31 July 2007

Basic Concepts in Oracle AR - Part2

Defining Receivables Activities

Define Receivables activities to provide default accounting information for miscellaneous cash, discounts, finance charges, and adjustments. Activities that are defined in this window appear as lists of values in various Receivables windows, such as the bank, adjustment, and system options windows. You can define multiple activities.Screenshot shows the window, where you can define a Receivables activity:


The Receivables Activities Window


Note

For Bank Error type activities, you cannot implement tax accounting because there is no business need to calculate tax on these activities. After you define an activity, you cannot change its type. In addition, you cannot update the GL account for an existing activity if you have assigned the activity to a transaction.

To define the receivables activity:

  1. Open the Receivables Activities window and enter a name and description for this activity.

  2. Choose the type of activity. An activity type determines whether it uses a distribution set or GL account. The types of activities are:

    • Adjustment: Use these activities in the Adjustments window. At least one activity of this type must be created.

    • Bank Error: Use these activities in the Receipts window. This activity is used when you enter miscellaneous transactions.

    • Earned Discount: Use these activities in the Adjustments and the Remittance Bank windows. These activities adjust a transaction if a payment is received within the discount period.

    • Finance Charge: Use these activities in the Customers and System Options windows. A finance charge activity is defined if you include finance charges on your statements or dunning letters.

    • Miscellaneous Cash: Use these activities in the Receipts window when entering miscellaneous transactions. You must define at least one activity of this type.

    • Unearned Discount: Use these activities in the Adjustments and the Remittance Banks windows. These activities adjust a transaction if payment is received after the discount period.

  1. Specify how AR should derive the accounts for the expense or revenue generated by this activity by determining a GL account source. Choose a GL account source from:

    • Activity GL Account: Allocates the expense or revenue to the general ledger account that you specify for this AR Activity.

    • Distribution Set: Allocates the expense or revenue to the distribution set that you have specified for this AR Activity. Choose this option only if the activity type is Miscellaneous Cash.

    • Revenue on Invoice: Allocates the expense or revenue net of any tax to the revenue accounts specified on the invoice.

  1. Specify a tax code source from:

    • Activity: Allocates the tax amount to the Asset or Liability tax accounts specified by the Receivables Activity.

    • Invoice: Distributes the tax amount among the tax accounts specified by the tax code on the invoice.

    • None: Allocates the entire tax amount according to the GL Account Source that you specified. Select this option, if you do not want to separately account for tax.

  1. Choose the Tax Recoverable radio button if the tax is deductible, otherwise, choose Non-Recoverable.

  2. Enter an Activity GL Account.



Entering Transaction Information

To make a record of the business with the customers, you need to enter information about transactions from the Enter Transaction window. Entering transactions in Receivable enables you to raise an invoice, debit memo, credit memo, deposit, or guarantee. Screenshot shows the window where you enter the transaction information:


The Transaction Window

To enter invoices or debit memos:

  1. Open the Transactions window.

  2. If the batch source does not specify the Automatic Invoice Numbering profile option, then you need to enter a transaction number. If the automatic batch source is specified, AR automatically assigns a number when you save the transaction. A transaction number is unique within this batch and it is not possible to modify this number after a transaction is saved.

  3. Enter the date and currency of this transaction. The default date is the batch date. If there is no batch information, then the default date is the current date. The default currency is the currency entered at the batch level. You can change the currency to any currency defined in the system.

  4. Select a transaction source type with a class, either Invoice or Debit Memo.

  5. If the transaction batch source has the Post to GL option set to Yes, then enter the GL Date for this transaction.

  6. Enter the customer Bill-To, Name, and Location for the transaction, in the respective fields.

  7. Enter the payment terms for the transaction. The hierarchy used by Receivables to determine the default payment terms is:

    • Customer Bill-To site level

    • Customer address level

    • Customer level

    • Transaction Type

  1. If manual sequence numbering is used, then open the More section of this window and enter a unique Document Number.

  2. Open the Remit To region from this window and enter the Remit To Address for this transaction.

  3. To enter the goods or services to bill this customer, choose Line Items, and enter the Item, Quantity, and Unit Price for each item. AR automatically calculates the total amount for each item.

