O A W P A R12 O R: Racle Pplications Hite Aper Ccounting in Racle Eceivables

ORACLE APPLICATIONS WHITE PAPER
ACCOUNTING IN R12 ORACLE

RECEIVABLES
OCT 2011
Author: Mohamed Nazih

CPA, PMP, Oracle Financials Consultant
m.nazih@gmail.com
Version 1.0
Accounting in Oracle EBS Payables © 2011
Contents
About the Author ................................................................................................... 4

Introduction ........................................................................................................... 4
Purpose.................................................................................................................. 4
Scope ..................................................................................................................... 4
Audience ................................................................................................................ 5
Accounting in R12 Oracle Receivables ................................................................... 6
Determinants - Accounts .............................................................................................................. 6
System Options Accounts ......................................................................................................................................... 7
Transaction Type....................................................................................................................................................... 8
Customer Bill-To Site ................................................................................................................................................ 9
Remittance Bank ..................................................................................................................................................... 10
Receivables Activities.............................................................................................................................................. 11
Salesperson ............................................................................................................................................................. 11
Standard Line – Inventory Item .............................................................................................................................. 12
Standard Line – Memo Lin ...................................................................................................................................... 12
Determinants - Options .............................................................................................................. 13

AutoAccounting ...................................................................................................................................................... 13
Receivables Journal Entries ........................................................................................................ 14

AR-1 Regular Invoice ............................................................................................................................................... 14
AR-2 Bill in Arrears Invoice...................................................................................................................................... 14
AR-3 Bill in Advance Invoice .................................................................................................................................... 15
AR-4 Debit Memo ................................................................................................................................................... 15
AR-5 Credit Memo .................................................................................................................................................. 16
AR-6 Apply credit memo to invoice, debit memo, or chargeback .......................................................................... 16
AR-7 Apply credit memo to commitment ............................................................................................................... 16
AR-8 On-account credit .......................................................................................................................................... 17
Page 2 of 28
AR-9 Apply On-account credit to invoice ................................................................................................................ 17
AR-10 Adjustment to invoice .................................................................................................................................. 17
AR-11 Deposit ......................................................................................................................................................... 17
AR-12 Invoice applied to Deposit............................................................................................................................ 18
AR-13 Guarantee .................................................................................................................................................... 18
AR-14 Invoice applied to Guarantee ....................................................................................................................... 19
AR-15 Unidentified Receipt .................................................................................................................................... 19
AR-16 Unapplied Receipt ........................................................................................................................................ 20
AR-17 Applied Receipt ............................................................................................................................................ 20
AR-18 On Account Receipt ...................................................................................................................................... 20
AR-19 Receipt with Discount .................................................................................................................................. 21
AR-20 Miscellaneous Receipt ................................................................................................................................. 21
AR-21 Receipt Write-Off ......................................................................................................................................... 21
AR-22 Receipt requiring Remittance ...................................................................................................................... 21
AR-23 Standard Remittance.................................................................................................................................... 22
AR-24 Clearing of Remitted Receipts ...................................................................................................................... 22
AR-25 Factoring Remittance ................................................................................................................................... 22
AR-26 Maturity of Factored Receipts or Eliminating Risk ....................................................................................... 22
AR-27 Clearing Factored Receipts ........................................................................................................................... 22
AR-28 Non-Invoice related Claim ............................................................................................................................ 23
Notes Receivable ........................................................................................................................ 24

NR-01 Note Receivable requiring Remittance ........................................................................................................ 24
NR-02 Standard Remittance ................................................................................................................................... 24
NR-03 Clearing of Remitted Notes Receivable ....................................................................................................... 24
NR-04 Factoring Remittance ................................................................................................................................... 24
NR-05 Maturity of Factored Receipts or Eliminating Risk ....................................................................................... 24
NR-06 Clearing Factored Receipts .......................................................................................................................... 25
Special Accounts ......................................................................................................................... 26

Cross Currency Rounding ........................................................................................................................................ 26
Header Rounding .................................................................................................................................................... 26
AutoInvoice Clearing Account................................................................................................................................. 27
Information Sources ................................................................................................................... 28

