Oracle Applications White Paper

ORACLE EBS R12 RECEIVABLES

CLOSING PERIOD PROCEDURES
Jan 2010

Author:

Mohamed Nazih
CPA, PMP, Oracle Financials Consultant
m.nazih@gmail.com

Version

1.0

R12 Receivables - Closing Period 2010

Contents

About the Author ................................................................................... 3

Introduction ......................................................................................... 4
Purpose .............................................................................................. 4
Who Should Read This ............................................................................. 4
Oracle EBS R12 Receivables - Closing Period Procedures ..................................... 5
Overview of the Period Close ............................................................................ 5
Prepare for Period Close .................................................................................. 5
1- Import Sales Order or Project Billing Transactions ......................................................... 5
2- Reconcile bank statements with Cash Management........................................................ 5

Complete Transactions .................................................................................... 5

1- Complete Invoicing, Credits and Adjustments ..............................................................
2- Complete Lock Box Processing.................................................................................
3- Complete Receipts and Reversals .............................................................................
4- Run the revenue recognition program ........................................................................

5
6
6
6

Internal Reconciliation .................................................................................... 7

1- Reconcile Transactions.......................................................................................... 7
2- Reconcile Receipts............................................................................................... 8
3- Reconcile Outstanding Customer Balances .................................................................. 8
4- AR Reconciliation Report ...................................................................................... 10
4- Potential Reconciling Items Report .......................................................................... 10

Create, Transfer, and Post Journals ................................................................... 12

Reconciling Journals Transfer Process ................................................................. 14
Reconciling Journals Import Process (GL) ............................................................. 14
External Reconciliation .................................................................................. 15
Close AR Current Period ................................................................................. 17

Information Sources............................................................................... 18

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R12 Receivables - Closing Period 2010

About the Author

Mohamed Nazih is a Proficient functional consultant in Oracle e-Business Suite
with more than six years of experience of solutions design, configuration,
testing and documentation and three full life cycle implementations.
Prior to Oracle, he worked as a certified accountant and auditor for six years.
This experience gave him an advantage to team up with financial staff in many
companies in delivering high quality professional services, such as consulting,
support, and training.
While not working, Mohamed Nazih takes care of his family. Furthermore, he is
a self-learner and avid reader in project management, change management,
business intelligence, science, and environment issues.
Mohamed Nazih values an atmosphere of ethics, punctuality, and teamworking.

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R12 Receivables - Closing Period 2010

Introduction
Closing the books is a necessary step in the accounting cycle. In order to issue
the financial statement, accounting staff must ensure that subledgers balances
are cross checked with relevant General Ledger accounts balances.
Doing so in Oracle EBS R12, requires performing actions in order and running
many reports to ascertain that ledgers and accounts are in harmony and no
surprises will be discovered at year end.

Purpose
This paper will help you understand the steps, order, and reports required to
close Oracle Receivables period. Proper closing each month helps minimizing
year end time needed to issue financial statements.

Who Should Read This

This paper is aimed to super users and applications auditors, as well as
functional consultants and implementers.

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R12 Receivables - Closing Period 2010

Oracle EBS R12 Receivables - Closing Period Procedures

Overview of the Period Close

At the end of each accounting period, companies must complete the closing
process in Receivables and reconcile Receivables activity for the period.

Prepare for Period Close

1- Import Sales Order or Project Billing Transactions
Run: AutoInvoice Master Program to process Sales Order exported from Oracle
Order Management or Transactions exported from Project Billing.

2- Reconcile bank statements with Cash Management

Reconcile any outstanding bank statements if you are using Cash Management.

Complete Transactions
1- Complete Invoicing, Credits and Adjustments
Run: Incomplete Invoices Report: to review all of your incomplete invoices,
debit memos, credit memos, and on-account credits. Incomplete invoices do
not update your open receivables balance nor do they display on your aging.
Use the Transactions window to complete your invoice or debit memo once you
have updated them. For credit memos and on-account credits, use the Credit
Transactions window.

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2- Complete Lock Box Processing

3- Complete Receipts and Reversals
Ensure all payments received have been recorded
Ensure all recorded receipts have been applied (i.e., there is no Unidentified
Receipts)
Ensure all cash application adjustments, write-offs, and transfers have been
made

4- Run the revenue recognition program

To generate revenue distribution records for your invoices and credit memos that
use invoicing and accounting rules.

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Internal Reconciliation
Reconcile the period's operational activity with Receivables accounting data,
before posting to the general ledger.