  4. If you have entered an inventory item, enter a Warehouse Name to indicate the ship-from location for this item. This field is optional.

  5. If you want to enter Freight information for an invoice line, select the line, then choose Freight and complete the information.

  6. Save the data. If you are ready to complete this transaction, press the complete tab.

Entering Commitments

A commitment may be an oral or written commitment for certain goods or services for a prevailing rate. In AR, you can create two types of commitments, Deposits and Guarantee. You need to follow the same steps to enter commitments as those used to create invoices. The only difference is that you need to specify the transaction type as either Deposit or Guarantee.

Deposits

Deposits are created to record any advance payment made by customer for goods or services that will be delivered in the future. The Invoice is raised for the goods or services and then the deposit invoice is adjusted against it. The steps to create a Deposit Invoice are similar to that of creating a regular Invoice. To create a deposit invoice, specify the transaction class, Deposit, in the set up.

After a Deposit invoice is entered and payment is received against the deposit, several journals are created for the transaction. These are Customers Deposit Account Debit, Revenue Account Credit, Bank Account Debit, and Customer Deposit Account Credit.

When an order is placed and an Invoice is raised for the goods and services, against the deposit then the customer's receivable account is debited and the revenue account is credited. The unearned revenue account is also debited and the customer invoice account is credited.

Guarantees

A guarantee is created to record a contractual agreement with a customer to conduct business over a specified period. The invoice for the guarantee is raised and it is adjusted against the invoice raised for the goods or services. Creating an Invoice for guarantee is similar to creating a regular Invoice. Commitments do not include tax or freight charges. Use the transaction class, Guarantee, to enter Invoices for a guarantee. In the Commitment tabbed region, you can enter a range of effective dates for this commitment. If you do not assign an end date, Receivables lets you enter invoices and credit memos against this commitment until the amount due becomes zero.

After the full cycle of Guarantees is complete, a set of accounting entries are generated in receivables, when:

  • The Invoice for the Guarantee is raised, the unbilled receivable account is debited, and the unearned revenue account is credited.

  • The Invoice is raised for goods or services for the guarantee. The customer account is debited and the revenue account is credited.

  • Money is received against the goods or services. The bank account is debited and the customer account is credited.

Entering Invoices with Rules

You can create invoices that span over several accounting periods. The accounting rule determines the accounting period in which the revenue distributions for the invoice or the Invoice lines are stored. The invoicing rule determines the accounting period in which the receivable amount is stored. You can either manually assign invoicing and accounting rules to transactions you create or import these rules into Receivables using the AutoInvoice utility.

You can also use the accounting rules to determine revenue recognition schedules. The duration over a predefined number of periods and variable duration lets you define the number of periods during invoice entry.

The invoicing rules determine when to recognize the receivables for invoices that span over multiple accounting periods. There are two types of invoicing rules, bills in advance and bills in arrears.

Bills in Advance

The bills in advance rule is used to recognize the receivables at the time when the bill is raised. It is an invoice created before the revenue is recognized.

For example, if your company provides services and has to enter into a contract for the next three months, then you should recognize revenues in that particular month even though you may have received the payment when you started the service. The invoice raised is a bill in advance and revenue is recognized in the months ahead. For example, in April you raise an invoice of $1,500 for a three-month contract. The Accounting rule is three months fixed duration. The entries passed for this invoice are:

  • In April, when the invoice is raised, the receivable account debit is $1,500 and the unearned revenue credit is $1,500. The unearned revenue debit is $500 and the revenue credit is $500.

  • In May, when the invoice is raised, the unearned revenue debit is $500 and the revenue credit is $500.

  • In June, when the invoice is raised, the unearned revenue debit is $500 and the revenue credit is $500.

Bills in Arrears

You use the bill in arrears rule if you want to record the receivables at the end of the revenue recognition schedule.

