Oracle General Ledger Theory/General ledger R12 Theory/R12 GL Theory Simplified --Part-2

Types of Journals

1.   Functional Currency Journal

2.   Foreign Currency Journal

3.   Recurring Journal

4.   Tax Journal

5.   Revaluation Journal

6.   Suspense Journal

7.   Reverse Journal

8.   Mass allocation Journal

9.   STAT currency Journal

10.Budget Journal

11. Batch Journal

12.Manual Encumbrance Journal

SuspenseJournal

•      As per accounting principles Debit amount should always equal to Credit amount for the same Company Value.

•      If both amounts are not equal, the difference amount will go to Suspense Account.

Recurring Journal

•      Journals which are repeating every accounting period is called a recurring journal.

Recurring journals are 3 types:

1. Standard Recurring Journal
2. Skeleton Recurring Journal
3. Formula Recurring Journal

Ø  Standard Recurring Journal:

Under standard recurring journal method same accounts with the same amounts will be effected with the each accounting period. We know account and amount already.

Ø  Skeleton Recurring Journal:

Under skeleton journal method partial information will be entered at the time of recurring journal creation. We know the account but do not know the amount.

Ø  Formula Recurring Journal:

Using formula recurring method, journal lines amounts will be calculated by recurring journal program based on simple formula.

REVALUATION

Is nothing but Current value of Asset &Liabilities

Revaluation reflects the changes in the exchange rates.

For example:                            

Invoice      May 5^th      $1000        Rs 45         Rs 45000

Payment    May 10^th    $1000        Rs 47         Rs 47000

If paid on   May 25^th    $1000        Rs 43         Rs 43000

In the above example gain or loss is Rs 2000

Setup Steps:

1.   Define un realized gain or loss accounts

2.   Define exchange rate type

3.   Define daily rates for the date of journal entry (USD à INR)

4.   Define daily rates for the date of Payment (USD à INR)

5.   Enter foreign currency journal

6.   Run revaluation

ü  Enter name and description for revaluation

ü  Currency Options: Choose single currency & USD

ü  Rate Options: Choose Daily Rates & Exchange rate type

ü  Choose Unrealized gain & loss accounts

ü  Choose revaluation ranges

Say “Revalue”

Submit request window will open

System choose automatically program as “Program – Revalue balances”

Choose parameters:

ü  Ledger

ü  Revaluation batch

ü  Period

ü  Effective date

Say OK

Submit

View à request

Ensure program completed normal

7.Query revalue journal and post it

Tax Journal

Steps:

1.   Enable “Journal Entry Tax” at Ledger level under “Journaling” tab

2.   Define input tax codes and assign GL account

3.   Set up tax options: √ Allow tax code override

4.   Enter and post journal

Manual Encumbrance Journal

Encumbrance means is reserve the funds for future usage.

We do not do this practice in real time.

Navigation: Journal à Encumbrance

ü  Category:   Expenditure

ü  Source:     Encumbrance

ü  Balance type:     Encumbrance

ü  Type:                Encumbrance

Approval is not applicable

TRANSLATION

Ø  Translation is used to convert the accounting balances from Functional Currency to Foreign currency atBalances level

Ø  This activity is done at a particular period end

Ø  This is an off line activity

Ø  Translation is done at balances level

Ø  We can report in number of currencies – No limit

Ø  Translation is part of “Consolidation”

Ø  We cannot run Translation for first period

Ø  We use 3 types of rates:

RatesAccount Type

1.   Period end rate:      Assets & Liabilities(balance sheet)

2.   Average rate:         Expenses & Revenues(profit&loss)

3.   Historical rate:                Ownership

Setup Steps:

1.   Create “Cumulative Translation Adjustment” account

2.   Define exchange rate type

3.   Define daily rates

4.   Assign rate type & CTA account to ledger

5.   Run Translation

6.   Run Trial balance Translation report

** Exchange rate type is used to build relationship between the two currencies

There are various exchange rate types

1.   Corporate

2.   Market

3.   User

4.   Spot

Corporate type:is used for rates which are defined by the higher management in the organization.

Market rate:is at present what the rate in the market is

User rate:  At the time of transaction entry user can enter applicable exchange rates

Spot rate:is a kind of market rate

MRC – MULTI REPORTING CURRENCY

To convert the balances from functional currency to foreign currency at transaction level (at journal entry level) we use reporting currency.