Accounting in R12 Oracle Receivables
About the Author

Mohamed Nazih is a proficient functional consultant in Oracle e-Business Suite with more
than seven 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.
Introduction
Accounting Journal Entries are embedded in every aspect of Oracle Financials Applications.
Since they are “Financials”, you must have a good understanding of how these journals are
generated and integrated. This understanding affects how you design and implement solution
and it is the ground of discussion with customer’s representatives in this sector. They may
have little knowledge of Oracle but, mostly, are good accountants.
Purpose
This whitepaper will provide a detailed overview of accounting events, entries, and source.
This overview may help designing better chart of accounts and justifying decisions taken to
setup system parameters and options
Scope
This whitepaper will cover Oracle R12 Receivables accounting except those of:
• Bills Receivable
• Credit Cards
• Trade Management and Claim Investigation
Page 4 of 28
Audience
This whitepaper is aimed to super users and functional consultants and implementers as well
as applications’ auditors.
Page 5 of 28
Determinants - Accounts
Receivables’ Journal Entries are controlled by the definition of:
1. System options
2. Transaction Type
3. Customer Bill-to Site
4. Remittance Bank
5. Receivable Activity
6. Sales Person
7. Standard Line
Account Qualifier System Transaction Customer Remittance Receivable Sales Standard

options Type Bill-to Site Bank Activity Person Line
Receivable Asset    
Revenue Revenue    
Freight Revenue   
Clearing Asset  
Unbilled receivable Asset  
Unearned revenue Liability  
Tax Liability   
Realized Gain Revenue 
Realized Losses Expense 
Unallocated Revenue Revenue 
Cross Currency Rounding Expense 
Header Rounding Expense 
Offset Asset
Cash Asset 
Bank charges Expense 
Receipts Confirmation Asset 
Remittance Asset 
Factoring Asset 
Short Term Debt Liability 
Unapplied Receipts Asset 
Page 6 of 28
Account Qualifier System Transaction Customer Remittance Receivable Sales Standard

options Type Bill-to Site Bank Activity Person Line
Unidentified Receipts Asset 
On Account Receipts Liability 
Unearned discount Expense 
Earned discount Expense 
Adjustment (write-off) Revenue 
Bank Error Expense 
Finance Charges Revenue 
Refund Liability 
Misc. Cash Revenue 
System Options Accounts
Figure 1
Page 7 of 28
Transaction Type
Figure 2
Page 8 of 28
Customer Bill-To Site
Figure 3
Page 9 of 28
Remittance Bank
Figure 4
Page 10 of 28
Receivables Activities
Figure 5
Salesperson
Figure 6
Page 11 of 28
Standard Line – Inventory Item
Figure 7
Standard Line – Memo Lin
Figure 8
Page 12 of 28
Determinants - Options
AutoAccounting
If an account can be defined in more than one window, AutoAccounting Setup determines
which account segment will be picked from which source. That does apply only to
transactions’ accounting since receipts’ accounting has one source (i.e., Receipt Class -
Remittance Bank). AutoAccounting applies to the following accounts:
• AutoInvoice Clearing Account
• Freight
• Receivable
• Revenue
• Tax
• Unbilled Receivable
• Unearned Revenue
Page 13 of 28
Receivables Journal Entries

Oracle Receivables has the following accounting events:
AR-1 Regular Invoice

Accounts Debit Credit
Receivables X
Revenue X
Tax X
Freight X
AR-2 Bill in Arrears Invoice

(Every Period within the Accounting Rule)
Unbilled Receivables X
Revenue X
(Last Period)
Receivables X
Unbilled Receivables X
Tax X
Freight X
Page 14 of 28
AR-3 Bill in Advance Invoice

(First Period)
Receivables X
Unearned Revenue X
Tax X
Freight X
(Every Period within the Accounting Rule)

Unearned Revenue X
Revenue X
AR-4 Debit Memo

Receivables X
Revenue X
Tax X
Freight X
Receivables X
(1)
Late Charges X
(1) Late Charges account is defined in a Receivable Activity of type Finance Charges. This
activity assigned to System options and can be overridden on customer Bill-To site.
Page 15 of 28
AR-5 Credit Memo

Revenue X
Tax X
Freight X
(2)
Receivables X
(2) The profile option AR: Use Invoice Accounting for Credit Memos determines how JE for
credit memos are generated. If Yes, Receivables credits original transaction. If No,
Receivables uses AutoAccounting to determine accounts.
AR-6 Apply credit memo to invoice, debit memo, or chargeback