For example, for the invoice of $1,500 raised for a three-month contract, the accounting entries passed are:

  • In April, when the invoice is raised, the unbilled receivable debit is $500 and the revenue credit is $500.

  • In May, when the invoice is raised, the unbilled receivable debit is $500 and the revenue credit is $500.

  • In June, when the invoice is raised, the unbilled receivable debit is $500, the revenue credit is $500, the receivable debit is $1,500, and the unbilled receivable is $1,500.

You need to run the revenue recognition program to generate the revenue distribution.


Note

If the GL date for a transaction is in a period that has a status of either Closed or Close Pending, then Revenue Recognition changes the revenue GL date to the first subsequent period that has a status of Open, Future, or Not Open.

Crediting Transactions

Credit memos are created to reduce the balance due for a transaction. From the Credit Transactions window, you can enter, update, and review credit memos against specific invoices, debit memos, or commitments. When you credit a transaction, the appropriate accounting entries are created. You can credit an entire invoice or specific invoice lines. Freight can also be credited for an entire invoice or only for specific invoice lines.

You can also delete an incomplete credit memo if the Allow Invoice Deletion option is set to Yes in the system option window. Before you create a credit memo for the transaction, the transaction must be complete. Screenshot shows the window where you create crediting transactions:


The Credit Transaction Window

To create a credit memo against a transaction:

  1. In the Transactions Summary or Credit Transactions windows, query the transaction to credit. If you chose Credit Transactions from the Main menu, enter the number of the transaction to credit in the Find Transactions window.

  2. Enter the batch source for the credit memo. The default is the batch source of the transaction that is being credited.

  3. Enter the date, which is printed on the credit memo. If the batch date is earlier than the date of the credited transaction, then the default date is the current date. If the date of the invoice is later than the credit memo date, then the default date is the invoice date.

  4. If the batch source does not use the automatic transaction numbering option, then enter a credit memo number. If you do not enter a number, AR automatically assigns a number when you save the transaction.

  5. Enter a transaction type for the credit memo. The default is the transaction type assigned to the invoice. You can choose a transaction type with a class of credit memo.

  6. Choose the rules method if you are crediting a transaction that uses invoicing and accounting rules.

  7. Enter the currency for the credit memo. If this credit memo is part of a batch, then the default currency for this memo is the one assigned to the batch. You need to enter exchange rates if a currency other than the functional currency is entered.

  8. Enter a unique document number for this credit memo, if the automatic sequence numbering is not used. If automatic sequence numbering is used, a number is automatically assigned when the transaction is completed.

  9. Enter the percentage or amount of line, tax, or freight charges to credit for only the part of the balance due. The balance due for each type of charge that is credited is created in the interface table and the sales revenue and non-revenue credit assigned to your salespersons are reversed.

  10. Save the data and complete the transaction.

Setup for Entering Receipts

For creating receipts in receivables you need to record information about banks, receipt batch sources, and receipt classes.

Defining Banks

Enter the bank information for bank branches with which you do business. Each bank branch can have several bank accounts and each bank account defined can be associated with the payables payment documents and receivables payment methods. If you are using Oracle Cash Management, define a Bank Errors Account, a Bank Charges Account, and a Cash Clearing Account for each bank account you plan to reconciliate. Screenshot shows the Banks window where you enter information on the bank:


The Banks Window

To define a bank and bank branches:

  1. In the Banks window, enter the basic bank information, such as the bank name, branch name, bank number, branch number, and address, and select bank as the Institution.

  2. Enter the Electronic Funds Transfer (EFT) number if required.

  3. Enter the name and other information about your bank contacts in the Contact region and save the data.

  4. Click the Bank Account button. The Bank Accounts window appears, as shown below-
    The Bank Accounts Window

  1. Enter the Bank Account Branch and Bank Account Number. The bank account numbers must be unique within a bank branch.

  2. Select Internal Account Use.

  3. In the GL Accounts window, enter a cash account, clearing account, bank charges, bank errors, confirmed receipts, and the future dated payments with a GL code combination.

