Accounting information in Procure to Pay Cycle

Flow of accounting information in Procure to Pay Cycle

If you are implementing the Procure to Pay Cycle in Oracle Apps, you might have come across the following accounting activities:
1. Run the Create Accounting program after creating an invoice to post entries to the General Ledger
2. Run the Create Accounting program after making payments to post entries to the General Ledger.
As a newbie consultant, I always used to wonder why someone would have run the accounting entries twice. If you are one of the professional consultants or belong to the Chartered Accounting fraternity, you may already know the answer.
Else, read on..
1. The reason for creating accounting entries after creating an invoice is to ensure that the General Ledger is updated with the correct accounting information for the following 2 types of accounts:
a) Accounts Payable A/C
b) Merchandise A/C (incase of goods purchased) or Expense A/C (in case of expense)
When a supplier invoice is created, the business is liable to pay for the invoice and hence, the Accounts Payables A/C is credited. Since the invoice is raised for purchasing goods or for an expense, the corresponding Merchandise A/C or Expense A/C is debited.

Account		Dr	Cr
Merchandise A/C or Expense A/C		100
	Accounts Payable A/C		100

2.  The reason for creating accounting entries after making a payment is to ensure that the General Ledger is updated with the correct accounting information for the following 2 types of accounts:
a) Cash A/C or Bank A/C
b)Accounts Payable A/C 

When the invoice is paid, the payment is made in Cash. Hence the Cash A/C or Bank A/C is credited. Since the payment reduces the amount that the company owes to the Supplier, the Accounts Payable A/C is debited to the same extent.

Account		Dr	Cr
Accounts Payable A/C		100
	Cash A/C		100

Oracle Apps Receivables Accounting Entries****

Transactions Accounting:

Accounting setups:

1. Define Receivable and Revenue Account for Transaction Type like Invoice,Credit Memo,etc.

    Navigation

    Setup>Transactions>Transaction Types



2. Define AutoAccounting which determines defaulting rules for each segment of different Accounts like

    Receivable, Revenue, Tax, etc

    Setup>Transactions>AutoAccounting



Accounting entries:

Below are Transaction Accounts that are hit for Transaction like Invoices and Credit Memos

Invoices

When you enter a regular invoice through the Transactions window,

Receivables creates the following journal entry:

DR Receivables

CR Revenue

CR Tax (if you charge tax)

CR Freight (if you charge freight



Credit Memos

When you credit an invoice, debit memo, or charge back through the

Credit Transactions window, Receivables creates the following journal

entry:

DR Revenue

DR Tax (if you credit tax)

DR Freight (if you credit freight)

CR Receivables (Credit Memo)

DR Receivables (Credit Memo)

CR Receivables (Invoice)



Receipts Accounting:

Depending upon the status of the Receipt whether its Applied, Unapplied, Applied On-Account the

Transaction entries will hit different accounts. The Accounts are defaulted based on Payment method

(Receipt Class) and Remittance Bank selected when you enter the receipt.



Accounting setups:

Navigation:

Setup>Receipts>Receipt Classes

1.Define your Receipt Class along with  Remittance Bank. Receivables uses the default Cash, Unapplied,

   Unidentified, On account, Unearned, and Earned accounts that you specified in the Remittance Banks

    window for this receipt class.



2. Remittance Method: determines status of receipt, remittance required or not Standard, No Remittance



3. Clearance Method: Determines whether clearance is required or not.

        By Automatic Clearing

        By Matching

       Directly

4. At Receipt Class the values of Remittance method and Clearance method determines whether accounting

     entries hit Remittance and Cash Clearing accounts. If these are No Remittance and Clearing is Directly

     the accounting entries don't hit Remittance and Cash Clearing accounts.



Accounting entries:

These examples assume that the receipt has a Remittance Method of No Remittance and a Clearance Method of Directly.

