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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

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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 customers 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

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Accounting in R12 Oracle Receivables

Audience
This whitepaper is aimed to super users and functional consultants and implementers as well
as applications auditors.

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Accounting in R12 Oracle Receivables

Accounting in R12 Oracle Receivables


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

Receivable

Asset

Revenue

System Transaction Customer Remittance Receivable


options
Type
Bill-to Site
Bank
Activity

Sales
Person

Standard
Line

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

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Accounting in R12 Oracle Receivables

Account

Qualifier

System Transaction Customer Remittance Receivable


options
Type
Bill-to Site
Bank
Activity

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

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Sales
Person

Standard
Line

Accounting in R12 Oracle Receivables

Transaction Type

Figure 2

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Accounting in R12 Oracle Receivables

Customer Bill-To Site

Figure 3

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Accounting in R12 Oracle Receivables

Remittance Bank

Figure 4

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Accounting in R12 Oracle Receivables

Receivables Activities

Figure 5

Salesperson

Figure 6
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Accounting in R12 Oracle Receivables

Standard Line Inventory Item

Figure 7

Standard Line Memo Lin

Figure 8
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Accounting in R12 Oracle Receivables

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

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Accounting in R12 Oracle Receivables

Receivables Journal Entries


Oracle Receivables has the following accounting events:

AR-1 Regular Invoice


Accounts
Receivables

Debit

Credit

Revenue

Tax

Freight

AR-2 Bill in Arrears Invoice


(Every Period within the Accounting Rule)
Accounts
Unbilled Receivables

Debit

Credit

Revenue

(Last Period)
Accounts
Receivables

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Debit

Credit

Unbilled Receivables

Tax

Freight

Accounting in R12 Oracle Receivables

AR-3 Bill in Advance Invoice


(First Period)
Accounts
Receivables

Debit

Credit

Unearned Revenue

Tax

Freight

(Every Period within the Accounting Rule)


Accounts
Unearned Revenue

Debit

Credit

Revenue

AR-4 Debit Memo


Accounts
Receivables

Credit

Revenue

Tax

Freight

Accounts
Receivables
Late Charges

(1)

Debit

Debit

Credit

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.

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Accounting in R12 Oracle Receivables

AR-5 Credit Memo


Accounts

Debit

Revenue

Tax

Freight

Receivables

(2)

Credit

(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


Accounts
Receivables

(3)

Debit

Credit

Receivables

(4)

(3)

Credit Memo account

(4)

Invoice account

AR-7 Apply credit memo to commitment


Accounts
Revenue (5)
Receivables

Credit

X
(6)

(5)

Credit Memo account

(6)

Invoice account

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Debit

Accounting in R12 Oracle Receivables

AR-8 On-account credit


Accounts

Debit

Revenue

Tax

Freight

Receivables

(7)

(7)

Credit

JE is the same as this of Credit Memo

AR-9 Apply On-account credit to invoice


Accounts
Receivables

(8)

Debit

Credit

Receivables

(9)

(8)

On-account credit account

(9)

Invoice account

AR-10 Adjustment to invoice


Accounts
Adjustment

Debit

Credit

Receivables

(10)

(10) This is a negative adjustment

AR-11 Deposit
Accounts
Receivables
Offset

(11)
(12)

(11) Deposit account

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Debit

Credit

X
X

Accounting in R12 Oracle Receivables

(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)


Accounts
Cash

Debit

Credit

X
Receivables

(13)

(13) Deposit account

AR-12 Invoice applied to Deposit


Accounts
Receivables

(14)

Debit

Credit

Revenue

Tax

Freight

Offset

Receivables

(15)

(14) This is the invoice part of the transaction


(15) Invoice account

AR-13 Guarantee
Accounts
Receivables

(16)

Revenue (17)

(16) Unbilled Receivables account can be used


(17) Unearned Revenue account can be used

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Debit

Credit

X
X

Accounting in R12 Oracle Receivables

AR-14 Invoice applied to Guarantee


Accounts
Receivables

(18)

Debit

Credit

Revenue

Tax

Freight

Revenue

Receivables

(19)

(18) This is the invoice part of the transaction


(19) Invoice account

(Cash is received against Guarantee)


Accounts
Cash

Debit

Credit

X
Receivables

(20)

(20) Guarantee account

AR-15 Unidentified Receipt


Accounts
Cash

Credit

Bank Charges

(21)

Unidentified Receipt
(21)

Debit

X
X

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').

