Accounting Entries in Oracle Fusion Cloud Application

 

Procure-to- Pay Accounting Entries:

When we receive the Goods in the staging area the accounting entry would be (GRN):

Receiving Inventory --- Dr-----It will pick from receiving options. 

Ap Accrual --- Cr---It will pick from Purchasing Options.

When we are moving the Goods from Staging area to Sub-Inv (Recv Trans):

Material A/C --- Dr-----It will pick from Inventory Options

Receiving Inv --- Cr----It will pick from Receiving Options

While Creating Invoice: 

Ap Accrual --- Dr

Liability ---- Cr-----It will pick from supplier Liability 

While Making Payment:

Liability – Dr

Cash Clearing – Cr-----It will pick from Bank

Reconciliation:

Cash Clearing --- Dr

Cash – Cr

Standard Invoice Entry : 

Ap Accrual --- Dr

Liability ---- Cr

Debit and Credit Memo Entries:

Liability --- Dr 

Ap Accrual --- Cr

Prepayment Entries:

While Creating Prepayment Invoice:

Prepayment --- Dr----It will pick from supplier

Liability – Cr----It will pick from supplier

While Making Payment to Prepayment:

Liability – Dr

Cash – Cr

While applying Prepayment on Standard Invoice:

Liability --- Dr

Prepayment – Cr

INTEREST INVOICE ENTRY WHILE MAKING PAYMENT:

Interest expenses –- Dr-----It will pick from Financial options

Liability ---------------- Dr

Cash ---------------------Cr

EXPENSE REPORT ENTRY:

Item Expense A/C --- Dr

Liability --- Cr

PAYMENT REQUEST INVOICE ENTRY :

Item Expense --- Dr

Liability – Cr

FUTURE DATED PAYMENT ENTRY :

When Bills Issued:

Item Expense – Dr

Bills Payable --- Cr

When Maturity Date Confirmed:

Bills Payable – Dr---It will pick from Supplier or Financial options

Liability – Cr

WITH HOLDING TAX ENTRY :

When Withholding tax applied on standard Invoice:

Item Expense --- Dr

Liability --- Cr

Withholding --- Cr-----It will pick from WHT codes 

Auto Generated WHT Entry:

Item Expense – Dr

Liability --- Cr

RETAINAGE RELEASE ACCOUNTING ENTRY:

When Invoice matched with PO accounting entry would be: 

Accrual ------ Dr

Liability ---- Cr

Retainage ---Cr----It will pick from financial options

While making payment to the invoice matched with PO:

Liability ---- Dr

Cash --------Cr

When Retainage Release Invoice Matched with PO accounting entry would be:

Retainage --------Dr

Liability ----------- Cr

While making Payment to Retainage Release:

Liability ---Dr

Cash --------Cr

Order - to- Cash ENTRIES:

Pick Release:

Receiving Inventory ---- Dr

Item Expense/Material ac ---- Cr

Ship Confirmation:

COGS ---- Dr----It will pick from Inv Information

Receiving Inv (Sub-Inv) ---- Cr

While Creating Transaction:

Receivable ---- Dr

Revenue ------- Cr

Freight --------Cr

Tax -------------Cr

While Recording Receipt: WHEN STATE IS CONFIRMED

Confirmed Cash--------------Dr

Receivables ----Cr

When Remitted: WHEN STATE IS REMITTED

Remitted Cash ---- Dr

Confirmed Cash--------Cr

When Reconciled: WHEN STATE IS CLEARED

Cash -------Dr

Remitted Cash --- Cr

DEPOSIT ACCOUNTING ENTRY:

When we create DEPOSIT invoice the accounting entry would be:

Receivable --- Dr 

Accrual (Unearned Revenue) -------- Cr

When we create Sales Invoice:

Receivable---Dr

Revenue----- Cr

When Deposit adjusts with actual transaction invoice the entry would be:

Unearned Rev (Accrual) -----Dr

Receivables-------Cr

GAURANTEE ACCOUNTING ENTRY:

When we crate Guarantee transaction:

Unbilled receivable----Dr

Unearned Revenue ---Cr

When we create sales Invoice:

Receivable ----Dr

Revenue -------Cr

When Guarantee transaction adjusts with sales invoice:

Unearned Revenue ---Dr

Unbilled Receivable—Cr

REVENUE RECOGNISATION:

INVOICE ADVANCE:

When we create sales invoice and set invoicing rule as IN ADVANCE(FIXED SCH):

Receivables ---- Dr

Unearned Revenue -------- Cr

Once we recognize the Revenue the accounting entry would be:

Unearned Revenue ---- Dr

Revenue------------------Cr 

And the final entry would be:

Receivable ------Dr

Revenue ---------Cr

INVOICE ARREARS:

REVENUE RECOGNISATION using Invoice Arrears Schedule:

Unbilled Receivables—Dr

Revenue-----------------Cr

Once we have billed the customer

Receivables---------------Dr

Unbilled Receivables—Cr

ON-ACCOUNT ACCOUNTING ENTRY:

When we created the Receipt and applied to On Account :

Cash ---Dr

Receivables ----CR,

ONACCOUNT -----Cr

CUSTOMER REFUND ACCOUNTING ENTRY :

When we release the On account and Refund the Amount:

Cash ----Dr

Receivables----Cr

On Account Cash ---Cr

Unapplied Cash -----Dr

Refund----------------Cr

ASSET

Asset Addition

The process of adding a Fixed Asset either through detailed, quick or mass addition is called asset addition. Detail and quick addition are carried out only in Oracle Assets.