When you enter a receipt and its Unapplied, Receivables creates the following journal entries:

DR Cash

CR Unapplied Cash



When you fully apply a receipt to an invoice, Receivables creates the following journal entry:

DR Cash

DR Unapplied Cash

CR Unapplied Cash

CR Receivables



When you enter an unidentified receipt, Receivables creates the following journal entry:

DR Cash

CR Unidentified



When you enter an on– account receipt, Receivables creates the following journal entry:

DR Cash

CR Unapplied

DR Unapplied

CR On–Account



When your receipt includes a discount, Receivables creates the following journal entry:

DR Receivables

CR Revenue

DR Cash

CR Receivables

DR Earned/Unearned Discount

CR Receivables



At Receipt Class the Remittance and Clearance method is set as Standard and By Matching

Enter the Receipt the entry hits Receipt Confirmation with status of receipt as Confirmed

DR Receipt Confirmation

CR Receivables



Once the receipt is remitted and status becomes "Remitted"

DR Remittance

CR Receipt Confirmation



Once receipt is Cleared

Dr Cash

CR Remittance





  

  

Accounting entries in Order to Cash cycle

A quick summary of accounting entries in Order to Cash cycle

    Sales order creation – No entries
    Pick release:
    Inventory Stage A/c…………………Debit
    Inventory Finished goods a/c……..Credit
    Ship confirm:
    Cogs A/c ……………………………Debit
    Inventory Organization a/c………Credit
    Receviable:
    Receviable A/c………………………Debit
    Revenue A/c………………………Credit
    Tax ………………..…………………Credit
    Freight…………..….……………….Credit
    Cash:
    Cash A/c Dr…………………………Debit
    Receivable A/c……………………….Credit

---------------------------------------------------------------------------
 For Order to Cash Entries.


Step 1: Sales order creation - No entries


Step 2: Pick release : Inventory Stage A/c Dr
To Inventory Finished goods a/c

Step 3: Ship confirm : Cogs A/c Dr
Inventory Organization A/c.


Step 4: In Receviable : Receviable A/c dr
To Revenue A/c
To Tax
To Freight

Step 5: Cash : Cash A/c Dr
Receivable A/c cr

Order to Cash Process

order to cash process steps can be listed as below

• Enter the Sales Order
• Book the Sales Order
• Launch Pick Release
• Ship Confirm
• Create Invoice
• Create the Receipts either manually or using Auto Lockbox ( In this article we will concentrate on Manual creation)
• Transfer to General Ledger
• Journal Import
• Posting

Watch o2c Video:  Order to Cash cycle Video

Query: Order to Cash query

Let’s get into the details of each step mentioned above.
Enter the Sales Order:
Navigation: Order Management Super User Operations (USA)>Orders Returns >Sales Orders
Enter the Customer details (Ship to and Bill to address), Order type.

Click on Lines Tab. Enter the Item to be ordered and the quantity required.

Line is scheduled automatically when the Line Item is saved.
Scheduling/unscheduling can be done manually by selecting Schedule/Un schedule from the Actions Menu.
You can check if the item to be ordered is available in the Inventory by clicking on Availability Button.

Save the work.
Underlying Tables affected:
In Oracle, Order information is maintained at the header and line level.
The header information is stored in OE_ORDER_HEADERS_ALL and the line information in OE_ORDER_LINES_ALL when the order is entered. The column called FLOW_STATUS_CODE is available in both the headers and lines tables which tell us the status of the order at each stage.
At this stage, the FLOW_STATUS_CODE in OE_ORDER_HEADERS_ALL is ‘Entered’
Book the Sales Order:
Book the Order by clicking on the Book Order button.

Now that the Order is BOOKED, the status on the header is change accordingly.