In reporting feature we will be having one primary ledger and unlimited reporting ledgers

Setup Steps:

1.   Define rounding difference account

2.   Assign rounding difference tracking asset at ledger level

3.   Define exchange rate type

4.   Define daily rates

5.   Define reporting currency options at primary ledger level

6.   Define reporting GL responsibility

7.   Assign reporting ledger to responsibility

8.   Assign responsibility to user

9.   Open periods in reporting ledger

10.                Create journal and post in primary ledger

Difference of MRC & Translation

MRC	TRANSLATION
Transaction level	Balance Level
Up to 8 Currencies	No limit of Currencies
On line activity	Off line activity
Daily Rates	Average, Period end & historical rates
	Part of consolidation
We can run at any point of time	We cannot run for first period

Auto Post

•      We can post the journals automatically by specifying the some criteria in Auto post criteria set.

•      Criteria could be: combinations of ledger or ledger set, journal source, journal category, balance type, and period.

•      Once you define an Auto Post criteria set, run the Auto Post program to select and post any journal batches that meet the criteria defined by the criteria set.

•      You can also schedule the Auto Post program to run at specific times and submission intervals.

•      You can submit the Auto Post program or schedule Auto Post runs directly from the Auto Post Criteria Sets window. Alternatively, you can use the Submit Request window.

Steps:

1.   Define auto post criteria

Navigation: Set up à Journal à Auto Post

2.   Enter Journal

Navigation: Journal à Enter

Enter Journal lines

Save journal

Do not post

Check to see Auto post program completed successfully

Auto Reversal

Auto reverse is nothing but, reversing journal automatically based on the criteria that we specify.

Criteria could be:

ü  Journal category

ü  Reversal Method

ü  Reversal period

If you routinely generate and post large numbers of journal reversals as part of your month end closing and opening procedures, you can save time and reduce entry errors by using Automatic Journal Reversal to automatically generate and post your journal reversals.

Prerequisites for Auto Reversal:

•      The journal balance type is Actual.

•      The journal category is enabled to be Auto reversed.

•      The journal is posted but not yet reversed.

•      The journal reversal period is open or future enterable.

•      Note: Automatic Journal Reversal reverses posted journals of the balance type Actual. You cannot use this feature to automate budget or encumbrance journal reversals.

SEQUENTIAL NUMBERING

ü  Sequential numbering is used to assign unique number to the various transactions.

ü  System will assign serial numbers to the data flows in to General Ledger through sub ledger accounts based on the category.

ü  The transactions are Journals, AP Invoices, AP payments, Bank accounts, AR invoices and AR receipts etc.

ü  Sequencing information is available for querying and display of journals.

ü  You can call either sequential numbering or Document category or voucher numbers.

SLA provides 2 different sequence mechanisms for sub ledger journal entries:

1.   Accounting Sequence

2.   Reporting Sequence

Accounting Sequence:

The accounting sequence is assigned to sub ledger accounting journal entries at the time that the journal entry is completed.

Reporting sequence:

The reporting sequence is assigned to both sub ledger accounting journal entries & General Ledger journal entries, when the General Ledger period is closed.

This sequence is used by most of the legal reports required in some countries, as the main sorting criteria to display the journal entries.

Reporting sequence is optional

These two sequences are not mutually exclusive, and, can coexist in the same journal entry

Setup Steps

1.   Define “Sequential numbering” profile option at responsibility level

Navigation: System administrator

                Profile à System

2.   Define sequential numbering

Navigation: System administrator

                Application à Sequence numbering à Define

3.   Assign sequential number to the Category

Navigation: System administrator

                Application à Sequential numbering à Assign

4.   Create Journal

Navigation: General ledger   

Journals à Enter

** Automatic: System generate number after saving journal

** Manual: user has to enter number manually

** Gapless: No gap for the journals from different sources

JOURNAL APPROVAL

Journal approval is an additional security feature to post the journals using this feature we can define approval limits for employees.

