Accounts Receivables

System Options (AR) 

Define system options to customize your Receivables environment. Is is used to set some default and control on receivables module. You can specify your accounting information, customer and invoice parameters, and how the Auto Invoice and Automatic Receipts programs will run.
There are two types of Flexfields
              1. Sales Tax Location KFF
              2. Territory KFF
Sales Tax Location KFF: It is used to calculate tax based on the different locations. In general we have different tax rates in different states.
Territory KFF: Territory KFF is used to track sales information location wise. Sales tax location KFF & Territory KFF is an optional KFF's.

Customer Profile Class

Profile class is used to group the customers based on certain parameters like with similar creditworthiness, business volume, payment cycles, and late charge policies. The pre-requiste for creation of Customer Profile Class are Payment Terms, Collectors and Statement Cycle.

Application Rule Set

It will determine how to apply receipt amount against invoice components. The invoice components are item, tax, freight, financial charges. Oracle provides by default three appliction rule set. We can define as per our requirement. The three default one are:
                1. Line First--Tax Prorate
                2. Line First--Tax After
                3. Prorate All.

Transaction Types

Transaction type will determine the following features that defaults to the transactions. They are
               1. The Accounting Information for the debit memos, credit memos, on-account credits, charge backs, commitments, invoices, and bills receivable you create in Receivables.
               2. Whether to Post in General ledger or not.
               3. Whether we can print the invoice or not.
               4. Amount Sign "+ " or "-".
               5. Tax Information.
               6. Freight Information.
               7. Natural Application Only or Allow Over application.

Transaction Sources

Transaction source will determine the numbering for individual transactions and batch transactions. And also it will determine “Transaction type”. There are 2 types of transaction Source.
           1. Manual Transaction Source.
           2. Imported (Automatic) transaction source is used to import the transactions into AR using Auto Invoice

                                      Receivable Activities
Receivable activities are used to default the accounting information for various activities. The activities are like Adjustment, Bank Error, Earned Discount, Endorsement, Finance Charges Miscellaneous Cash, Short term Debt, Unearned Discount, Receipt Write Off.
                                         Auto Accounting
Auto Accounting is used to default the accounting information into various transactions. Auto Accounting will be defined for:

                  1. Receivables Account 

                  2. Revenue Account 

                  3. Tax 

                  4. Freight
                  5. Unearned Revenue
                  6. Unbilled Receivables......etc.

Receipt Class

Receipt class will determine the:
            1. Receipt creation method
            2. Remittance method
            3. Clearance method
            4. Receipt method for various receipts Creation Methods: 

            1. Manual
            2. Automatic
            3. AP / AR Netting
            4. Bills receivables
Remittance Method:
The remittance method determines the accounts that Receivables uses for automatic receipts that you create using the receipt method assigned to this receipt class. Choose one of the following methods:
           1. No Remittance
           2. Standard
           3. Factoring
           4. Standard and factoring.
Standard: Use the remittance account for automatic receipts or for standard bills receivable assigned to a receipt method with this receipt class.
Factoring: Use the factoring account for automatic receipts or for factored bills receivable assigned to a receipt method with this receipt class.
Standard and Factoring: Choose this method if you want Receivables to select receipts assigned to this receipt class for remittance regardless of the batch remittance method. In this case, you can specify either of these remittance methods when creating your remittance batches.
No Remittance: Choose this method if you do not require receipts assigned to this receipt class to be remitted. Note: If the creation method is Automatic, then you cannot select No Remittance as the Remittance Method.
Clearance Method:
To require receipts created using a receipt method assigned to this receipt class to be reconciled before posting them to your cash account in the general ledger, choose one of the following Clearance Methods:
              1. Directly
              2. By Matching
              3. By Automatic clearing
Directly: Choose this method if you do not expect the receipts to be remitted to the bank and subsequently cleared. These receipts will be assumed to be cleared at the time of receipt entry and will require no further processing. Choosing this method is the same as setting Require Bank Clearance to No in previous releases of Receivables.
By Automatic Clearing: Choose this method to clear receipts using the Automatic Clearing program. (Receipts using this method can also be cleared in Oracle Cash Management.)
By Matching: Choose this method if you want to clear your receipts manually in Oracle Cash Management.
Receipt Method:
                  1. Check
                  2. EFT
                  3. Wire
                  4. Clearing.