(3)
Receivables X
(4)
Receivables X
(3) Credit Memo account

(4) Invoice account
AR-7 Apply credit memo to commitment

Revenue (5) X
(6)
Receivables X
(5) Credit Memo account

(6) Invoice account
Page 16 of 28
AR-8 On-account credit

Revenue X
Tax X
Freight X
(7)
Receivables X
(7) JE is the same as this of Credit Memo
AR-9 Apply On-account credit to invoice

(8)
Receivables X
(9)
Receivables X
(8) On-account credit account

(9) Invoice account
AR-10 Adjustment to invoice

Adjustment X
(10)
Receivables X
(10) This is a negative adjustment
AR-11 Deposit
(11)
Receivables X
(12)
Offset X
(11) Deposit account
Page 17 of 28
(12) Offset account can be an account such as unearned revenue and is controlled by profile
option = AR: Deposit Offset Account Source (AutoAccounting or deposit's transaction type)
(Cash is received against Deposit)

Cash X
(13)
Receivables X
(13) Deposit account
AR-12 Invoice applied to Deposit

(14)
Receivables X
Revenue X
Tax X
Freight X
Offset X
(15)
Receivables X
(14) This is the invoice part of the transaction

(15) Invoice account
AR-13 Guarantee
(16)
Receivables X
Revenue (17) X
(16) Unbilled Receivables account can be used

(17) Unearned Revenue account can be used
Page 18 of 28
AR-14 Invoice applied to Guarantee

(18)
Receivables X
Revenue X
Tax X
Freight X
Revenue X
(19)
Receivables X
(18) This is the invoice part of the transaction

(19) Invoice account
(Cash is received against Guarantee)

Cash X
(20)
Receivables X
(20) Guarantee account
AR-15 Unidentified Receipt

Cash X
(21)
Bank Charges X
Unidentified Receipt X
(21) Bank Charges can be entered if profile option "AR: Create Bank Charges" = Yes and
receipt's creation status is 'Cleared' (clearance method of receipt class is set to 'Directly').
Page 19 of 28
Change from unidentified to unapplied

Unidentified Receipt X
Unapplied Receipt X
AR-16 Unapplied Receipt

Cash X
Bank Charges X
Unapplied Receipt X
Change from unapplied to applied

Unapplied Receipt X
Receivables X
AR-17 Applied Receipt

Cash X
Bank Charges X
Receivables X
AR-18 On Account Receipt

Cash X
Bank Charges X
On Account X
Page 20 of 28
AR-19 Receipt with Discount

Cash X
Earned / Unearned Discount X
Receivables X
AR-20 Miscellaneous Receipt

Cash X
Bank Charges X
Misc. Cash (22) X
(22) This usually a revenue account
AR-21 Receipt Write-Off

Unapplied Cash X
(23)
Write-Off X
(23) This usually a revenue account
AR-22 Receipt requiring Remittance

Receipt Confirmation X
Receivables X
Page 21 of 28
AR-23 Standard Remittance

Remitted Receipt X
AR-24 Clearing of Remitted Receipts

Cash X
Bank Charges X
Remitted Receipt X
AR-25 Factoring Remittance

Factored Receipt X
AR-26 Maturity of Factored Receipts or Eliminating Risk

Short-Term Debt X
Factored Receipt X
AR-27 Clearing Factored Receipts

Cash X
Bank Charges X
Short-Term Debt X
Page 22 of 28
AR-28 Non-Invoice related Claim

Claim Investigation X
Unapplied Cash X
Page 23 of 28
Notes Receivable
NR-01 Note Receivable requiring Remittance
Notes Receivable X
Receivables X
NR-02 Standard Remittance

Notes Receivable X
Notes Receivable X
NR-03 Clearing of Remitted Notes Receivable

Cash X
Bank Charges X
Remitted Notes Receivable X
NR-04 Factoring Remittance

Factored Notes Receivable X
Notes Receivable Confirmation X
NR-05 Maturity of Factored Receipts or Eliminating Risk

Short-Term Debt X
Factored Notes Receivable X
Page 24 of 28
NR-06 Clearing Factored Receipts

