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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 .............................................................. 5
2- Complete Lock Box Processing................................................................................. 6
3- Complete Receipts and Reversals ............................................................................. 6
4- Run the revenue recognition program ........................................................................ 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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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 team-


working.

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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 Run AR to GL


Accounting Program Reconciliation Report

Reconciling
Yes
Items?

Differences due to:


- GL Source Manual
No
- GL Subledgers Not AR
- Unposted in GL

Reconciliation Identify Differences and


Complete 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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