Underlying tables affected:
At this stage:
The FLOW_STATUS_CODE in the table OE_ORDER_HEADERS_ALL would be
‘BOOKED’
The FLOW_STATUS_CODE in OE_ORDER_LINES_ALL will be
‘AWAITING_SHIPPING’.
Record(s) will be created in the table WSH_DELIVERY_DETAILS with
RELEASED_STATUS=’R’ (Ready to Release)
Also Record(s) will be inserted into WSH_DELIVERY_ASSIGNMENTS.
At the same time DEMAND INTERFACE PROGRAM runs in the background and inserts
into MTL_DEMAND
Launch Pick Release:
Navigation: Shipping > Release Sales Order > Release Sales Orders.
Key in Based on Rule and Order Number

In the Shipping Tab key in the below:
Auto Create Delivery: Yes
Auto Pick Confirm: Yes
Auto Pack Delivery: Yes

In the Inventory Tab:
Auto Allocate: Yes
Enter the Warehouse

Click on Execute Now Button.
On successful completion, the below message would pop up as shown below.


Pick Release process in turn will kick off several other requests like Pick Slip Report,
Shipping Exception Report and Auto Pack Report

Underlying Tables affected:
If Autocreate Delivery is set to ‘Yes’ then a new record is created in the table WSH_NEW_DELIVERIES.
DELIVERY_ID is populated in the table WSH_DELIVERY_ASSIGNMENTS.
The RELEASED_STATUS in WSH_DELIVERY_DETAILS would be now set to ‘Y’ (Pick Confirmed) if Auto Pick Confirm is set to Yes otherwise RELEASED_STATUS is ‘S’ (Release to Warehouse).
Pick Confirm the Order:
IF Auto Pick Confirm in the above step is set to NO, then the following should be done.
Navigation: Inventory Super User > Move Order> Transact Move Order
In the HEADER tab, enter the BATCH NUMBER (from the above step) of the order. Click FIND. Click on VIEW/UPDATE Allocation, then Click TRANSACT button. Then Transact button will be deactivated then just close it and go to next step.
Ship Confirm the Order:
Navigation: Order Management Super User>Shipping >Transactions.
Query with the Order Number.

Click On Delivery Tab

Click on Ship Confirm.


The Status in Shipping Transaction screen will now be closed.

This will kick off concurrent programs like.INTERFACE TRIP Stop, Commercial Invoice, Packing Slip Report, Bill of Lading
Underlying tables affected:
RELEASED_STATUS in WSH_DELIVERY_DETAILS would be ‘C’ (Ship Confirmed)
FLOW_STATUS_CODE in OE_ORDER_HEADERS_ALL would be “BOOKED”
FLOW_STATUS_CODE in OE_ORDER_LINES_ALL would be “SHIPPED”
Create Invoice:
Run workflow background Process.
Navigation: Order Management >view >Requests

Workflow Background Process inserts the records RA_INTERFACE_LINES_ALL with
INTERFACE_LINE_CONTEXT     =     ‘ORDER ENTRY’
INTERFACE_LINE_ATTRIBUTE1=     Order_number
INTERFACE_LINE_ATTRIBUTE3=     Delivery_id
and spawns Auto invoice Master Program and Auto invoice import program which creates Invoice for that particular Order.

The Invoice created can be seen using the Receivables responsibility
Navigation: Receivables Super User> Transactions> Transactions
Query with the Order Number as Reference.

Underlying tables:
RA_CUSTOMER_TRX_ALL will have the Invoice header information. The column INTERFACE_HEADER_ATTRIBUTE1 will have the Order Number.
RA_CUSTOMER_TRX_LINES_ALL will have the Invoice lines information. The column INTERFACE_LINE_ATTRIBUTE1 will have the Order Number.
Create receipt:
Navigation: Receivables> Receipts> Receipts
Enter the information.

Click on Apply Button to apply it to the Invoice.


Underlying tables:
AR_CASH_RECEIPTS_ALL
Transfer to General Ledger:
To transfer the Receivables accounting information to general ledger, run General Ledger Transfer Program.
Navigation: Receivables> View Requests
Parameters:

• Give in the Start date and Post through date to specify the date range of the transactions to be transferred.
• Specify the GL Posted Date, defaults to SYSDATE.
• Post in summary: This controls how Receivables creates journal entries for your transactions in the interface table. If you select ‘No’, then the General Ledger Interface program creates at least one journal entry in the interface table for each transaction in your posting submission. If you select ‘Yes’, then the program creates one journal entry for each general ledger account.
• If the Parameter Run Journal Import is set to ‘Yes’, the journal import program is kicked off automatically which transfers journal entries from the interface table to General Ledger, otherwise follow the topic Journal Import to import the journals to General Ledger manually.