  4. In the More Receivables options, enter receipt and discount GL account information. You can enter contact information in the Account Contact region.

  5. Save the data.

Defining Receipt Batch Sources

The receipt batch source provides default values for the receipt class, payment method, and remittance bank account fields for the receipts added to a receipt batch. Screenshot below shows the Receipt Sources window:


The Receipt Sources Window

To define receipt sources:

  1. In the Receipt Sources window, enter a unique name and description for this source.

  2. Enter a receipt class in the appropriate text box. The receipt class determines the processing steps for receipts you created using this batch source.

  3. Enter a payment method. The accounting for automatic and manual receipts is determined by the payment method.

  4. Enter a bank account to associate a remittance bank. You remit receipts created using the receipt batch source to the remittance bank.

  5. Select either the manual or automatic batch numbering option. If automatic batch numbering is selected, then you need to enter the last number you want to use when numbering your receipt batches.

  6. Enter the range of dates during which this receipt batch source will be active.

  7. Save the data and close the window.

Defining Receipt Classes

Use receipt classes to store receipt information. You can specify the payment method in the receipt class window. Screenshot shows the Receipt Classes window:


The Receipt Classes Window

To define the receipt class:

  1. Open the Receipt Classes window and enter a name for the receipt class.

  2. Select a Creation Method from this window. The automatic creation method creates receipts using the Automatic Receipt program. The manual creation method enables you to manually enter information in the Receipts or QuickCash windows, or import information into Receivables using AutoLockbox.

  3. Check the Require Confirmation option for this receipt class to be confirmed before these receipts can be remitted.

  4. Choose a remittance method according to the type of receipt class you want. The options are Standard, Factoring, Standard and Factoring, and No Remittance

  5. Check the Bill of Exchange box if creating a bill of exchange receipt class. You cannot change this attribute after you assign a payment method.

  6. Choose one of these Clearance Methods:

    • Directly: Use this method if you do not expect the receipts to be remitted to the bank and subsequently cleared. These receipts will be assumed to be cleared at the time of receipt entry and will not require further processing.

    • By Automatic Clearing: Use this method to clear receipts using the Automatic Clearing program. Receipts using this method can also be cleared in Oracle Cash Management.


    • By Matching: Use this method if you want to clear the receipts manually in Oracle Cash Management.

  1. Enter the payment method for this receipt class.

  2. Save the data and click the bank account button to assign remittance bank information. When you click the bank account button, the Remittance Banks window is displayed, as shown -
    The Remittance Banks Window

In the Remittance Banks window:

  1. Enter information related to the remittance bank, such as the bank name, branch, account name, and a range of effective dates.

  2. Enter a minimum receipt amount if the creation method of the receipt class is automatic.

  3. Clear the Primary check box, if you do not want this account to be the primary remittance bank account in this currency for the payment method.

  4. Enter GL Account information for the remittance bank. When you select a receipt batch source to enter receipts, AR automatically uses the cash, unapplied, unidentified, on-account, or earned and unearned discount account information assigned to this payment method.

  5. Enter the formatting program information only if the creation method of the associated receipt class is automatic.

  6. Save the data and close the window.



Entering Receipts

You use the Receipts window to enter receipt transactions. There are two types of receipts:

  • Cash receipts: Receipts, such as cash or cheques received from customers for goods or services.

  • Miscellaneous transactions: Receipts earned from investments, interest, refunds, and stock sales other than regular sales.

You apply receipts to invoices, debit memos, deposits, guarantees, on-account credits, and chargebacks. You can apply receipts either fully or partially to a single debit item or to multiple debit items from the Receipts window, as shown -


The Receipts Window

Receipts can have the status:

  • Approved: Receipt has been approved for automatic receipt creation.

  • Confirmed: Manually entered receipts that require remittance.

  • Cleared: Payment is transferred to the bank account and the bank statement has been reconciled.

  • Reversed: Customer has stopped payment on a receipt.

