA:
1) Accrual Journal Line Type: This is the journal line type which is debited at first and then gets
credited in each subsequent period. In other words this is the JLT to store Prepaid expenses.
2) Recognition Journal Line Type: This is the actual expense account which gets debited in each
period of recognition.
4.2.2.1 Define MPA Enabled Accrual Journal Line Type
Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup>Accounting Methods Builder-> Journal Entry Setup->Journal Line Types
Query for Seeded JLT
Application: Payables
Event Class: Invoices
Line Type Code: AP_ITEM_EXPENSE_INV

Subledger Accounting: Multi Period Accounting (MPA)

Page 11 of 37

Click on Copy button

Click on Done button

Subledger Accounting: Multi Period Accounting (MPA)

Page 12 of 37

Select Accrual in Multiperiod region and save the JLT definition.

4.2.2.2 Define MPA Enabled Recognition Journal Line Type

Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup>Accounting Methods Builder->Journal Entry Setup->Journal Line Types
Query for Seeded JLT
Application: Payables
Event Class: Invoices
Line Type Code: AP_ITEM_EXPENSE_INV

Subledger Accounting: Multi Period Accounting (MPA)

Page 13 of 37

Click on Copy button

Click on Done button

Subledger Accounting: Multi Period Accounting (MPA)

Page 14 of 37

Remove all the conditions of Journal Line Type:

Click on Conditions button

Select first condition and Navigate Edit->Delete

Subledger Accounting: Multi Period Accounting (MPA)

Page 15 of 37

Repeat same above steps for each condition one by one to delete all the conditions.
Save the work, close the form.

Subledger Accounting: Multi Period Accounting (MPA)

Page 16 of 37

Select Recognition in Multiperiod region.

Note: A Recognition type of JLT does not have any conditions as this JLT is linked (will be
discussed in later sections) with an Accrual type of JLT, so in fact no condition is needed for this
type of JLT to be selected for accounting.
4.2.3 Define Journal Line Definition (JLD)
Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup>Accounting Methods Builder->Methods and Definitions->Journal Line Definition
Query for Seeded Journal Line Definition
Applications: Payables
Event Class: Invoices
Owner: Oracle
Definition Code: ACCRUAL_INVOICES_ALL

Click on Copy Definition button

Subledger Accounting: Multi Period Accounting (MPA)

Page 17 of 37

Click on Done button

Subledger Accounting: Multi Period Accounting (MPA)

Page 18 of 37

User defined ACCRUAL_INVOICES_ALL_1 JLD is defined.

Subledger Accounting: Multi Period Accounting (MPA)

Page 19 of 37

Now add Accrual enabled MPA JLT defined earlier and add ADR for the user defined JLT
AP_ITEM_EXP_INV_MPA_ACC.

As per definition above, for AP_ITEM_EXP_INV_MPA_ACC JLT, the distribution account of the
transaction will be taken as per Seeded Account Derivation Rule Invoice Distribution Account. This rule
enables to copy all account segments from Invoice distribution, as shown in below screen shot.

Subledger Accounting: Multi Period Accounting (MPA)

Page 20 of 37

Disable the Seeded Item Expenses JLT so that on the same condition the system should not derive 2
JLTs for accounting. Remember AP_ITEM_EXP_INV_MPA_ACC has been created by copying seeded
Item Expenses JLT. If we do not deactivate the seeded JLT then the system will create 2 item expense
lines while performing accounting of an invoice.

Subledger Accounting: Multi Period Accounting (MPA)

Page 21 of 37

4.2.3.1 Add Multi Period Accounting Elements

Select the Accrual JLT in JLD definition and click on Multiperiod Accounting button.

Subledger Accounting: Multi Period Accounting (MPA)

Page 22 of 37

Click on the Line Assignments button.

By default AP_ITEM_EXP_INV_MPA_ACC gets attached in line assignments.

Subledger Accounting: Multi Period Accounting (MPA)

Page 23 of 37

Add Recognition type of JLT in Line Assignments region. This is how the Recognition line type is linked to
the Accrual JLT, that is why a condition is not needed for the Recognition JLT (refer to the section on
Define MPA Enabled Recognition Journal Line Type).
Add ADR for Recognition Journal Line type.

Based on ADR attached above, for AP_ITEM_EXP_INV_MPA_RECOG JLT, the system will overlay the
Natural account (based on AP_MPA_RECOG_ADR) on the Invoice distribution account. This means for
Recognition JLT the system will derive the Natural account from AP_MPA_RECOG_ADR and all other
segments from Invoice distribution account.
This completes the Definition of JLD.