Underlying tables:
This transfers data about your adjustments, chargeback, credit memos, commitments, debit memos, invoices, and receipts to the GL_INTERFACE table.
Journal Import:
To transfer the data from General Ledger Interface table to General Ledger, run the Journal Import program from Oracle General Ledger.
Navigation: General Ledger > Journal> Import> Run
Parameters:

• Select the appropriate Source.
• Enter one of the following Selection Criteria:
  No Group ID: To import all data for that source that has no group ID. Use this option if you specified a NULL group ID for this source.
  All Group IDs: To import all data for that source that has a group ID. Use this option to import multiple journal batches for the same source with varying group IDs.
  Specific Group ID: To import data for a specific source/group ID combination. Choose a specific group ID from the List of Values for the Specific Value field.
  If you do not specify a Group ID, General Ledger imports all data from the specified journal entry source, where the Group_ID is null.
• Define the Journal Import Run Options (optional)
  Choose Post Errors to Suspense if you have suspense posting enabled for your set of books to post the difference resulting from any unbalanced journals to your suspense account.
  Choose Create Summary Journals to have journal import create the following:
  • one journal line for all transactions that share the same account, period, and currency and that has a debit balance
  • one journal line for all transactions that share the same account, period, and currency and that has a credit balance.
• Enter a Date Range to have General Ledger import only journals with accounting dates in that range. If you do not specify a date range, General Ledger imports all journals data.
• Choose whether to Import Descriptive Flexfields, and whether to import them with validation.

Click on Import button.

Underlying tables:
GL_JE_BATCHES, GL_JE_HEADERS, GL_JE_LINES
Posting:
We have to Post journal batches that we have imported previously to update the account balances in General Ledger.
Navigation: General Ledger> Journals > Enter
Query for the unposted journals for a specific period as shown below.

From the list of unposted journals displayed, select one journal at a time and click on Post button to post the journal.


If you know the batch name to be posted you can directly post using the Post window
Navigation: General Ledger> Journals> Post

Underlying tables:
GL_BALANCES.