Receipt Source

Receipt Source will determine:
                 1. Receipt class
                 2. Payment method
                 3. Numbering for receipt batches
                 4. Bank Account
There are 2 types of receipt sources
                 1. Manual Receipt Source.
                 2. Automatic Receipt Souce.

Remit to Address

Remit to address is an address where customer is sending the receipt details of checks and Payments to.

Aging Buckets

Aging buckets are time periods you can use to review and report on your open receivables. For example, the 4-Bucket Aging bucket that Receivables provides consists of four periods: -999 to 0 days current, 1 to 30 days past due, 31-61 days past due, and 61-91 days past due. When you create your Collections reports, you can specify an aging bucket and 'as of date', and Receivables will group the transactions and their amounts in the appropriate days past due period. There are two types:
              1. Four Aging Buckets
              2. Seven Aging Bukets.
Four Aging Buckets allows to define an aging bucket with four periods. Wheres as Seven Aging Buckets allows to define an aging bucket with Seven periods.

Statement Cycle 

Statement cycle will determine when to send statements to customer. For example: Monthly, quarterly, half-yearly or Yearly.

Earned Discount & Unearned Discount

Earned discount you will receive if payment made within the due date. In some situations you will receive discount if you are not paid within due date also, this is called unearned discount.We have to create receivable activity for the other income stating that what is the reason we are receiving money on.

                                     Invoice ( Sales Invoice)
When you sell goods to record normal sales we use Invoice.
Accounting Entry:
           Receivables A/c.........................Dr
                          To Revenve.............................Cr.
                          To Freight A/c ........................Cr.
                          To Tax A/c..............................Cr.

Debit Memo

When the customer is undercharged to increase customer balance we use Debit Memo. Debit Memo is Positive sign invoice.
Accounting Entry:
              Receivables A/c.........................Dr
                           To Revenue.............................Cr.
                           To Freight A/c ........................Cr.
                           To Tax A/c..............................Cr.

Credit Memo.

When the customer returns goods or overcharged to decrease customer balance we use Credit Memo. Debit Memo is Negative sign invoice.
Accounting Entry:
                 Revenue A/c...................Dr.
                 Tax A/c ..........................Dr.
                 Freight A/c.....................Dr.
                              To Receivables A/c..................Cr.

Deposits. 

If we received advance from our customer, to record the same we use “Deposit” Transaction. Lather it will be adjusted against future invoices or future Liability. We call it as Commitment Transaction.
Steps:
1) Define Deposit Transaction Type.
2) Define Deposti Transaction Source.
3) Create a Deposit Transaction and enter detials in commitment Tab
4) Record the Receipt against deposit transaction.
5) Enter Standard Transaction and apply against Deposit Transaction Number.
6) Query the Deposit Transaction and check on Details button to check Commitment Amt.
Accounting Entry:
When you enter a deposit, Receivables creates the following journal entry:
             Receivable A/c......................Dr.
                            To Unearned Revenve A/c..............Cr.
When you enter an invoice against this deposit, Receivables creates the following journal entries:
            Receivables A/c......................Dr.
                            To Revenve A/c.............................Cr.
                            To Tax A/c.....................................Cr.
                            To Freight A/c................................Cr.
            Unearned Revenve A/c .............Dr
                            To Receivables A/c........................Cr.

