Accounting Rule and Invoicing Rules

 

Accounting rules determine the number of periods and percentage of total revenue to record in each accounting period. You can use accounting rules with transactions that you import into Receivables using Auto-Invoice and with invoices that you create manually in the Transaction windows. You can define an unlimited number of accounting rules.

Invoicing and accounting rules let you create invoices that span several accounting periods. Accounting rules determine the accounting period or periods in which the revenue distributions for an invoice line are recorded. Invoicing rules determine the accounting period in which the receivable amount is recorded.

You can assign invoicing and accounting rules to transactions that you import into Receivables using Auto-Invoice and to invoices that you create manually in the Transactions window.

Here we use both Accounting Rules and Invoicing Rules in combination.

There are 4 types of Accounting Rules.
1. Fixed Schedule
2. Variable Schedule
3. Daily Revenue Rate, All Period
4. Daily Revenue Rate, Partial Period

and

There are 2 types of Invoicing Rule
1. In Arrear
2. In Advance

Now we create 2 cases in which 1st case will be with Fixed Schedule Accounting Rule and In Arrear Invoicing Rule and 2nd case will be with Fixed Schedule Accounting Rule and In Advance Invoicing Rule. 
In rest of the cases accounting will remain same only amount calculation will be different for each month which will be explained in the last.

Case 1: Fixed Schedule - In Arrear

First we create Fixed Schedule Accounting Rule.

Here we are creating 3 Month Fixed Schedule Rule with Period Type which we have taken in our GL Calendar. After specifying the number of period system will automatically distribute the percentage on the basis of number of period taken.

Now we create AR Invoice with both rules.

  

Here enter all the necessary details and select Invoicing Rule as 'In Arrear' and then click on lines.

when you select any Invoicing rule then a field in Rules tab becomes mandatory in which you have to take your accounting rule.

Here select your rule and specify the date in which you want your recognition to be placed and the Save.

Before completing the invoice check distributions, in which you can see the code combinations for receivable and revenue but there is no amount mentioned because of the accounting rule.
For bifurcation of amounts complete the invoice and then we need to run Revenue Recognition program which will distribute the amount on the basis of Accounting and Invoicing Rule in different months.

Here after completion of program, system distributed amount as per the accounting rule in the months which were taken while adding line items. In this case equally.

Now process accounting and see the impact in OAF Form.

Here as per the above entries, revenue is distributed is the following months which will be recognized in the respective months against which Unbilled Receivables is debited and the main Receivable Account gets debited in the last month.

Case 2: Fixed Schedule - In Advance

In this case we are taking the same accounting rule but Invoicing rule will be different.

Here take Invoicing Rule as In Advance.

Use the same Fixed Accounting Rule.

For the impact Run Revenue Recognition.

Here In-Advance, Receivable account is fully debited in the first month and revenue is recognized in the following months.

Accounting Difference When "Accrue at Receipt" is Checked and Unchecked at PO Level

 

When "Accrue At Receipt" is Checked.

When "Accrue At Receipt" is Not Checked.

Multi-Period Accounting - Custom SLA - Standalone Invoice

 

Case Scenario: If company is paying Rent in the month of "April" but the amount is inclusive of accumulated total for 3 Months i.e. April, May & June. Business wants to distribute this amount in all three above mentioned period without creating separate invoice in different month.

Solution Approach: As per the above case, In Payables we have "Multiperiod Accounting" functionality to distribute that amount in the next future periods without opening those periods. To elaborate the approach, business has created an invoice for Rs. 1,00,000 in the month of April and want to distribute that amount in the future months (Never Opened). Here system behavior's is to generate accounting entries for all the the three months and by distributing that amount on the basis of "Proration Type".

In that accounting entry system distribute the invoice amount in the months but will only post balance to trial balance for current open month which is April, rest will be transferred to GL but will only get posted once those period is opened.

For proper understanding of this functionality you can follow the below process in which I have explained what Custom SLA setups needs to be done.

To understand the step by step process for Custom SLA Setups. (Click Here)

Step 1: Create Value Set and add values

Step 2: Create Mapping Set

Step 3: Add Context DFF at Invoice Line Level

Step 4: Create Account Derivation Rule

Step 5: Create Journal Line Definition by Copying the standard and assign the same to "Invoices" Event Class in your Custom Application Accounting Definition.

Go to your Custom Application Accounting Definition. Click on "Invoices" Event Class. 
Go to "Journal Line Definition". Click on Copy and enter name and chart of accounts.

Remove standard JLD and assign your custom.

Step 6: Create 2 Journal Line Type, one for accrual and one for recognition. Will explain the concept of "Accrual" and "Recognition" at the time of accounting entry.

Open your Custom Journal Line Definition and go to Journal Line Type of  "Item Expense" and click on "Line Type" and then copy the same for your "Accrual" Line Type.

 

Change the setup for JLT after copying as below for Accrual.

Copy "Item Expense" JLT again for Recognition and change the setup as shown below. Also delete all the conditions for "Recognition" JLT as per oracle standards.

 

Step 7: Go to Journal Line Definition and Inactive the standard "Item Expense" JLT and add your new JLT for "Accrual"

Click on "Multiperiod Accounting"

Enter Values according to Business Process.

Save and Click on "Line Assignments"

Accrual Line Type is already added here. We need to our Recognition Line Type here and our Custom Account Derivation Rule to it which we created at step 4.

Save and Close

Now Validate the Application Accounting Definition and assign the same to your Custom Sub-Ledger Accounting Method and assign the Custom Sub-Ledger Accounting Method to your ledger.

 

Now we create AP Invoice. 

For system to understand this AP Invoice is of Prepaid Expense we have to give the invoice "Deferred Dates". By which system treats this invoice as prepaid expense invoice and recognize the expense in future months.

Enter "Default Distribution Account" as "Prepaid Expense" and enable "Deferred Dates" check box and after that enter enter Start Date and End Date in which prepaid expense amount will be distributed.

Go to Line Level DFF and enter value as "RENT" which was mapped to GL Code "E10266" and will distribute the balance from Prepaid Expense GL Code (entered at line level) to Expense Account mapped at ADR Level at Step 2.

 

Validate the Invoice and Submit Create Accounting to its impact.

Now we understand the work of "Accrual" & "Recognition"

Here the first two lines is generated from "Accrual" JLT as uses the default distribution account as Item Expense Account.

For "Recognition" system passes additional entries in which GL Account which was mapped against "RENT" at mapping set level is debited and default distribution account is credited.

Here same entry is passed in each month which shows the "Recognition" Event as per JLT.

Here in the above screenshot we can see that GL Date is having 3 Months i.e. April, May and June. GL Period is Open for the month of April, so entries will be posted and will show impact in Trial Balance. As for the month of May & June, when period is opened these entries will not be posted directly. We need to submit the below program "Complete Multiperiod Accounting" for those entries to be accounted as per there period in the GL Date.

 

After completion of this program "Journal Entry Status" will be changed from "Incomplete" to "Final".

Advance Receipt with Unidentified, Unapplied, On-Account and Applied Accounting

 

O2C Accounting with GST (Tax Point Base - Invoice)