The journal entry in Oracle Assets during detailed or quick addition is

Dr. Asset Cost

Cr. Asset clearing account

Asset clearing account is used to reconcile the transactions between Oracle Payables and Oracle Assets. When an asset is added through detailed or quick additions, the credit goes to the asset clearing account.

Also for mass addition process, oracle assets use Asset Clearing account for reconciliation.

In Oracle Assets the journal entry remains the same

Dr. Asset Cost 

Cr. Asset clearing account

In AP

Dr Asset Clearing Account

Cr Accounts Payables

Changes:

Changes refer to change in Asset Cost or Depreciation method or Depreciation rate for one or more assets. Oracle Assets would use the new cost or depreciation method or rate from the period of change to arrive at the depreciation amount. Also it recalculates the depreciation that should have been calculated so far, compares with the actual depreciation and passes an adjusting entry.

If the transaction results in addition to the cost of asset, then the journal entry created is

Dr. Asset Cost

Cr. Asset Clearing

Hence an adjusting entry to incorporate depreciation as per the new cost of the asset should be incorporated. Also due to change in method or rate the new depreciation calculated may be lower or greater than the depreciation calculated so far.

If the accumulated depreciation recalculated is lower than the accumulated depreciation calculated until now,

Dr. Accumulated Depreciation

Cr. Depreciation Expense (Adjustment)

If it is greater than the Accumulated depreciation until now,

Dr. Depreciation Expense (Adjustment)

CR. Accumulated Depreciation

Transfer

Transfers refer to change in Location, expense account, and employee assignment. If there is a change in expense account, for e.g. If an asset is transferred from department 001 to department 002,The journal entry for accounting the asset cost is

Dr. Asset Cost (002)

Cr. Asset Cost (001)

The journal entry for accounting the accumulated depreciation is

Dr. Accumulated Depreciation (001)

Cr. Accumulated Depreciation (002)

Revaluation

Revaluation is a process so as to reflect current market price of the Asset.

The journal entry created by revaluing a fixed asset is as follows:

Revalue Accumulated Depreciation is enabled at the Book Controls level:

The amount of revaluation would be credited to Accumulated Depreciation and Revaluation reserve in the same proportion as the existing Accumulates Depreciation and Net Book value.

Dr. Asset Cost Cr. Accumulated Depreciation 

Cr. Revaluation Reserve

Revalue Accumulated Depreciation is disabled at the Book Controls level:

To the extend of the revaluation amount, the following journal entry would be passed.

Dr. Asset Cost 

Cr. Revaluation Reserve 

Also, the existing depreciation reserve would also be transferred to the Revaluation Reserve

Dr. Accumulated Depreciation 

Cr. Revaluation Reserve

Oracle Assets passes the following journal entry for retirement. If the retirement transaction resulted in a Gain, the journal entry passed would be.

Dr. Accumulated Depreciation

Dr. Proceeds of sale

Cr. Asset Cost

Cr. Gain / Loss

If the retirement transaction resulted in a Loss, the journal entry passed would be.

Dr. Accumulated Depreciation

Dr. Proceeds of sale

Dr. Gain / Loss

Cr. Asset Cost

Depreciation:

Running depreciation (as applicable to a particular asset) during the period end would pass a journal entry

Dr. Depreciation Expense 

Cr. Accumulated Depreciation

CHART OF ACCOUNTS IN ORACLE FUSION FINANCIALS

CHART OF ACCOUNTS IN ORACLE FUSION FINANCIALS

 

In this article we will see how to create chart of account step by step in Fusion Financial Application. First we will create Chart of Account structure and then Chart of Account Instance.

Before we see Fusion Financials Flexfields , why do I need a chart of accounts in Fusion General Ledger ?
Companies use their General Ledger to report their profit, losses, assets, liabilities & owners equity. But how does General Ledger calculates the values for profit, asset, loses etc for various segments within the business. For example, how does Reliance Bank know that the Loan Division needs to be sold off cos its performing poorly but the Investment & Trading Division of the bank must be retained? They do so, by looking at the positioning of the company division's GL Balances. They will have a GL segment named Entity in GL Chart Of Accounts which has one value for Investment Division another for Trading Division and another one for Loan Division. The CFO can then see that loan division is making losses and has huge liabilities but very less assets.  The CFO might further ask, which types of Loans are making loses, and for that, the CFO will check profit/losses/assets/liabilities for a combination of Entity Segment and Account Segment. The account segment may state that Commercial Loan division is profitable but the Retail Loan division is the one causing loses. The level at which you can investigate is called GL Granularity. Oh dear, we could spend all day here discussing about thick or thin chart of accounts. But let us begin this Fusion Financials Training article to see how this gets configured into Fusion Financials.This happens because each transaction in the ERP system gets accounted using a GL Code Combination. One of the fields in code combination is Account. Each account field value is tagged as being a revenue or expense which results in profit/loss. Account values can also be flagged as asset, liability etc. This is how Oracle General Ledger keeps track of companies health.