Cash X
Bank Charges X
Short-Term Debt X
Page 25 of 28
Special Accounts
Cross Currency Rounding
Is used to record rounding error amounts created during a cross currency receipt application
for currencies that have a fixed rate relationship. These errors:
• May occur because there are usually more decimal places defined for an exchange rate
than for the standard precision of functional currency. When a receipt amount is
multiplied by an exchange rate and then rounded to match standard precision, the
result can be slightly different from the transaction amount specified in the
transmission file.
• May be expected if receipt in foreign currency (USD) is to be applied to invoices in
different foreign currency (EUR) while functional currency is EGP.
Header Rounding
Is used to record any rounding differences occur upon converting foreign currency
transactions to functional currency.
Upon creating a transaction with several line items, total amount in the two currencies may
vary slightly (usually by the minimum accountable unit defined for functional currency). These
differences occur due to rounding.
Example:
Item Amount in EUR Exchange Rate Amount in EGP
A 15 8.639 129.59
B 12 8.639 103.67
C 23 8.639 198.70
431.96
Total 50 8.639 431.95
Rounding Difference 0.01
Total amount of lines after conversion is EGP 431.96 while header amount is 431.95. This
results in a rounding difference of 0.01. The journal entry would be:
Receivables 431.95
Header Rounding 0.01
Revenue 431.96
Page 26 of 28
Unless it’s a legal requirement, Header Level Rounding is not recommended. If so, Receivables
rounds amounts at line level (EUR 50), multiply by exchange rate (EGP 8.693), and posts any
rounding difference to the Receivables account. When more than one receivable account is
used – according to AutoAccounting setup – the account with largest amount is affected by
the rounding difference.
Receivables A 129.59
Receivables B 103.67
Receivables C 198.96
Revenue 431.95
AutoInvoice Clearing Account

If “Create Clearing” option is enabled for imported transactions batch source, this account will
be used to hold any difference between the specified revenue amount and the selling price
times the quantity for imported invoice lines. In other words, (quantity * unit price) ≠
extended price.
Finance charge
Page 27 of 28
Information Sources
o AutoAccounting Setup White Paper [ID 215376.1]
o Oracle Recivables User's Guide Release 12.1 Part No. E13522-04
o Oracle Payables Implementation Guide Release 12.1 Part No. E13510-04
Page 28 of 28

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ORACLE APPLICATIONS WHITE PAPER

ACCOUNTING IN R12 ORACLE

Author: Mohamed Nazih

About the Author ................................................................................................... 4

Determinants - Options .............................................................................................................. 13

Receivables Journal Entries ........................................................................................................ 14

Notes Receivable ........................................................................................................................ 24

Special Accounts ......................................................................................................................... 26

Information Sources ................................................................................................................... 28

About the Author

Accounting in R12 Oracle Receivables

Account Qualifier System Transaction Customer Remittance Receivable Sales Standard

Account Qualifier System Transaction Customer Remittance Receivable Sales Standard

System Options Accounts

Customer Bill-To Site

Standard Line – Inventory Item

Standard Line – Memo Lin

Receivables Journal Entries

AR-1 Regular Invoice

AR-2 Bill in Arrears Invoice

AR-3 Bill in Advance Invoice

(Every Period within the Accounting Rule)

AR-4 Debit Memo

Accounts Debit Credit

AR-5 Credit Memo

AR-6 Apply credit memo to invoice, debit memo, or chargeback

(3) Credit Memo account

AR-7 Apply credit memo to commitment

(5) Credit Memo account

AR-8 On-account credit

(7) JE is the same as this of Credit Memo

AR-9 Apply On-account credit to invoice

(8) On-account credit account

AR-10 Adjustment to invoice

(10) This is a negative adjustment

(11) Deposit account

(Cash is received against Deposit)

(13) Deposit account

AR-12 Invoice applied to Deposit

(14) This is the invoice part of the transaction

(16) Unbilled Receivables account can be used

AR-14 Invoice applied to Guarantee

(18) This is the invoice part of the transaction

(Cash is received against Guarantee)

(20) Guarantee account

AR-15 Unidentified Receipt

Change from unidentified to unapplied

AR-16 Unapplied Receipt

Change from unapplied to applied

AR-17 Applied Receipt

AR-18 On Account Receipt

AR-19 Receipt with Discount

Earned / Unearned Discount X

AR-20 Miscellaneous Receipt

Misc. Cash (22) X

(22) This usually a revenue account

AR-21 Receipt Write-Off

(23) This usually a revenue account

AR-22 Receipt requiring Remittance

AR-23 Standard Remittance

AR-24 Clearing of Remitted Receipts

AR-25 Factoring Remittance

AR-26 Maturity of Factored Receipts or Eliminating Risk