Guarantee

Guarantee Transaction means that our customer will agree to purchase from us for a particular amount to avail some discount. It is known as commitment Transaction.
Steps:
1) Define Guarantee Transaction Type.
2) Define Guarnatee Transaction Source.
3) Create a Guarantee Transaction and enter details in commitment Tab
4) Enter Standard Transaction and apply against Guarantee Transaction Number.
5) Record the Receipt against Standard Transaction.
6) Query the Guarantee Transaction and check on Details button to check Commitment Amt.
Accounting Entry:
When you enter a guarantee transaction, Receivables creates the following journal entry:
           Unbilled Receivable A/c ...................Dr.
                       To Unearned Revenue A/c....................Cr
When you enter an invoice against this Guarantee Transaction, Receivables creates the following journal entries:
           Receivables A/c.........................Dr
                        To Revenue A/c.............................Cr.
                        To Tax A/c......................................Cr.
                        To Freight A/c ...............................Cr.
          Unearned Revenue A/c...................Dr.
                        To Unbilled Receivables A/c..........Cr.

Charge back Transaction

Charge back transactions are used to close the open invoice and to open new transaction with new terms. For example: Customer agreed to pay the total invoice amount on a particular date but failed to pay total invoice amount. But customer is able to pay part of the invoice amount on agreed date and requested to extend the due date without charging any interest on balance amount. In this case we have to close the existing invoice and to open a new invoice for balance amount with extended due date without charging any interest on the balance amount.
Steps:
1) Define Charge back Transaction Type
2) Define Charge back Transaction Source.
3) Define Charge back Receivable Activity.
4) Create Standard Invoice
5) Record charge back Receipt against Standard invoice and create charge back transaction for remaining amount.
6) Query the Charge back invoice No.

AP/AR Netting.

AP/ AR netting allows you to net off the payable invoice balances against receivable invoice balances for whose customers who is also your supplier. For example, If you have a customer who is also your supplier, then rather than him paying you and then you paying him, AP/AR netting allows you to pay the net difference between how much you owe the supplier and how much he owes you. After establishing a netting agreement with such trading partners, you set up the agreement and the rules associated with it in e Business Suite and you can then start to net AP and AR transactions.
Setup Steps:
1) Netting Bank A/c and create PPP.
2) Enable "Allow payment to unrelated transaction" in Receivable Options.
3) Create Receipt Class for AP/ AR Netting and give bank account Details.
4) Define Document Sequence and assign Document Category to Document Sequence in assignment window for Payable and receivables.
5) Define Netting Agreement.
6) Create Netting Batch.

Revenve Recognition

In Revenue Recognition we have two concept in oracle apps.
                 1. Invoicing Rule.
                 2. Accounting Rule.
Invoicing Rule:
Invoice rules will be determined the accounting period in which receivables are recognized.
There are 2 types of Invoice Rules:
                 1. Bills in advance
                 2. Bills in Arrears
Bills in advance: System will recognize the invoice amount as a advance or starting of a project. In case of Bill in advance " Unearned Revenue " will come into the picture.
If you enter an invoice with a Bill in Advance invoicing rule, Receivables creates the following journal entries.
In first Period:
                 Receivables A/c .....Dr
                                 To Unearned Revenue A/c......Cr
                                  To Tax A/c ...........................Cr
                                  To Freight A/c.......................Cr
In all periods of the rule for the portion that is recognized:
                  Unearned Revenue A/c ......Dr
                                  To Revenue...........Cr
Bills in Arrears: System will recognize amount at the end of the contract or project. In case of Bills in Arrears " Unbilled Receivable" will come into the picture. If you enter an invoice with a Bill in Arrears invoicing rule, Receivables creates the following journal entry:
In first Period:
                   Unbilled Receivable A/c.......Dr
                                  To Revenue ..............Cr
In all periods of Rule, for the portion that is recognized:
                   Receivables A/c..............DR
                                   To Unbilled Receivables A/c.............Cr
                                   To Tax.........................................Cr
                                   To Freight...................................CR
Accounting Rules:
Accounting Rules will determined the Accounting Period in which Revenues are recognized.
There are 2 types of accounting rules:
                        1. Fixed Schedule
                        2. Variable Schedule
Fixed Schedule:
We will define duration of the project and % of Revenue of each accounting period, at the time of fixed scheduled accounting rule setup.
Step: 1 Define Fixed Schedule Accounting Rule.
Step: 2 Create Invoice with Fixed Schedule accounting rule with Bills in advance invoice rule. Now system will automatically pic the " Unearned Revenue" & Revenve A/c from autoAccounting setup. Save and complete the transaction
Step -3: Run Revenue Recognisation program
Now, Run create accouting program and see the ouput in subledger accounting.
Variable Schedule:
At the time of set up the Variable Schedule Rule we will not enter duration of the project & % of Revenue for each accounting period.
We enter only first period Revenue % at the time of accounting rule set up. Duration of the project will be entered at the time of invoice entry.
Step – 2:
Create Invoice with Fixed Schedule accounting rule with Bills in advance invoice rule.
Step -3: Run Revenue Recognition program
Now, Run create accounting program and see the output in subledger accounting.