Subledger Accounting: Multi Period Accounting (MPA)

Page 24 of 37

4.2.4 Define Application Accounting Definition (AAD)

Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup>Accounting Methods Builder->Methods and Definitions->Application Accounting Definition
Query for a seeded AAD
Application: Payables
Owner: Oracle
Definition Code: ACCRUAL

Click on the Copy button to create User defined AAD for Payables by copying seeded AAD. The idea is
to copy the complete AAD and modify AAD suitable for MPA.

Subledger Accounting: Multi Period Accounting (MPA)

Page 25 of 37

AAD Definition code: ACCRUAL_1

Subledger Accounting: Multi Period Accounting (MPA)

Page 26 of 37

As of now, in ACCRUAL_1 AAD, event class has seeded all JLDs attached with it.
Attach user defined JLD (defined in step 4.2.3) in ACCRUAL_1 AAD for Invoices event class.

Now we have user defined AAD (ACCRUAL_1) which has a JLD ACCRUAL_INVOICES_ALL_1.
JLD ACCRUAL_INVOICES_ALL_1 has JLTs enabled for MPA.
Validate the AAD by clicking on Validate button.

Subledger Accounting: Multi Period Accounting (MPA)

Page 27 of 37

4.2.5 Define Sub Ledger Accounting Method (SLAM)

Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup->Methods
and Definitions-> Sub Ledger Accounting Method
Query for a seeded SLAM
Query for:
Method Name: Standard Accrual
Owner: Oracle

Click on Copy button

Subledger Accounting: Multi Period Accounting (MPA)

Page 28 of 37

Click on Done button

For application Payables attach the AAD ACCRUAL_1 (defined in step 4.2.4)

Subledger Accounting: Multi Period Accounting (MPA)

Page 29 of 37

4.2.6 Attach SLAM to Ledger definition

Payables Responsibility->Setup->Accounting Setup->Ledger Setup->Define->Accounting Setups
Query for Respective Ledger.

Click on Update Accounting Options.

Scroll down to Primary Ledger region and Click on Update link.

Subledger Accounting: Multi Period Accounting (MPA)

Page 30 of 37

Attach the User defined SLAM STANDARD_ACCRUAL_1 to Subledger Accounting Method

option.

Subledger Accounting: Multi Period Accounting (MPA)

Page 31 of 37

5. Sample Transaction to Test MPA configuration

To test the MPA configuration lets create an invoice as follows:

a. Invoice amount of USD 36000
b. 2 lines:
i. First line for Insurance for Building of amount USD 12000
ii. Second line for Insurance for Vehicle of amount USD 24000
c. Invoice date: 27-Dec-2010
d. Invoice is for Insurance premium for year 2011 (Jan-Dec). So respective expense needs to be
recognized every month from Jan-11 to Dec-11 on a prorated basis.
5.1 AP Invoice Creation

Invoice Number: TR200111-01

Subledger Accounting: Multi Period Accounting (MPA)

Page 32 of 37

GL Date: 27-Dec-2010
Distribution account for both Lines: 01-000-1340-0000-000 (This is prepaid account)

Deferred Option: Yes, this means that respective invoice line is eligible for MPA.

Subledger Accounting: Multi Period Accounting (MPA)

Page 33 of 37

Deferred Start Date: 01-Jan-2011

Number of Periods: 12

First line is for Insurance for Building, based on this DFF information ADR will derive respective
expense account for each period.

Subledger Accounting: Multi Period Accounting (MPA)

Page 34 of 37

Second line is for Insurance for Vehicle, based on this DFF information ADR will derive respective
expense account for each period.
5.2 Invoice Accounting
System generates the following accounting entries:
Accounting Date: 27-Dec-2010
01-000-1340-0000-000

Dr

USD 36000 (Prepaid)

01-000-2210-0000-000

Cr

USD 36000 (Liability)

Following are accounting entries for recognizing the expenses on a prorated basis in respective periods
Accounting Date: 01-Jan-2011
1)
01-000-7420-0000-000

Dr

USD 2000 (Actual expense for Insurance for Vehicle)

01-000-1340-0000-000

Cr

USD 2000 (Reversal of Prepaid)

01-000-6501-0000-000

Dr

USD 1000 (Actual expense for Insurance for Building)

01-000-1340-0000-000

Cr

USD 1000 (Reversal of Prepaid)

01-000-7420-0000-000

Dr

USD 2000 (Actual expense for Insurance for Vehicle)

01-000-1340-0000-000

Cr

USD 2000 (Reversal of Prepaid)

01-000-6501-0000-000

Dr

USD 1000 (Actual expense for Insurance for Building)

01-000-1340-0000-000

Cr

USD 1000 (Reversal of Prepaid)

2)

Accounting date: 01-Feb-2011

1)

2)

and so on until last accounting date 01-Dec-2011.