1- Reconcile Transactions
Transaction Register: includes all transactions (such as invoices, credit memos,
debit memos, chargebacks, deposits, and guarantees) that affect a customer's
outstanding balance for a specified period, including transactions that do not
post or age.
Sales Journal by GL Account:
Includes all transactions associated with specified GL account
Should be run with a posting status of Unposted
Ensure the following is correct:

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Transaction Register postable items total should equal Sales Journal by GL

Account (posting status is unposted) total.
Note: Sales Journal by GL Account is in functional currency, while Sales Journal
by Customer is in entered currency.

2- Reconcile Receipts
Receipt Register: includes a list of receipts (standard trade and miscellaneous)
for a specified period
Receipt Journal: includes the journal entries for both standard and
miscellaneous receipts
Ensure the following is correct
Receipts Register total should equal Receipt Journal total.
Note: Receipt Journal by Account is in functional currency, while Receipt
Journal by Customer is in entered currency.

3- Reconcile Outstanding Customer Balances

Aging - 4 Buckets and Aging - 7 Buckets: includes outstanding receivables at a
specific date
Adjustment Register: includes approved adjustments that affect transaction
balances for the selected period
Adjustments include manual adjustments, automatic adjustments, bills
receivable endorsements, invoices applied to commitments, and credit
memos applied to commitment-related invoices
When reconciling, the Adjustment Register's total should match the
Adjustments Journal
Invoice Exception Report: includes detail for any transactions where Open
Receivables is set to No. These transactions:
Appear on Transaction Register, but do not on aging reports
Affect aging, but may still affect GL balances, if postable
Applied Receipts Register: includes all receipt applications that affect
customer balances. You can review how customers' receipts were applied to
invoices and debit memos or reversed from invoices and debit memos

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When reconciling, the Applied Receipts Register's total should match the
Applied Receipts Journal
Unapplied and Unresolved Receipts Register: includes all receipts that are not
fully applied to customer transactions
This report includes:
receipts with unapplied cash
receipts with applications that require resolution, such as applications
to:
o On Account
o Prepayment
o Claim Investigation (for users of Oracle Trade Management only)
This report excludes:
Receipts applied to activities that do not affect the customer balance,
such as receipt write-offs, short-term debt, and credit card refunds
Miscellaneous receipts
When reconciling, Unapplied and Unresolved Receipts Register's total
should equal Unapplied Receipts Journal total
Ensure the following is correct
Outstanding customer balances at the beginning of a specified period are
reconciled with ending balance for the same period, using the Roll Forward
Formula:
Component

Report

Beginning Balance

Aging reports

+ Transactions

Transaction Register

+ Adjustments

Adjustment Register

+ Exceptions

Invoice Exception Report

+ Applied Receipts

Applied Receipts Register

+ Unapplied Receipts

Unapplied and Unresolved Receipts Register

= Ending Balance

Aging report (at end of accounting period)

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4- AR Reconciliation Report
provides a quick update on the status of your receivables by comparing:
Transactional data (affects aging and consistent with registers reports) in
an Activity column
Accounting data (affects GL accounts balances from journal reports) in a
Journal column
Displays summarized information consistent with detailed egisters and journal
reports. To view the underlying detail, run these reports:
1- Aging 7-Buckets - By Account report or Aging 4-Buckets report (to view
the beginning and ending balances)
2- Transaction Register and Sales Journal
3- Adjustment Register and Adjustment Journal
4- Applied Receipts Register and Applied Receipts Journal
5- Unapplied and Unresolved Receipts Register and Unapplied Receipts
Journal
6- On-Account Credit Memo Gain/Loss Journal
7- Invoice Exception Report
uses the Roll Forward Formula above

4- Potential Reconciling Items Report

AR Reconciliation report confirms that transactional and accounting data match
but give no indication that journals had been posted to the correct GL accounts
Potential Reconciling Items report addresses this issue by suggesting journal
items that might potentially post to GL accounts with unexpected account
types, thus creating reconciliation issues in Oracle General Ledger
An unexpected account type refers to GL account types that are not normally
associated with an item's GL category. General Ledger account types used by
Oracle Receivables include assets, liabilities, income, and expense
For example, a receivable item might be expected to post to an asset account;
if the item posts to a non-asset account, then it will display on the Potential
Reconciling Items report

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Potential Reconciling Items report includes the following items:

Adjustment journals with offset accounts that are asset accounts, rather
than income or expense
Revenue journals for invoices and credit memos that post to account
types other than income
Unearned revenue journals that post to an account type other than
liability
Unbilled journals created for deferred billing that post to an account
type other than asset
Late charge journals that post to an account type other than income.
Cash, confirmation, or remittance journals that post to account types
other than asset
Short term debt journals created by factoring receipts that post to
account types other than liability
Non-recoverable tax that posts to an account type other than expense
Possible causes of this discrepancy could be due to:
Incorrect accounting setup
Incorrect manual updating of GL account distributions
Setup created for activities that is inconsistent with the intended use of
Oracle Receivables
When a potential reconciling item is an error, correct the individual
transaction as well as the incorrect setup to prevent future occurrences
of the same error
Potential Reconciling Items report:
Should be run as an automatic step during the submission of the AR
Reconciliation report
Is an exception report that will print only if selected as a parameter upon
running the AR Reconciliation report. Typically, run the Potential
Reconciling Items report:
o For new software installations, to confirm the correct derivation of
accounting
o Whenever accounting setup has been modified, such as the creation
of new transaction types or receivables activities

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Create, Transfer, and Post Journals

Run Submit or Create Accounting after processing all postable records.
Submit Accounting spawns the following programs:
Revenue Recognition
Create Accounting
Accounting Program
Transfer Journal Entries to GL (if run with Transfer Journal Entries = Yes)
Journal Import
If Submit Accounting IS NOT submitted, you will need to run the Revenue
Recognition Master Program before running Create Accounting.

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Create Accounting

Submit Accounting

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Reconciling Journals Transfer Process

Subledger Accounting Program report:
Is produced by Create Accounting program
Shows subledger journal entries created for successful accounting events.
Journal Entries report (in Posted status mode):
includes all transactions that should be posted to General Ledger (i.e.
associated transaction type has Post to GL set to Yes)
displays:
o details of what is or will be posted to each GL account for a specific
period and
o Journals by receivables categories
Ensure the following is correct
Subledger Accounting Program report total should equal Journal Entries report
total.

Reconciling Journals Import Process (GL)

Journal Import Execution report:
Is produced by (GL) journal import process
Shows total debits and credits for the journals it created.
Posting Execution report: Is produced by (GL) journal posting journals process
Unposted Journals report
General Journals report
Ensure the following is correct: total of these report should equal (what is
transferred by Receivables = what is posted by GL)

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External Reconciliation
After posting, reconcile subledger details with General Ledger.
Run Create
Accounting Program

Run AR to GL
Reconciliation Report

Reconciling
Items?

Yes

Differences due to:

- GL Source Manual
- GL Subledgers Not AR
- Unposted in GL

No

Reconciliation
Complete

Identify Differences and

Take Corrective Actions

Two approaches can be used

Reconciliation Report approach: AR to GL Reconciliation report is matched with
the account balances for the same accounts in GL
Aging Report approach: Aging 7 Bucket by Account Report is matched with the
Account Analysis report / Trial Balance Report in GL
AR to GL Reconciliation report:
Simplifies reconciliation process by comparing account balances in Oracle
Receivables to those in Oracle General Ledger in a single report.
If total balance of all accounts is different in Receivables than in GL,
then there are items did not successfully post to GL accounts.
If balance of a specific account is different in Receivables than in GL,
then the type of journals that affect the account balances are
highlighted in the following columns:
o GL Source Manual: Manual journal entries made in the general ledger.

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o GL Subledgers Not AR: Journal entries posted to the general ledger

from other subledgers, such as Oracle Payables or a legacy feeder
system.
o Unposted in GL: Unposted journals in the general ledger.

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Close AR Current Period

Close current period in Oracle Receivables using the Open/Close Accounting
Periods window.
Where there are multiple operating units within the same ledger all
operating units must be ready to close at the same time. All of the
operating units that share a ledger also share the same period statuses.
When you update the period statuses to Open in one operating unit,
that period is opened for all operating units within the ledger.
Period cannot be closed if there are any unprocessed accounting events
or unposted journal entries in Oracle Subledger Accounting (SLA) for the
period.
Review Subledger Period Close Exceptions Report:
Lists all the accounting events and journal entries that fail period close
validation.
is automatically submitted by GL upon closing a GL period if there are
unprocessed accounting events or un-transferred journal entries.

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Information Sources
o Metalink Note: 740297.1
o Metalink Note: 740964.1
o Metalink Note: 961285.1
o Oracle Receivables User's Guide Release 12.1 Part No. E13522-02

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