R12 Cash Management/Oracle Cash Management/CM

CASH MANAGEMENT THEORY

Introduction

•      Oracle Cash Management is an enterprise wide solution for managing liquidity and controlling cash.

•      Cash Management gives you direct access to expected cash flows from your operational systems.

•      You can quickly analyze enterprise wide cash management cash requirements and currency exposures, ensuring liquidity and optimal use of cash resources.

Benefits of Cash Management

•      Forecast cash flows in any currency and in multiple time periods

•      Streamline the reconciliation process

•      Monitor for exceptions and fraud

•      Forecast based on historical or future transactions

•      Manage the cash cycle efficiently and with control

Cash Management Integration

•      Cash Management is integrated with Payables, Receivables and General Ledger.

•      Payables: Payments information automatically transfers to CM without any process.

•      Receivables: to transfer Receipts information to CM remittance process is required.

•      From AR only remitted eligibility transactions will transfer to CM.

•      GL: If we have entered any journal in GL with cash account, that data will flow to CM.

•      Cash Management is used mainly for 2 purposes

            1. Reconciliation

            2. Forecasting

•      Forecasting is used to identify the future cash inflows and outflows of an Organization.

Reconciliation:

·         Normally at the end of every period, the entries in the cash book are compared with entries in the pass book.

·         The exact causes of differences are scrutinized and then bank reconciliation statement is prepared.

·         Necessary suitable entries will passed in the cash book.

   

Reconciliation process is 3 types:

1. Manual Clearing Process
2. Manual Reconciliation
3. Automatic Reconciliation

Manual Clearing Process:

In this process we will manually clear the transactions without entering the bank statement into Oracle.

Manual Reconciliation:

In this process we will manually enter the bank statement into Oracle. We will take the transactions one by one and search for the bank transactions manually and mark the transactions as reconciled.

Automatic Reconciliation Process

Automatic Reconciliation process can be done in 2 ways:

ü  We will enter bank statement into Oracle and run a program, so that system will search the transactions and will reconcile automatically.

ü  In another way, in the case where bank statement transactions are more and not possible to enter manually into oracle, in that case, we will upload the bank statement into Oracle through specific formats:

            BAI 2& SWIFT 940

ü  These formats are used to upload bank statements into Oracle.

ü  Once we received bank statements in the above formats from the bank, we will place these files in a directory where cash management application is stored.

ü  We have to run “Bank statement load” program.

ü  We have to define Bank codes for transaction identification purpose.

Cash Management period closing procedures

Ensure the following before closing the Payables & Receivables.

·       Any reconciliation transactions created by Cash Management are properly entered.

·       Account balances are updated.

·       Reports include accurate information.

Specifically the following steps are recommended.

1.    Reconcile all your bank statements.

2.    Transfer all transactions from Payables to your General Ledger interface tables.

3.    Run Journal Import in General Ledger.

4.    Post journals in General Ledger.

5.    Run the GL Reconciliation Report from Cash Management for each bank account. This report compares the statement balance you specify to the General Ledger ending balances.

6.    Review the report for errors.

7.    If there are errors in the report, correct them in Cash Management, as needed. Repeat the above steps until there are no more errors.

Oracle Assets R12 Theory/Fixed Assets r12 Theory/R12 Fixed Assets

Introduction:

v  Fixed Assets is a standalone application.

v  This will come at SOB/PL level.

v  Key Flex Fields in Fixed Assets:

1.   Category KFF

2.   Asset Location KFF

3.   Asset Key KFF

v  We can create only one structure by using the above KFF

v  Based on the asset life we have to create Fiscal Calendar. For example 1976 to 2030.

v  Depreciation calendar is used to calculate depreciation.

v  Prorate convention calendar is used to prorate the depreciation from which date to which date we have to consider.

v  Massadditions: Process of transferring fixed assets related data from Accounts Payables to Fixed Assets is called Mass additions. After transferring data from AP, data will store in interface tables.

AP --à FA Mass additions interface tables ----à FA

The data which is there in “FA Mass additions interface tables” we can see from FA application.

If you want to convert the invoices information to Assets, we can add necessary data at interface tables, then the data will store in FA base tables.

v  For Quick addition of Assets, only basic information is required.

v  For detailed additions: list of information is required like: Asset category, Asset name, cost of asset and depreciation of Asset.

Difference between:  Detailed addition and Quick addition:

•      As mentioned above for Detailed additions we have to navigate several windows to enter an asset.

(Additions, Book and Assignments)

•      Whereas through quick addition button asset information will be maintained by navigating single window only. Latter detailed information would be updated.

v  Depreciation calculation is in 3 methods:

1.   Straight line method

2.   Diminition method

3.   Production based

ü  Straight line method: We will set a fixed amount for a fixed period as depreciation. For example: Asset cost 1 Lac, asset life 5 years, so depreciation per year 1 Lac / 5 = 20000

ü  Diminition method: depreciation will be calculated on written down value of asset.