This article explains how Oracle Fusion Financials allows you to configure these rules.

Creating Chart of Accounts Structure and Instances 

In Oracle Fusion General Ledger, a user can create one or more chart of account structure instance. A chart of account structure defines key attributes of Chart of Account like number of segments, segment sequence, segments names, segments prompt, segment labels (eg natural account, primary balancing segments or default value sets)

By default, a chart of account instance inherits all the attributes of a chart of account structure, which means that all instances of a same structure will share common shape and have same segments in the same order.

However at the chart of account instance level, one can override the defaults value set assignments of segments and assign a unique account hierarchy. This will help to determines parent and child relationships between the different values of a same value set.

As an alternative of creating new accounts combination manually, one has to enable Allow Dynamic Insertion to generate new account combinations dynamically.

Creating a Value Set for Your Chart of Accounts: Example

You need to create value sets before creating chart of accounts. A value set can be shared by different charts of accounts or across different segments of the same chart of accounts.

Let us create first company value set to be used in creating chart of accounts for our enterprise Apps2fusion.

1. Navigate to the Manage Chart of Accounts Value Sets task from implementation project and click the Go to Task.
2. Click the Create icon on the toolbar of the Search Results table. The Create Value Set page opens.
3. Enter a unique Value Set Code, Apps2fusion Company, and an optional Description, Company values for Apps2fusion
4. Select General Ledger from the list in the Module field.
5. Select Independent as Validation Type.
6. Select Character as the Validation Data Type.
7. Click Save and Close.

Similarly create value sets for Apps2fusion Account, Department or Product etc which we will use further in defining different segments.

Chart of Account Structure

Let’s see what are various steps required to create Chart of Account step by step in Fusion Applications-Firstly navigate to Manage Chart of Account page from Functional Setup Manager by querying for Manage Chart of Accounts and clicking on the Go to Task.

Navigate to Manage Chart of Account screen-

Select General Ledger from the Module list of values and click Search.

Click Manage Structures to open the Manage Key Flexfield Structures page.

Select the General Ledger row and click the Create to open the Create Key Flexfield Structure page.

Enter a unique Structure Code, Apps2fusion_COA_STRUCTURE, and Name, Apps2fusion COA Structure.

Provide an optional Description for Chart of Accounts Structure.

Select the “-“  Delimiter to visually separate your segment values.

Click Save.

To create a new segment, click the Create to open the Create Key Flexfield Segment page.

Enter the following parameters:

Parameter	Value
Segment Code	Apps2fusion Company
Name	Apps2fusion Company segment
Description	Company Segment for Apps2fusion
Sequence Number	1
Prompt	Apps2fusion Company
Short Prompt	A2F CO
Display Width	2
Column Name	Segment1
Default Value Set Code	Apps2fusion

Select a segment label, Primary Balancing Segment, to indicate its purpose within your chart of accounts.

Minimum two segment labels are required: primary balancing segment and natural account segment. These labels are not used with each other or with other labels in a specific segment.

Click Save and Close.

Click Done.

Define additional segments following the same process.

Similarly define Additional segments for Account and Department

Below screen shows 3 segments defined for Apss2fusion structure-

Chart of Account Instance

Let’s us create now chart of accounts instance as we setup chart of accounts for our enterprise, Apps2fusion.

Follow these steps:

Navigate to the Manage Chart of Accounts page from the Functional Setup Manger by querying on Manage Chart of Accounts and clicking on the Go to Task.

Select General Ledger from the Module list of values and click Search.

Select the General Ledger row and click Manage Structure Instances to open the Manage Key Flexfield Structure Instance page.

Click the Create icon to open the Create Key Flexfield Structure Instance page.

Enter a unique Structure Instance Code, Apps2fusion_COA_INSTANCE, and Name, Apps2fusion COA Instance. Provide an optional Description, Apps2fusion Chart of Accounts Structure Instance. 

Select Dynamic combination creation allowed to indicate that you want to dynamically generate account combinations.

Associate your instance with your Structure Name, Apps2fusion COA Structure.

By default, an instance inherits the key attributes of the associated structure. Some attributes, such as the value set assigned to each the segment, can be modified.

Click Save. 

Click Done.

Click Deploy Flexfield

This step is equivalent to compiling Chart of Account.

Click OK and we are done with the creating chart of account structure and Instance in Fusion Application.