For further details please refer to the accounting entries in the Create Accounting Output file below.

Subledger Accounting: Multi Period Accounting (MPA)

Page 35 of 37

Subledger Journal Entries

Event Class
Event Number
Party Name
Invoice Number
Invoice Currency
Invoice Type

Invoices

Event Type

Invoice Validated

Event Date

Dec 27, 2010

GE Plastics

Party Site Name

DANBURY

TR200111-01

Invoice Amount

36000

USD

Invoice Ledger Amount

STANDARD

Invoice Date

Cancelled Date

2011-01-20T12:00:00

Invoice Description

Ledger Vision Operations (USA)

Ledger USD
Currency
Version

Balance Actual
Type
GL Date Dec 27, 2010

Application ACCRUAL_1
Accounting Definition
Journal Entry Invoice Validated , Invoice Number: TR200111-01 , Date: 20-JAN-11 , Document
Description Sequence Category: STD INV , Document Sequence Name: US_STD_INV , Invoice
Voucher Number: 1520 , Invoice Description:
Entered
Accounted
Account
ing
Curren
Line Class
Account
cy
Debit
Credit
Debit
Credit
1
Item
01-000-1340-0000-000
USD
36,000.00
36,000.00
Expense
2
Liability 01-000-2210-0000-000
USD
36,000.00
36,000.00
Journal Entry Total
36,000.00
36,000.00
Ledger Vision Operations (USA)
Application ACCRUAL_1
Accounting Definition
Journal Entry
Description
Account
ing
Line Class
Account
1
Item
01-000-1340-0000-000
Expense
2
Item
01-000-6501-0000-000
Expense

Ledger USD
Currency
Version

Entered
Curren
cy
USD
USD

Debit

Accounted
Credit
1,000.00

1,000.00

Application ACCRUAL_1
Accounting Definition
Journal Entry
Description
Account
ing
Line Class
Account
1
Item
01-000-1340-0000-000
Expense
2
Item
01-000-7420-0000-000
Expense

Ledger USD
Currency
Version

Entered
Curren
cy
USD
USD

Debit

Debit

Credit
1,000.00

1,000.00

Journal Entry Total

Ledger Vision Operations (USA)

Balance Actual
Type
GL Date Jan 1, 2011

1,000.00

1,000.00

Balance Actual
Type
GL Date Jan 1, 2011

Accounted
Credit
2,000.00

2,000.00
Journal Entry Total

Debit

Credit
2,000.00

2,000.00
2,000.00

2,000.00

Similar Recognition accounting entries would be created for each month until Dec 2011.
Subledger Accounting: Multi Period Accounting (MPA)

Page 36 of 37

Ledger Vision Operations (USA)

Ledger USD
Currency
Version

Application ACCRUAL_1
Accounting Definition
Journal Entry
Description
Account
ing
Line Class
Account
1
Item
01-000-1340-0000-000
Expense
2
Item
01-000-6501-0000-000
Expense

Entered
Curren
cy
USD
USD

Debit

Accounted
Credit
1,000.00

1,000.00

Application ACCRUAL_1
Accounting Definition
Journal Entry
Description

Ledger USD
Currency
Version

Entered
Accounti
Line ng Class Account
1
Item
01-000-1340-0000-000
Expense
2
Item
01-000-7420-0000-000
Expense

Curren
cy
USD
USD

Debit

Debit

Credit
1,000.00

1,000.00

Journal Entry Total

Ledger Vision Operations (USA)

Balance Actual
Type
GL Date Dec 1, 2011

1,000.00

1,000.00

Balance Actual
Type
GL Date Dec 1, 2011

Accounted
Credit
2,000.00

2,000.00
Journal Entry Total

Debit

Credit
2,000.00

2,000.00
2,000.00

2,000.00

6. References
Refer to the following documentation for more information on the Multi Period Accounting feature:
Oracle Subledger Accounting Implementation Guide
Oracle documentation can be found at:
http://www.oracle.com/technetwork/documentation/applications-167706.html

Subledger Accounting: Multi Period Accounting (MPA)

Page 37 of 37