Oracle General LedgerTheory/General ledger R12 Theory/R12 GL Theory Simplified -- Part-1

General Ledger Cycle

1.   Opening the periods

2.   Enter / Import journals

3.   Review journals

4.   Post journals – Inquiry

5.   If require – Run revaluation

6.   If require – Run Translation for consolidation

7.   Review results

8.   Prepare financials

9.   Close the current period

10.       Open next period

FLEX FIELDS IN GENERAL LEDGER:

1.   Key Flex Fields

2.   Descriptive Flex Fields 

Key Flex Fields:

•         General Ledger:

•         Accounting KFF

•         Reporting Attribute KFF – For reporting purpose.

•         GL LedgerKFF– It is a mirror image of Accounting KFF. It is only for internal purpose.It is used exclusively for certain GL features such as Mass Allocations, Recurring Journals and FSG Reports.

•         Receivables:

•         Sales Tax Location Flex Field

•         Territory Flex Field

•         Fixed Assets:

•         Category KFF

•         Asset Location KFF

•         Asset key KFF

Flex Field Qualifiers  (Assign to Segments)

1. Balancing Segment FFQ        *

2. Cost Center Segment FFQ

3. Natural Accounts Segment FFQ *
4. Inter Company Segment FFQ
5. Secondary Tracking Segment FFQ
6. Management FFQ

Segment Qualifiers (Assign to Segment values)

1. Allow Budgeting
2. Allow Posting
3. Account type (Assets / Liability / Expenses / Revenue / Ownership)
4. Control Account
5. Reconcile

Assignment of FFQ to Segments

•      Company           Balancing Segment FFQ

                                Inter company Segment FFQ

•      Department        Cost Center Segment

•      Accounts            Natural Accounts Segment FFQ

                      

Note:

•      One FFQ we can use only one time.

•      One segment we can assign to more than one FFQ.

•      We can create maximum 30 segments apart from General Ledger Segment (Total 31).

1.   Balancing Segment: We generally assign these qualifiers for “Company” segment, where usually balances are maintained.

2.   Cost Centre Segment: We generally assign these qualifiers to “Department” segment, where costs are spend or even gain.

3.   Natural Accounts Segment: We generally assign these qualifiers for “Accounts” segment, where it consist of accounting categories such as Expenses, Revenue, Assets, Liabilities and ownership.

4.   Inter Company Segment: (Optional): We generally assign these qualifiers for “COMPANY” segment, using these qualifiers we are able to perform inter company transactions.

5.   Secondary tracking Segment: (Optional): Using these qualifiers we are able to identify secondary tracking segment to process income statement, closing transactions and revaluation.

6.  Management Segment Qualifier:

MSQ is used in Data Access set for allowing privileges to user other than balancing segment values.

But we cannot assign Management segment FFQ for the segment for which already Intercompany, Balancing and Natural accounts FFQ are assigned.

Compile Structure:

•      Segment separator is used to separate the segments in the code combination. (Dash, Period, Pipe and Custom).

•      Allow Dynamic Inserts: If we enable Allow Dynamic inserts, then we are able to enter the all possible code combinations at the time of transaction entry.

       

        If we want to know how many code combinations in our structure, multiply the number of values across the segments.

       

        If we disable allow dynamic inserts, we cannot enter all possible code combinations at the  time of transaction entry.

•       Enable “Freeze Flex Field Definition” and click on “Compile” button.

•      The structure information will get stored in a tabular form “GL_Code_Combinations_KFV”. 

Primary Ledger (Set of Books) – 4 C’s

4 C’s

•      Chart of Accounts (Structure, Segments & Segment values)

•      Currency

•      Calendar

•      Accounting Convention Method (Accrual / Cash)

Pre requisites for Chart of Accounts

•      Value Set

•      Structure and Segments

•      Segment Values

Value Set:

Value set is Set of rules or properties which are going to attach to segments.

Upon enforcing or attaching value set to the Segment, your segment will behave or act according to the value set.

Validation Types in Value Set

•      Independent: If validation type is independent, we can define values for the value set and we can use at the time of transaction time.

•      Dependent: If validation type is dependent, then we cannot define values for value set. Dependent values are always depending on the independent value set.

•      None:If validation type is none, we cannot define values for the value set. User can enter desire value at the time of transactions entry.

•      Pair & Special: Used in the programs to add additional pop up window for parameters.