Base Tables for Order to Cash (O2C) Cycle in Oracle Apps

1. Order Entry
This is the first stage where Order is entered into the system. It creates a record in Headers table and Lines table
OE_ORDER_HEADERS_ALL:
This table stores the Header Information of the Sales Order
Important columns in this table:
HEADER_ID: Unique system generated ID
ORG_ID, ORDER_NUMBER, SHIP_FROM_ORG_ID, SHIP_TO_ORG_ID and FLOW_STATUS_CODE
At the time of Order Entry, the FLOW_STATUS_CODE is ‘Entered’
Sample code:
SELECT HEADER_ID, ORG_ID, ORDER_TYPE_ID, FLOW_STATUS_CODE, TRANSACTIONAL_CURR_CODE, SHIPPING_METHOD_CODE, SHIP_FROM_ORG_ID, SHIP_TO_ORG_ID FROM OE_ORDER_HEADERS_ALL WHERE ORDER_NUMBER= 66405;
OE_ORDER_LINES_ALL:
This table stores the Line Information of the Sales Order
Important columns of this table
LINE_ID: Unique system generated ID
HEADER_ID: It is the link between OE_ORDER_HEADERS_ALL and OE_ORDER_LINES_ALL
ORDERED_ITEM, INVENTORY_ITEM_ID, PRICING_QUANTITY, ORDERED_QUANTITY, FLOW_STATUS_CODE and UNIT_SELLING_PRICE_PER_PQTY
Sample code:
SELECT LINE_ID FROM OE_ORDER_LINES_ALL WHERE HEADER_ID= 190452;
SELECT ORDERED_ITEM, INVENTORY_ITEM_ID, PRICING_QUANTITY, ORDERED_QUANTITY, FLOW_STATUS_CODE, UNIT_SELLING_PRICE_PER_PQTY FROM OE_ORDER_LINES_ALL WHERE LINE_ID= 388401;
2. Order Booking
Order Booking is the final stage in the Sales Order entry. Now that the Order Entry process is complete and that the order is eligible for the next stage in the line flow for this order, as defined by its Transaction Type. By clicking Book Order button, the Order is booked.
OE_ORDER_HEADERS_ALL
OE_ORDER_LINES_ALL
WSH_DELIVERY_DETAILS
When the Order is Booked, the FLOW_STATUS_CODE in OE_ORDER_HEADERS_ALL would be ‘BOOKED’ and the FLOW_STATUS_CODE in OE_ORDER_LINES_ALL would be ‘AWAITING_SHIPPING’
RELEASED_STATUS in WSH_DELIVERY_DETAILS would be ‘R’ (means- ready to release)
Important columns of WSH_DELIVERY_DETAILS table:
DELIVERY_DETAIL_ID: Unique system generated id with reference to SOURCE_HEADER_ID (it is the HEADER_ID from OE_ORDER_HEADERS_ALL)
SOURCE_HEADER_ID: It is the HEADER_ID generated from OE_ORDER_HEADERS_ALL
SOURCE_LINE_ID: It is the LINE_ID generated from OE_ORDER_LINES_ALL
RELEASED_STATUS, SOURCE_CODE, CUSTOMER_ID, INVENTORY_ITEM_ID, SHIP_FROM_LOCATION_ID, SHIP_TO_LOCATION_ID, MOVE_ORDER_LINE_ID, REQUESTED_QUANTITY, SHIPPED_QUANTITY, SUBINVENTORY, SHIP_METHOD_CODE etc.
Sample Code:
SELECT DELIVERY_DETAIL_ID, SOURCE_HEADER_ID, SOURCE_LINE_ID, SOURCE_CODE, CUSTOMER_ID, INVENTORY_ITEM_ID, ITEM_DESCRIPTION, SHIP_FROM_LOCATION_ID, SHIP_TO_LOCATION_ID, MOVE_ORDER_LINE_ID, REQUESTED_QUANTITY, SHIPPED_QUANTITY, SUBINVENTORY, RELEASED_STATUS, SHIP_METHOD_CODE, CARRIER_ID FROM WSH_DELIVERY_DETAILS WHERE SOURCE_HEADER_ID= 190452;
3. Launch Pick Release:
Pick release is the process by which the items on the sales order are taken out from inventory. This process allocates on-hand inventory to your order and inform the warehouse personnel to move the item from inventory to the shipping staging area.  Once your item is in the shipping staging area, it is ready to be shipped.
OE_ORDER_LINES_ALL:  Here the FLOW_STATUS_CODE should be ‘PICKED’ or ‘AWAITING_SHIPPING’ depending on Auto Pick Confirm (set to No or Yes)