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Accounting in R12 Oracle Receivables

Change from unidentified to unapplied


Accounts
Unidentified Receipt

Debit

Credit

Unapplied Receipt

AR-16 Unapplied Receipt


Accounts

Debit

Cash

Bank Charges

Unapplied Receipt

Credit

Change from unapplied to applied


Accounts
Unapplied Receipt

Debit

Credit

Receivables

AR-17 Applied Receipt


Accounts

Debit

Cash

Bank Charges

Receivables

Credit

AR-18 On Account Receipt


Accounts

Debit

Cash

Bank Charges

On Account

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Credit

Accounting in R12 Oracle Receivables

AR-19 Receipt with Discount


Accounts

Debit

Cash

Earned / Unearned Discount

Receivables

Credit

AR-20 Miscellaneous Receipt


Accounts

Debit

Cash

Bank Charges

Misc. Cash (22)


(22)

Credit

This usually a revenue account

AR-21 Receipt Write-Off


Accounts
Unapplied Cash
Write-Off
(23)

Debit

Credit

X
(23)

This usually a revenue account

AR-22 Receipt requiring Remittance


Accounts
Receipt Confirmation
Receivables

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Debit

Credit

X
X

Accounting in R12 Oracle Receivables

AR-23 Standard Remittance


Accounts
Remitted Receipt

Debit

Credit

Receipt Confirmation

AR-24 Clearing of Remitted Receipts


Accounts

Debit

Cash

Bank Charges

Remitted Receipt

Credit

AR-25 Factoring Remittance


Accounts
Factored Receipt

Debit

Credit

Receipt Confirmation

AR-26 Maturity of Factored Receipts or Eliminating Risk


Accounts
Short-Term Debt

Debit

Credit

Factored Receipt

AR-27 Clearing Factored Receipts


Accounts

Debit

Cash

Bank Charges

Short-Term Debt

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Credit

Accounting in R12 Oracle Receivables

AR-28 Non-Invoice related Claim


Accounts
Claim Investigation
Unapplied Cash

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Debit

Credit

X
X

Accounting in R12 Oracle Receivables

Notes Receivable
NR-01 Note Receivable requiring Remittance
Accounts
Notes Receivable

Debit

Credit

Receivables

NR-02 Standard Remittance


Accounts
Notes Receivable

Debit

Credit

Notes Receivable

NR-03 Clearing of Remitted Notes Receivable


Accounts

Debit

Cash

Bank Charges

Remitted Notes Receivable

Credit

NR-04 Factoring Remittance


Accounts
Factored Notes Receivable

Debit

Credit

Notes Receivable Confirmation

NR-05 Maturity of Factored Receipts or Eliminating Risk


Accounts
Short-Term Debt
Factored Notes Receivable

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Debit

Credit

X
X

Accounting in R12 Oracle Receivables

NR-06 Clearing Factored Receipts


Accounts

Debit

Cash

Bank Charges

Short-Term Debt

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Credit

Accounting in R12 Oracle Receivables

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
A
B
C

Amount in EUR
15
12
23

Exchange Rate
8.639
8.639
8.639

Total
Rounding Difference

50

8.639

Amount in EGP
129.59
103.67
198.70
431.96
431.95
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:
Accounts
Receivables
Header Rounding
Revenue

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Debit

Credit

431.95
0.01
431.96

Accounting in R12 Oracle Receivables

Unless its 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.
Accounts

Debit

Receivables A

129.59

Receivables B

103.67

Receivables C

198.96

Revenue

Credit

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

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Accounting in R12 Oracle Receivables

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

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