Deferred COGS

Prior to this enhancement, the value of goods shipped from inventory were expensed to COGS upon ship confirm, despite the fact that revenue may not yet have been earned on that shipment. With this enhancement, the value of goods shipped from inventory will be put in a Deferred COGS account. As percentages of Revenue are recognized, a matching percentage of the value of goods shipped from inventory will be moved from the Deferred COGS account to the COGS account, thus synchronizing, the recognition of revenue and COGS in accordance with the recommendations of generally accepted accounting principles.

Standard Memo lines

Items are maintained at Inventory module. If an item is not maintained at inventory module, for example “Service charges”, which is a non inventory item, can be maintained in “Receivables” module only.

Customer Refund

Refund is noting returning back excess receipt amount recevied more than transaction amount.
Steps:
1) Define Refund Receivable Activity
2) Create Standard Transaction.
3) Create receipt with excess amount and adjust invoice and keep remaining amount as unapplied or on account.
4) Complete Remittance Process like create, approve and format.
5) Query the receipt which you need to refund excess amount to customer. Apply the excess amount to Refund. Now, click on refund attributes and give refund payment method (I.e check, wire)
6) Copy Invoice No in receipt window from Refund Status.
7) Query the invoice in AP and make payment to it.

Receipt Write-off 

You can write off unapplied cash receipt balances. Receipt write off functionality is Provided to account for small overpayments that you do not intend to refund or maintain as unapplied amounts or On account balance.
Steps:
1) Define write off limits in receivables system options window.
2) Define Receipt write off receivables activity.
3) Set Write off limit for particular user.
4) Create transaction in AR
5) Create Receipt with access amount then transation amount and apply against receipt amount against transaction invoice.
6) Now place curser in "Applied To" tab and press down arrow, apply unapplied amount to receipt write-off and save it.

Remittance.

Remittance is nothing but sending receipt information to the bank for collection. There are 2 types of Remittance Method.
             1. Manual
             2. Automatic (Refund)
There are 3 steps in the remittance process.
             1. Create
             2. Approve
             3. Format.
Steps:
1) Create a remittance batch, by giving remittance Method, Receipt Class, Receipt Method, bank, bank branches, bank account.
2) Now click on " Manual Create" Button, Now status will change form "Started Create" to " Create Completed".
3) In Main Tab, Place cursor on Receipt Method, Press "Ctrl+F11" and Select the checks you wish to send to bank and click on " Approve" Button. Now status will be " Started Approve" , when " Automatic remittance execution" concurrent request completed, Status will change to "completed Approval"
4) Click on "Format" Button, Status will be " Started Format", when Print remittance program completed status will change to "Completed Format".

Transaction Batch

Transaction batch is used to enter group of transactions based on the certain parameters.

Receipt Batch

Receipt batch is used to group the Receipts based on certain parameters. There are 3 types of Receipts batches:
                1. Manual Regular
                2. Manual Quick
                3. Automatic

Miscellaneous Receipts

Non invoice related receipts is called miscellaneous receipts, such as interest on investment, dividend etc. For creating miscellaneous receipt, we have create Miscellaneous account and give GL account in Receivable activities window.

