Subledger Accounting: White Paper On Multi Period Accounting (MPA) in R12

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

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.

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:

Let’s 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

=> 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 USD 36000
b) Accounting Date: 31-Jan-2011

Recognition (Insurance for Building) Dr USD 1000
Accrual Cr USD 1000
Recognition (Insurance for Vehicle) Dr USD 2000

Accrual Cr USD 2000
c) Accounting Date: 28-Feb-2011

Accrual Cr USD 1000

Accrual Cr USD 2000
And so on for every month until Dec-2011

d) Accounting Date: 31-Dec-2011
Accrual Cr USD 1000

Accrual Cr USD 2000

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

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

Select the Actual_Expense Segment Name and Click on “Value Set”
4.1.2 Define Values for Value Set

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”

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

>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

Click on “Copy” button
Click on “Done” button

Select “Accrual” in Multiperiod region and save the JLT definition.
4.2.2.2 Define MPA Enabled Recognition Journal Line Type

>Accounting Methods Builder->Journal Entry Setup->Journal Line Types
Query for Seeded JLT
Line Type Code: AP_ITEM_EXPENSE_INV

Click on Done button

Remove all the conditions of Journal Line Type:
Click on “Conditions” button
Select first condition and Navigate Edit->Delete

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

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)

>Accounting Methods Builder->Methods and Definitions->Journal Line Definition
Query for Seeded Journal Line Definition
Applications: Payables
Owner: Oracle
Definition Code: ACCRUAL_INVOICES_ALL
Click on “Copy Definition” button


User defined “ACCRUAL_INVOICES_ALL_1” JLD is defined.

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.

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.

4.2.3.1 Add Multi Period Accounting Elements
Select the Accrual JLT in JLD definition and click on “Multiperiod Accounting” button.

Click on the “Line Assignments” button.
By default “AP_ITEM_EXP_INV_MPA_ACC” gets attached in line assignments.

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.

4.2.4 Define Application Accounting Definition (AAD)
>Accounting Methods Builder->Methods and Definitions->Application Accounting Definition
Query for a seeded AAD
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.

AAD Definition code: ACCRUAL_1

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.

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

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

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.

Attach the User defined SLAM “STANDARD_ACCRUAL_1” to “Subledger Accounting Method”
option.

5. Sample Transaction to Test MPA configuration
To test the MPA configuration let’s 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

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.

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.

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)
2)
01-000-6501-0000-000 Dr USD 1000 (Actual expense for Insurance for Building)
Accounting date: 01-Feb-2011
1)
01-000-7420-0000-000 Dr USD 2000 (Actual expense for Insurance for Vehicle)
2)
01-000-6501-0000-000 Dr USD 1000 (Actual expense for Insurance for Building)
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 Journal Entries
Event Class Invoices Event Type Invoice Validated

Event Number 1 Event Date Dec 27, 2010
Party Name GE Plastics Party Site Name DANBURY
Invoice Number TR200111-01 Invoice Amount 36000
Invoice Currency USD Invoice Ledger Amount
Invoice Type STANDARD Invoice Date 2011-01-20T12:00:00
Cancelled Date Invoice Description
Ledger Vision Operations (USA) Ledger USD Balance Actual
Currency Type
Application ACCRUAL_1 Version GL Date Dec 27, 2010
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:
Account Entered Accounted
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

Currency Type
Application ACCRUAL_1 Version GL Date Jan 1, 2011
Journal Entry
Description
ing Curren
1 Item 01-000-1340-0000-000 USD 1,000.00 1,000.00
Expense
2 Item 01-000-6501-0000-000 USD 1,000.00 1,000.00
Expense

Currency Type
Application ACCRUAL_1 Version GL Date Jan 1, 2011
Journal Entry
Description
ing Curren
1 Item 01-000-1340-0000-000 USD 2,000.00 2,000.00
Expense
2 Item 01-000-7420-0000-000 USD 2,000.00 2,000.00
Expense
Similar Recognition accounting entries would be created for each month until Dec 2011.

Currency Type
Journal Entry
Description
ing Curren
1 Item 01-000-1340-0000-000 USD 1,000.00 1,000.00
Expense
2 Item 01-000-6501-0000-000 USD 1,000.00 1,000.00
Expense

Currency Type
Journal Entry
Description
Entered Accounted
Accounti Curren
Line ng Class Account cy Debit Credit Debit Credit
1 Item 01-000-1340-0000-000 USD 2,000.00 2,000.00
Expense
2 Item 01-000-7420-0000-000 USD 2,000.00 2,000.00
Expense
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

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Subledger Accounting

White Paper on Multi Period

Subledger Accounting: Multi Period Accounting (MPA) Page 1 of 37

2. SCOPE/OUT OF SCOPE ....................................................................................................................................... 3

3. OVERVIEW OF THE MULTI PERIOD ACCOUNTING FEATURE ............................................................................... 3

4. STEP BY STEP GUIDE TO MAP BUSINESS SCENARIO EXAMPLE ............................................................................ 8

4.1 INVOICE LINE FLEX FIELD (DFF) CONFIGURATION............................................................................................................8

5. SAMPLE TRANSACTION TO TEST MPA CONFIGURATION .................................................................................. 32

5.1 AP INVOICE CREATION ............................................................................................................................................32

Subledger Accounting: Multi Period Accounting (MPA) Page 2 of 37

a) An overview of the “Multi Period Accounting (MPA)” feature in R12

3. Overview of the Multi Period Accounting Feature

Subledger Accounting: Multi Period Accounting (MPA) Page 3 of 37

This can be explained with the following example:

Subledger Accounting: Multi Period Accounting (MPA) Page 4 of 37

Accounting entry in Books for event (1), Accounting date – 20-Dec

Accounting entry in Books for event (2), Accounting date – 31-Jan

Accounting entry in Books for event (3), Accounting date – 28/29-Feb

and so on until 31-Dec.

3.2 Mapping of the Business Scenario in Oracle Applications

Accounting entry in Books for event (1), Accounting date – 20-Dec

Subledger Accounting: Multi Period Accounting (MPA) Page 5 of 37

Accounting entry in Books for event (2), Accounting date – 31-Jan

3.3 Overview of Example for MPA Configuration

a) Accounting Date: 25-Dec-2010

b) Accounting Date: 31-Jan-2011

Recognition (Insurance for Vehicle) Dr USD 2000

c) Accounting Date: 28-Feb-2011

Recognition (Insurance for Vehicle) Dr USD 2000

And so on for every month until Dec-2011

Recognition (Insurance for Vehicle) Dr USD 2000

Subledger Accounting: Multi Period Accounting (MPA) Page 6 of 37

Accrual: 01-000-1340-0000-000 (01 is Company, 1340 is Natural Account)

Recognition (Insurance for Building):

Recognition (Insurance for Vehicle):

3.4 Steps to Be Performed to Map the Business Scenario

Subledger Accounting: Multi Period Accounting (MPA) Page 7 of 37

4.1 Invoice Line Flex field (DFF) Configuration

4.1.1 Define Invoice Line DFF

Query for: Application: Payables Title: Invoice Lines

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4.1.2 Define Values for Value Set

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4.2.1 Define Accounting Derivation Rule (ADR)

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4.2.2 Define Journal Line Type (JLT)

4.2.2.1 Define MPA Enabled Accrual Journal Line Type

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Click on “Done” button

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4.2.2.2 Define MPA Enabled Recognition Journal Line Type

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Click on Done button

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Click on “Conditions” button

Select first condition and Navigate Edit->Delete

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4.2.3 Define Journal Line Definition (JLD)

Click on “Copy Definition” button

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