To enter receipts:

  1. Open the Receipts window and choose a receipt type.

  2. Enter the receipt number, currency, receipt amount, GL date, and receipt date.

  3. Enter a payment method. The payment method determines the accounting and remittance bank accounts for this receipt.

  4. Enter a unique document number if you are using manual document numbering. If you are using automatic document numbering, a unique number is assigned automatically.

  5. Enter the transaction number of the customer for the receipt. The name customer associated with this transaction appears in the Receipts window.

  6. If you have not entered the transaction, apply the receipt number by pressing the Application button and then choose the transaction.

  7. From the remittance tabbed region enter the receipt deposit date. This value is optional.

  8. The default remittance bank account is displayed from the payment method you enter. Accept this value or enter any bank account assigned to the payment method if the bank account is in the same currency as that of the receipt.

  9. Save the data.

Manually Applying Receipts

If the receipt is not applied to the respective debit item in the Enter Receipt window, then you need to use the Applications window to apply the receipts. You can apply all receipts, a part of the receipt, or on account credit to a single debit item or to several debit items, as shown -


The Applications Window

To manually apply receipts:

  1. In the Receipts window, click Application Button to apply the receipts.

  2. Enter the name or number of the customer if the receipt is unidentified.

  3. Select the transaction to apply this receipt from the list of values. AR enters the amount applied for this receipt and updates the unapplied amount of the receipt and the balance due for this transaction.

  4. Enter On Account in the Transaction Number field to place an amount on account.

  5. Save the data and Receivables will update the customer's account balances.



Remittances

You need to perform the remittance process to initiate receipts to the bank from the bank account of the customer. You have to create, approve, and format remittances. You can also combine these tasks into a single task. Screenshot shows the Remittance window, where you perform the remittance process:


The Remittance Window

You can create remittance batches to automatically select receipts for remittance to the customer's bank and to initiate the transfer of funds. You can either create one remittance batch for every remittance bank account or choose a clearing institution to get the receipts cleared. If you choose to approve and format your batch when you create it, then AR initiates an additional process that creates the formatted batch information.

To create a remittance batch:

  1. Open the Remittances window and enter the currency for this batch.

  2. Enter the batch and GL dates. The default batch date is the current date and the GL date must be within an open accounting period.

  3. Choose a remittance method. The standard method remits the batch of receipts on the maturity date. The factoring method lets you borrow money against the receipts before the maturity date.

  4. Enter or select from the list the information related to the receipt class, payment method, and remittance bank for this batch. The default remittance bank is generally the primary remittance bank account associated with the payment method.

  5. Select Auto Create to create this remittance batch automatically.

  6. Enter the selection criteria to create this remittance batch. AR selects all confirmed automatic receipts and manual receipts that match the criteria.

  7. Check the Approve and Format options to approve and format this remittance batch.

  8. Click OK, and then select Yes from the Remittance window to acknowledge the message that is displayed. A unique Request ID number is assigned for your concurrent request.

Manually Creating a Remittance Batch

To create a remittance batch manually:

  1. Choose Manual Create from the main menu and specify the receipts to include in this batch.

  2. Using selection criteria, specify the transactions that will be displayed by AR.

  3. Enter a range of payment methods and maturity dates to display or choose from:

    • Query Batch Only: Displays receipts that are associated with this batch.

    • Ignore Override: Displays all receipts matching the selection criteria.

    • Select All: Marks transactions that AR displays to be included in this remittance batch.

  1. Query the receipts.

  2. To add the receipts to the batch, check the box next to each receipt.

  3. Save the entered data to create the batch. A unique Request ID number is assigned for the concurrent request. Using this Request ID, check the status of the remittance process in the View Concurrent Requests window.


Note

After you submit the request, AR creates the Automatic Receipts and Remittances Execution report. The report lists the number and amount of remittances in this batch.

Related Articles to Read




Post a Comment

 

© 2008 About Oracle Apps - A Complete Guide to Oracle Applications Professionals. | Contact|About us.

All articles are copyrighted to About Oracle Apps.