Auto Cash Rule Set

Receivables provides five AutoCash rules that we can use to create our own AutoCash rule sets. When we run Post QuickCash to apply customer's receipts, Receivables tries to use each AutoCash rule within an AutoCash rule set. If the first rule in the set does not find a match, Receivables uses the next rule in the sequence, and so on until it can apply the receipt. Auto cash rule set is used to apply receipt amount against invoices. The following are the five Rules:
             1. Clear the account
             2. Clear the past due invoices
             3. Clear the past due invoices grouped by payment terms
             4. Match payment with invoice
             5. Apply to the oldest invoice first

Receipt Reversal

Receipt reversal is nothing but a kind of cancellation of Receipt. There are 2 types of Receipt Reversal Methods:
               1. Standard Reversal.
               2. Debit Memo Reversal.
Standard Reversal: When we reverse receipt with the standard reversal, all the transactions which are associated with that receipt will get reversed.
Debit Memo Reversal: When we reverse receipt using debit memo reversal all associated transactions will not get reversed, but new debit Memo get created with same amount.

Auto Lockbox

Lockbox is a service offered by banks to companies in which the company receives payments from their customers by mail to a post office box and the bank picks up the payments and deposits it in the company’s bank account. In away, the company is outsourcing its AR function of collecting the checks and depositing it in the bank. The bank then informs the company of all the payments received. They normally send a Flat file (text file) to the company that gives all the details of the deposits made in the bank account. The details captured in the flat file depend on the arrangement between the bank and the company. This flat file is referred to as the Lockbox file. The company can then import this Lock box file in their system to create receipts and apply these receipts to the open invoices. Oracle Receivables provide a standard functionality to import the lock box file to create the receipts. It also provides you with the flexibility to define customized lock box formats to enable you to accept the lock box file in any format for any of the banks. The Oracle Lock box functionality can also be extended to convert Receipts information from any other legacy system or from the remittance advice the company gets directly from their customers.
Setup'sYou need to setup the following before running the Lockbox process
1) Bank and Bank Accounts: You define your internal bank accounts in Accounts Receivables. This is the bank account where the customer payments are deposited.
2) Receipt Class: The Receipt Class determines the processing steps for the receipts and you assign Receipt Methods to your Receipt Class. The processing steps for any Receipt include confirmation, remittance and reconciliation.
3) Receipt Method: Receipt Method is assigned to a receipt class and it determines how to account for the receipts using the Receipt Class. For one Receipt Class, you can have more than one Receipt Methods. You associate bank accounts and the GL account combinations for Cash, Remittance, and Bank Charges etc with the Receipt Method.
4) Receipt Source: You define Receipt Batch Sources to provide default values for Receipt Class, Receipt Method and the Remittance Bank Account. Your Receipt Source also determines if the batch numbering system is manual or automatic.
5) Lockbox: Define a lockbox for your Lockbox service from each bank. The lockbox setup includes a Lockbox number (You get a Lockbox number from your bank).
6) Lockbox Transmission Formats: Oracle Receivables AutoLockbox uses the Transmission format while importing
the data from the lockbox file into Receivables. Transmission formats indicate how the data in the Lockbox file is organized.
7) AutoCash Rule Sets: AutoCash Rule Sets determines the sequence of AutoCash Rules that Post QuickCash
program uses to apply the receipt amount to the customer account open items.
Control file: A Control file is a sql loader file to load the lockbox file in Receivables payment interface table(ar_payments_interface_all). This file should have the ‘.ctl’ extension and should be placed in the $AR_TOP/bin directory. Lock box Processing Steps:
Start the lockbox processing by copying lockbox data file in required Folder.
Run Submit lockbox process.
Data is imported to AR_Payments_Interface_all tables. Validation process starts, If any errors found, Recify the same using Maintain transimission Data window.
If no error found, it will completed validation and quick cash batch is created.
Post quick cash program will run
Finally receipts applied and customer balances updated. Here end the process.