For example:

Year 1      Asset value                 500000

               Depreciation 10%        50000

               Balance                     450000

Year 2      Depreciation 10%        45000

               Balance                     405000

Year 3      Depreciation 10%        40500

               Balance                     355000

ü  Production base: Depreciation will be calculated on the production units

v  Asset transfer can be done between Locations, Employees, and Accounts.

v  Asset Changes: through this changes we can change the:

-      Depreciation

-      Prorate Convention

-      Cost Adjustment

-      Life time of Assets

v  Asset reclassification is used to reclassify the assets from one category to another category.

v  Projection: Through the projections we can have an idea of the future depreciation. We can see the depreciation of a asset for the future period also.

v  What if analysis: with if analysis we can analyze the differences between two different depreciation methods.

v  Overridedepreciation:       Example: A plant is running in 2 shifts in a month producing 2000 units. If one month they used the plant per day 3 shifts then the production is 3000 units. As per the regular calculation system will consider depreciation only for 2000 units.

But if you want to consider depreciation for 3000 units we have to over ride the depreciation. Over ride the depreciation where there is unplanned activity takes place. System will consider first over ride depreciation and then original depreciation.

v  Retirement: For every asset there will be a useful life of period. Once this period completed every asset should me retired. Some other reasons for retirement: Sale of Asset, Theft, Life of asset and Damage of asset.

v  Rollback depreciation: If we run the depreciation without period close, then we cannot make any modifications. Then if we want to do any modifications we have to do “Roll back depreci ation”.

v  Calendars: FA – depreciation calendar & GL – Accounting Calendar. While transferring the information from FA to GL, the period name should be same in the both calendars; otherwise data cannot be transferred.  

v  Types of Books:

•      For Assets, Journals will be created based on the asset book.

•      This Asset book will be associated with the particular Ledger.

•      Asset book will determine the:

        -       Calendar

        -       Accounting Rules

        -       Natural Accounts

        -       Ledger for various Fixed Assets.

Pre requisites to create Asset Book:

-          Specify System Controls

-          Define Calendars

-          Set up your Account segment values and combinations

-          Set up your journal entry formats.

In Fixed Assets we have 3types of books:

1.   Corporate Book

2.   Tax Book

3.   Budget Book

Corporate Book:

ü  This is also called Depreciation book, Asset book and Asset Register.

ü  Corporate book is used to maintain the Asset information and to maintain Depreciation information.

ü  Depreciation information will be maintained by following The Companies Act.

Tax Book:

ü  We will maintain the depreciation information by following the Income tax Act.

ü  We will copy the Asset information from the corporate book to Tax book.

ü  We maintain companies Act and IT Act for depreciation, if the % of depreciation is different for companies act and IT act.

Budget book:

ü  We will maintain capital Budget information.

ü  The Asset information also required in the tax book.

ü  It is an automatic activity

ü  We will copy the asset information from the corporate book to the tax book.

ü  We have 2 options to copy the information:

1.   Initial mass copy

2.   Periodic mass copy

v  Type of Assets:

Assets are again 3 types as per Fixed Assets

1.   Capitalized

2.   CIP

3.   Group Assets

Capitalized: Which Asset is started for using and Assets placed for service.

CIP: Construction in process: An asset which is under construction, for example building under construction. CIP asset will changed to capitalized when it starts service.

Group Assets: Grouping the assets related to same group.

v  Accumulated Depreciation: Total depreciation from beginning of the asset to till date.

v  YTD depreciation: For particular year

v  Depreciation: For particular period.

v  Physical Inventory: Process of verification assets information in the Oracle system with the Physical assets.

v  Split: Split is dividing the Assets into individual units of assets.

Example:

We purchased 5 plants at a time for Rs 5 Lakhs.  We received only one invoice for all the plants. We enter this invoice through Accounts payables. Now we are sending this information to FA through Mass Additions. Now we want that 5 plants information differently. So we will split that into 5 plants.

v  Merge: Merge is a process of adding multiple assets to a single Asset.

Example:

We have one asset like Computer.

Now we are purchasing first monitor and then CPU.

Now we are having 2 invoices I AP.

Now this will be transfer to FA through Mass addition.

These two invoices should be merged because they are single Asset.

Depreciation Calendar (Asset Calendar)

•      You can set up as many calendars as you need.

•      Each book you set up requires a depreciation calendar and a prorate calendar.

•      The depreciation calendar determines the number of accounting periods in a fiscal year.

•      The prorate calendar determines the number of prorate periods in your fiscal year.