Setup steps:

1.   Enable journal approval at ledger level

Navigation: General ledger

Setup à Financials à Accounting setup manager à Accounting setup

2.   Enable journal approval at journal source

Navigation: General ledger

                Setup à Journal à Sources

3.   Define approval limits for employees

Navigation: General Ledger

                Setup à Employees à Limits

4.   Create user and assign employee to user

Navigation: System Administrator

                        Security à User à Define

5.   Log in with employee user and create journals

Navigation: General ledger

                        Journals à Enter

** in 11i: we have to assign profile option to GL Responsibility, that is, “Journals: Allow preparer approval” through system administrator Navigation: Profile à System

Approver Methods:

1.   Go up management chain

2.   Go Direct

3.   One Stop then go direct

Security Rules (SR)	Cross validation rules (CVR)
SR enabled at Responsibility level	CVR enabled at structure & chart of accounts level
List of values are not displayed for those combination where SR was enabled	All list of values are displayed, but we will get error message for invalid code combination
No error message will displayed in SR	Error message will displayed in CVR
SR restrict permission for segment values	CVR restrict user for invalid code combination

SECURITY RULES

Security rules are used to restrict the user from entering segment values.

It will work at responsibility level.

CROSS VALIDATION RULES

It is used to restrict the end users from entering code combinations.

It will work at structure level.

DEFINITION ACCESS SET

Definition access set will work at Responsibility level.

DAS is used to provide access in 3 ways to the users for various definitions:

1.   Use

2.   View

3.   Modify

Step: 1      Define Definition Access Set

Navigation:

Set up à Financials à Definition Access sets à Define

Step: 2      Assign Definition Access set to Responsibility

Navigation:

Setup à Financials à Definition Access Sets à Assign

Step: 3      Enable Security for accounting Calendar

Navigation:

Setup à Financials à Calendars à Accounting

Query your accounting calendar

Select check box “Enable Security”

Say “Assign Access”

Choose Definition Access set

ALIASES

Aliases are used to define the short name for account code combinations

LEDGER SET

Ledger set is used to access multiple Ledgers information from single responsibility.

Using Ledger set we can group only Ledgers which are having same Chart of Accounts and same Calendars.

Step: 1      Define ledger sets

Navigation: Setup à Financials à Ledger Sets

Enter Name and Short name

Choose:

ü  Chart of Accounts

ü  Calendar

ü  Default Ledger

ü  All other ledgers you want to group

Save.

Step: 2      Assign Ledger set to responsibility

Navigation:         System Administrator

                        Profile à System

Choose responsibility

Profile Option: GL: Data Access Set

Choose Ledger set

If you assign both the profile options: GL Ledger Name & GL Data Access Set

System will choose first Data Access set

DESCRIPTIVE FLEX FIELD

If you want to have additional field in standard forms, DFF is used to capture the additional information of organization.

CONSOLIDATION

Consolidation is used to consolidate the multiple subsidiary ledger information into parent ledger.

In other words, Consolidation is used for preparation of financial reports of parent and subsidiary companies.

If both companies are using different currencies, translation is required.

After translation data will be remain in the same books.

By using consolidation concept, we transfer data from subsidiary to Parent SOB.

For Translation of fixed assets balances, revaluation is required.

The difference will go to “unrealized gain / loss” account.

The difference of 3 rates will go to “CTA Account” (Cumulative Translation adjustment account)

There are 2 types of consolidation methods:

1.   Balance

2.   Transaction

** Transaction method is used when we have same currency for parent and subsidiary ledger

** Balancing method is used when we have different currency in parent and subsidiary ledger

Consolidation Rules: 2

1.   Segment Rules

2.   Account Rules

Segment Rules again classified in to 3

1.   Use roll up rule from

2.   Use copy value from

3.   Assign single value

** If codes are different:      Co2 à Co1 Use roll up rule from

** If codes are same:          Do1 àDo1  Use copy value from

** If structure is different                     Assign single value

Setup Steps:

1.   Define Parent Ledger and required Subsidiary Ledgers

2.   Define Parent and Subsidiary GL Responsibilities

3.   Assign Ledgers to Responsibilities

4.   Assign responsibilities to users

5.   Define Exchange Rate type

6.   Define Daily Rates

7.   Complete currency translation options

8.   Define consolidation mapping in the Parent ledger

9.   Open periods in parent and subsidiary ledgers

10.                Define Consolidation set

11.                Enter and post journals in each subsidiary ledger

12.                Run translation

13.                Transfer data in to Parent ledger

14.                Query the Consolidation journals in the Parent Ledger and post

ROLL UP GROUP & SUMMARY ACCOUNTS

Step: 1      Create summary accounts at chart of account level

Navigation: Setup à Financials à Flex fields à Key à Values

Step: 2      Create Roll up group

Navigation:

Setup à Financials à Flex fields à Key à Groups

Step: 3      Assign Roll up group to parent account at COA level

Navigation:

Setup à Financials à Flex fields à Key à values

ü  Select “parent Account”

ü  Go to “Value, Hierarchy, Qualifiers”

ü  Group: Choose Roll up group

Save

Step: 4      Create Summary Accounts

Navigation:         Setup à Accounts à Summary

Name:       Enter Name

Choose Ledger

Enter Template values:

ü  Company: D

ü  Department: D

ü  Account: Choose Roll up group

ü  Sub account: D

ü  Product: D

Say OK

Choose: Earliest period

Save

Status: Adding

Go to View à Request

Ensure program completed normal

Step: 5      Pass a journal entry with these accounts and post it

Navigation:         Journal à Enter

Step: 6      Inquiry of Account balances

Navigation: Inquiry à Accounts

ü  Choose Summary Template

ü  Choose parent account

Click on “Show balances”

Average Balances

Ø  Average balances are in General used by banking sectors.

Ø  Through this we will find out the account balances for working days only

Ø  We have to setup working days and non-working days through “Transaction Calendar” in general ledger.

Ø  If you choose transaction calendar, system will not allow user to record any type of transaction on non-working days, and we can see the balances on daily basis also.

Steps:

1.   Set up Transaction calendar

2.   Create new set of books, assign this transaction calendar to new SOB

3.   At SOB √ Enable average balances and assign “Net income account” (No, No, Revenue, No, No)

4.   Create new responsibility for general ledger average balances

5.   Assign profile option “GL Ledger name” to the GL responsibility

6.   Assign this responsibility to user

7.   Open periods in SOB

8.   Enter journal to see whether non working days enabled or not

9.   We can inquiry the balances by specific day wise (Only for Balance sheet items)

Financial Statement Generator – FSG

Ø  FSG is dynamic tool in General Ledger to build reports such as Balance Sheet and Income Statement.

Ø  Through FSG we can build reports in simple manner without writing any codes.

Ø  The report is consist of Rows and Columns, and is used Row set & Column set to define rows and columns.

General Ledger period Closing Procedures

1. Set the status of the first accounting period in the new fiscal year to Future Entry.

Note: The first period of the new fiscal year should not be opened until all of the year–end processing for the last period of the current year has completed.

2. Transfer data from all of your sub ledgers and feeder systems to the GL_INTERFACE table.

3. Run the Journal Import process to populate the GL_JE_BATCHES, GL_JE_HEADERS, and the GL_JE_LINES tables. This can be done automatically from the sub ledger systems, or manually from Oracle General Ledger.

4. Close the period for each sub ledger. This prevents future sub ledger transactions from being posted to General Ledger in the same period.

5. Review the imported journal entries in Oracle General Ledger. You can review them online or in reports. Reviewing journal entries before posting minimizes the number of corrections and changes that need to be made after posting.

Below is a list of useful reports:

• Journal Batch Summary Report

• General Journal Report

• Journal Entry Report

• Journal Line Report

• Journal Source Report

• Journals by Document Number Report (when document sequencing is used)

• Unposted Journals Report.

6. Post the imported journal entries.  You can also schedule Auto post to pick up and post journals transferred from sub ledgers on a regular basis. This reduces the volume of posting done at month end.

8. Revalue balances to update foreign currency journals to your functional currency equivalents.

9. Post all journal entries, including: manual and reversals.

10. Update any unpostable journal entries and then post them again.

Common reasons for unpostable batches include:

• Control total violations

• Posting to unopened periods

• Unbalanced journal entries

11. Run General Ledger reports, such as the Trial Balance reports, Account Analysis reports, and Journal reports.

12. Create and post adjusting entries and accruals in the adjusting period.

13. Run Trial Balance reports and other General Ledger Reports in the adjusting period after adjustments are made.

14. Close the last period of the fiscal year using the Open and Close Periods window.

15. Open the first period of the new fiscal year to launch a concurrent process to update account balances. Opening the first period of a new year automatically closes your income statement and posts the difference to your retained earnings account specified in the Set of Books form.

16. Run FSG reports for the last period of the year.