WSH_DELIVERY_DETAILS: Here RELEASED_STATUS should be ‘S’ (Submitted for Release) or ‘Y’ (Pick Confirmed). These values again depend on the parameters given at Auto Pick Confirm (set to No or Yes)
WSH_DELIVERY_ASSIGNMENTS: DELIVERY_ID is populated here (from DELIVERY_DETAIL_ID with reference to WSH_DELIVERY_DETAILS table)
Sample Code:
SELECT DELIVERY_DETAIL_ID FROM WSH_DELIVERY_DETAILS WHERE SOURCE_HEADER_ID= 190452;
SELECT DELIVERY_ASSIGNMENT_ID, DELIVERY_ID, PARENT_DELIVERY_ID, DELIVERY_DETAIL_ID, PARENT_DELIVERY_DETAIL_ID, CREATION_DATE, CREATED_BY, LAST_UPDATE_DATE, LAST_UPDATED_BY, ACTIVE_FLAG, TYPE FROM WSH_DELIVERY_ASSIGNMENTS WHERE DELIVERY_DETAIL_ID= 3966467;
4. Ship Confirm the Order:
It is a process of sending the Items from shipping staging area to the Customer site. By ship confirming you will notify EBS that the shipment is complete and thereby updating the on-hand Inventory.  Ships confirm process will kick off the following Concurrent Programs:
Interface Trip stop, Packing slip Report, Bill of Lading, Commercial Invoice
OE_ORDER_LINES_ALL:  Here the FLOW_STATUS_CODE should be ‘SHIPPED’
WSH_DELIVERY_DETAILS:  Here RELEASED_STATUS should be ‘C’ (Shipped)
5. Creating Invoices in Receivables:
Here the Invoices are created based on the goods sold. We need to run the ‘Workflow Background Process’ where it picks the shipping records and transfers to Receivables interface
Workflow Background Process inserts new records in RA_INTERFACE_LINES_ALL
Important columns of this table:
INTERFACE_LINE_ID: It is the LINE_ID with reference to OE_ORDER_LINES_ALL
INTERFACE_LINE_CONTEXT, INTERFACE_LINE_ATTRIBUTE1, INTERFACE_LINE_ATTRIBUTE3
Sample Code:
SELECT INTERFACE_LINE_CONTEXT, INTERFACE_LINE_ATTRIBUTE1, INTERFACE_LINE_ATTRIBUTE3 FROM RA_INTERFACE_LINES_ALL WHERE INTERFACE_LINE_ID= 388401;
INTERFACE_LINE_CONTEXT:                       Order Entry
INTERFACE_LINE_ATTRIBUTE1:                  Order Number
INTERFACE_LINE_ATTRIBUTE3:                  Delivery ID
RA_CUSTOMER_TRX_ALL: Stores Invoice header information.
INTERFACE_HEADER_ATTRIBUTE1 column will have the Order Number.
INTERFACE_HEADER_ATTRIBUTE2 column will have Order Type
TRX_NUMBER column is the Invoice Number
Sample Code:
SELECT INTERFACE_HEADER_ATTRIBUTE2, CUSTOMER_TRX_ID, TRX_NUMBER, CUST_TRX_TYPE_ID, COMPLETE_FLAG, SHIP_DATE_ACTUAL FROM RA_CUSTOMER_TRX_ALL WHERE INTERFACE_HEADER_ATTRIBUTE1= ‘66405’;
RA_CUSTOMER_TRX_LINES_ALL: Stores Invoice lines information.
INTERFACE_LINE_ATTRIBUTE1 column will have the Order Number.
INTERFACE_LINE_ATTRIBUTE2 column will have Order Type
INTERFACE_LINE_ATTRIBUTE3 column will have Delivery
INTERFACE_LINE_ATTRIBUTE4 column will have Waybill
INTERFACE_LINE_ATTRIBUTE5 column will have count
INTERFACE_LINE_ATTRIBUTE6 column will have Line ID
INTERFACE_LINE_ATTRIBUTE7 column will have Picking Line ID
INTERFACE_LINE_ATTRIBUTE8 column will have Bill of Lading
INTERFACE_LINE_ATTRIBUTE9 column will have Customer Item Part
INTERFACE_LINE_ATTRIBUTE10 column will have warehouse
INTERFACE_LINE_ATTRIBUTE11 column will have Price Adjustment
INTERFACE_LINE_ATTRIBUTE12 column will have Shipment Number
INTERFACE_LINE_ATTRIBUTE13 column will have Option Number
INTERFACE_LINE_ATTRIBUTE14 column will have Service Number
6. Create Receipt
Underlying tables:
AR_CASH_RECEIPTS_ALL
CASH_RECEIPT_ID is the unique system generated ID
FLOW_STATUS_CODE in OE_ORDER_LINES_ALL should be ‘CLOSED’