•      You can use one calendar for multiple depreciation books and as both the depreciation and prorate calendar for a book.

•      Period name as per Accounting Calendar in GL should be same as in the FAotherwise we cannot transfer information from FA to GL.

Specifying the dates for Calendar periods

•      Your corporate books can share the same calendar.

•      A tax book can have a different calendar than its associated corporate book.

•      The depreciation program uses the prorate calendar to determine the prorate period which is used to choose the depreciation rate.

•      You must initially set up all calendar periods from the period corresponding to the oldest date placed in service to the current period.

•      You must set up at least one period before the current period. At the end of each fiscal year, Oracle Assets automatically sets up the periods for the next fiscal year.

PRORATE CONVENTION CALENDAR

Navigation:

        Setup à Asset system à Prorate Conventions

•      Prorate convention Calendar is used to determine the depreciation starting date for asset in first year.

•      Divide the year in to 2 parts and enter from date to dates and enter each period beginning date as prorated date. (Below 180 days & Above 180 days).

•      If you enable “Depreciate when place in service” system will not consider the dates mentioned in Prorated Calendar.

Define Asset Book – Corporate

Setup à Asset System à Book Controls

This window has 3 Tabs:

        1.   Calendar

        2.   Accounting Rules

        3.   Natural Accounts

ü  Enter the name of the book you want to define.

ü  Choose Class as “Corporate”

Complete 3 Tabs

ASSET CATEGORIES

Setup à Asset System à Asset Categories

•      Asset Category is used to group the Assets based on the Depreciation method and Rate, and also building a relationship with the Asset book.

•      Category information is common for a group of assets.

•      Oracle Assets defaults these depreciation rules when you add an asset, to help you add assets quickly.

•      The default depreciation rules that you set up for a category also depend upon the date placed in service ranges you specify.

Pre requisites to set up Asset categories:

ü  Set up Category Flex Field

ü  Set up depreciation Book

ü  Setup Depreciation Calendar & Prorate Convention Calendar

ü  Setup Depreciation Methods

   Category Types:  3

        1. Lease

        2. Non Lease

        3. Lease holds Improvements

  Owner ship is 2 types:  i) Owned   ii) Leased

Property Types:  6

1. Personal
2. Residential
3. Real
4. Intangible
5. Property
6. Other

Step: 1

Define Asset Category

Navigation: Setup à Asset System à Asset Categories

Step: 2      Choose appropriate General ledger Accounts

Step: 3      Setup default rules

ü   Choose Depreciation Method & Rate

ü  Choose Prorate Convention Calendar & Retirement Convention Calendar

Save

IMPORTANT REPORTS IN FIXED ASSETS

1.   Asset Additions by cost center report

2.   Asset transfers report

3.   Asset retirement report

4.   Asset retirement by cost center report

5.   Property Tax report

6.   Transaction history report

7.   Mass additions posting report

8.   Delete mass additions posting report

9.   Delete mass additions preview report

10.                Asset reclassification report

11.                Asset by category report

12.                Mass additions validity report

13.                Cost adjustment report

14.                CIP Asset report

15.                CIP capitalization report

16.                Unplanned depreciation

Fixed Asset period closing procedures

1.        Create all transactions (mass additions, retirements etc) before

running the Depreciation Program. Check for the Mass Additions with the Status of “NEW”.

2.        Before running the depreciation, Project the depreciation by

running the Projections. Select the projection calendar, number of periods, Starting period, the corporate book and click on the ‘Run’ button. Total Depreciation for the period will be shown as the output in the concurrent request output.

3.    Run the depreciation program without closing the period.

4.    Module: Fixed Assets.

5.    Navigation: Depreciation  Depreciation. Select the corporate

book and the period. Do Not Check the Check Box‘ Close Period ’

6.    Verify The Journal Entry Reserve Report for the calculation of

Depreciation and whether depreciation is calculated for all the assets. After checking the results go to next step.

7.    Now run the Depreciation program with the check box ‘Close

Period’ Checked.

8.    Transfer information from fixed assets to General Ledger.

(Module: Fixed Assets. Navigation: Submit RequestCreate Journal Entries in Fixed Asset. Choose the Corporate Book and period for parameters as shown below.

9.    This process creates the Journal Entries Automatically in the

General Ledger. Journal import from general Ledger need not be run both for Primary as well as Reporting Set of Books.

10.    Verify the Unposted Entries in the journal Entry Screen.

11.                       Post the journal Entries.

2.1  Opening / Closing the Period in Fixed Assets:

1.    If the Depreciation is run with the Check Box ‘Close Period’ Checked, the period will be closed and the next period will be opened automatically.

         Note: In Fixed Assets, once a period is closed, it cannot be reopened.