•      Table: If validation type is table, then we can not define values but we can use values from tables.

•      Translate dependent & Independent: We use to translate the segment values into desire language.

Contents of Value Set

List Type	Security Type	Format type	Validation Type
3 Types	3 Types	7 Types	8 Types
1. List of Values	1. No Security	1. Char	1. Dependent
2. Long List of Values	2. Hierarchical	2. Date	2. Independent
3. Pop List	3. Non Hierarchical	3. Date Time	3. None
		4. Number	4. Pair
		5. Standard date	5. Special
		6.  Standard date      time	6. Table
		7. Time	7. Translatable      Independent
			8. Translatable      Dependent

Currency:

Monitory currency: 1. Functional Currency,2. Foreign Currency

Non Monitory currency:( STAT Currency)

Calendar:

Accounting Calendar& Fiscal Calendar

Transaction Calendar

Period Type

•      General ledger have 3 standard period types:

        1. Month

        2. Quarter

        3. Year

•      Period types are used in defining Accounting Calendar.

•      Each ledger has an associated period type.

•      When you assign a calendar to a ledger using Accounting Setup Manager, the ledger only accesses the periods with the appropriate period type.

•      You can assign up to 366 accounting periods per fiscal year for any period type, and maintain actual balances for those periods.

•      For example, you could define a Week period type and specify 52 periods per year.

•      However, for budgets you can only use the first 60 periods.

Calendar Status:

1. Open
2. Closed
3. Permanently Closed
4. Future Entry
5. Never Opened

•      Year Types

        1. Calendar

        2. Fiscal

There are 5 types of period status:

Status                        Entry Posting

1. Never opened             X      X
2. Open                         √      √
3. Closed                       X      X(run reports)
4. Future                       √      X
5. Permanently Closed     X      X(run reports)

Mandatory Accounts for Set of Books

1. Retained Earnings Account (Ownership)*

2. Translation Adjustment Account (Expenses)

3. Suspense Account (Assets / Liabilities) *

4. Rounding Difference Account (Expenses)

5. Reserve for Encumbrance (Ownership)

6. Net Income (Expenses / revenue)

1.   Retained Earnings:

Retained earnings are accumulated profits. Whereas net income means current year profits

2.SuspenseAccount:Whenever, user is going to enter Debit without credit or credit without debit or debit balances are not matching with credit balances, in this case, system will automatically populate “Suspense” account.

3.Translation adjustment account:

Translation is conversion of functional currency or local currency into foreign currency for reporting purpose.

Translation basically uses 2 rates: period average rate &period end rate.

Translation uses period average rate to translate all profit and loss account balances. (Expenses & revenue)

Translation uses period end rate to translate all balance sheet balances. (Assets & Liabilities)

*Conversion rate types: 3

1.   Spot

2.   Corporate

3.   User (Reporting)

Spot:

An exchange rate which you enter to perform conversion based on the rate on a specific date. It applies to the immediate delivery of a currency.

Corporate:

This rate is generally a standard market rate determined by senior financial management for use throughout the organization.

User (Reporting):

An exchange rate you specify when you enter a foreign currency journal entry.

Journal Source

•      It is a Journal component; it is used to identify the ORIGIN of the journal.

•      To define journal source:  Setup à Journal à Sources.

•      When we import data from legacy systems to GL we require source names.

•      Importing journal Reference:

To import detailed information from summary journals we use this option.

•      Require Journal approval:

This field is used to get the journal approval by higher management for different journal sources.

•      Import using key: This is used to define whether journals will be imported using source key or not.

•      Freeze Journals:

To freeze the journal source, preventing users from making changes to any un posted journals from that source, or reversing journals for Sub ledger Accounting journal sources.

•      Effective date Rule:

                   1. Fail

                   2. Leave alone

                   3. Roll Date

•      Fail: Journal Import will reject transactions when the effective date is not a valid business day. No posting takes place.

•      LeaveAlone: Journal import will accept all transactions regardless of the effective date.

•      RollDate: Journal Import will accept the transaction, but roll the effective date back to the nearest valid business day within the same period. If there is no prior valid business day within the same period, the effective date is rolled forward.

Note: The Effective Date Rule field will not appear unless you have average balance processing enabled for at least one ledger.

Journal category

•      Journal Category determines the purpose or type of the journal entry.

•      When you enter a journal you specify a journal category.

Examples:

1. AP Invoices
2. AP Payments
3. Adjustment
4. Budget
5. Intercompany
6. Inventory
7. Payments
8. Payroll
9. Receipts

10.Year end close.

Enter Journals

•      It is used to record the day to day business transactions.

•      It containDr and Cr lines. Always debit must be equal to credit.

•      You can enter several types of journal entries, including foreign currency journals, statistical journals, and intercompany journals.

•      Journals can be created in two ways:     1. Manual  2. Import

1. manual:    Enter journals manually by using navigator

        Navigation to enter Journal:  Journals à Enter

        Manual journals can be enter in 2 ways:

        1. individual Journal    2. batch Journal.

•      Journal  body contains two areas: 

1.   Header  2. Lines

•      We have 2 types of methods:       

1.   Standard Journal  2. Average Journals

•      We have 3 types of balances:      

1. Actual  2. Budget3. Encumbrance

Reverse Journal

•      We generally reverse that journal, which got entered also got posted, where you find there is an error in the posted entry.

•      Once the journal is got posted it wouldn’t allow the user to make any changes.

•      The only solution or remedy is to reverse the journal.

Reverse Methods-1.SwitchDr/Cr

                        2. Change sign   

BUDGETS

Budget is nothing but: better planning and controlling of the funds for future usage.

In oracle we can define budgets up to 60 periods

There are 3typesofbudgets

1.   Planning budget (Estimation of Revenue Budget)

2.   Funding budget (Estimation of Expenses(Cash out flow) Budget)

3.   Capital budget (Estimation of investment)

PlanningBudget

This is used for only planning purpose. System will not be controlling under this budget.For planning budget we cannot create budget journals

Funding Budget

Under funding budget we can plan and control the expenses.

We can create budget journals in funding budget.

Balance types: 3

1.   Budget Balances

2.   Actual  Balances

3.   Encumbrance Balances

Budget balances are planned amounts at initial stage.

Actual balances are paid amounts so far.

Encumbrance balances are reserved amounts for future payments.

Funds Check Level: (Budgetary Controls)

1.   Absolute

2.   Advisory

3.   None

If we use absolute we cannot use more than the amount what we specified.

If we use Advisory, system will give caution if we cross the amount given

If we use None, System will not give any caution, and we can enter the more amounts also.

Amount Types: 4

1.   PTD:  Period to date:    One month

2.   QTD: Quarter to date:  3 months

3.   YTD:  Year to date:      1 year

4.   PJTD: Project to date:   Depends on project beginning date

Budget Rules: 8

1.   Divide evenly

2.   Repeat per period

3.   4/4/5

4.   4/5/4

5.   5/4/4

6.   Prior year budget monetary

7.   Current year budget monetary

8.   Prior year budget STAT

Mass Allocation

Mass allocation means:

Allocation of Revenues and cost expenses across any cost center,

department or division by using of parent values by using simple formula.

Example: Rent paid based on square feet used.

Formula:    T = A x B/C

A = Cost pool Amount

B = Usage factor

C = Total Usage

T = Target Account

O = Off set account

Segment types in mass allocation:

1. Constant    2. Looping  3. Summing

Mass Allocation Methods:

1. Full type allocation   2. Incremental Allocation

11i Steps:

1.   Define STAT Currency

2.   Create SFT account

3.   Create STAT journal with SFT account

4.   Set up parent department and set up parent & child relation

5.   Prepare mass allocation formula

6.   Run mass allocation

7.   Review and post journal

Mass allocation formula:

Formula              Amount               Account               Currency

A                      100000                      -               -

B                              -               C-L-C-C              STAT

C                              -               C-S-C-C             STAT

T                              -               C-L-C-C              INR

O                              -               C-C-C-C             INR          

R 12 Steps:

Step: 1      Create Usage factor account and Cost pool account

                Nav:  Setup à Financialsà Flex fields à key à Values

Step: 2      Define Parent and child values for departments

                Nav:  Setup à Financialsà Flex fields à key à Values

Step: 3      Create cost pool journal and post.

                Nav:  Journal à Enter

Step: 4      Create and Post Statistical Journal

                Nav:  Journal à Enter

Step: 5      Define and Generate Mass allocation formula

                Nav:  Journals à Define à Allocation

Step: 6      Query mass allocation j

                Nav:  Journals à Enter

Journals are nothing but Day to Day Transactions.