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Accrual Accounting (Periodic Accrual)

Posted on March 20th, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Some time back one of my reader asked to provide accounting details information that take place in accrual accounting, so here to go:

Lets try to understand the accounting details with these entry:

  • PO Cost SGD 200
  • Invoice Price SGD 200
  • Payment Rate SGD 200

ACCURAL ACCOUNTING

1Enter purchase order

When you enter a purchase order, accounts are created and stored with the purchase order distribution. The accounts will eventually be used as a basis for creating accounting that is sent to the general ledger. Creating a purchase order in and of itself generates no accounting that is sent to the general ledger.

2Receive

When you process a receipt, no accounting is created for period end accruals. Receipts that are accrued at period end will always be for a destination type of expense.

3Deliver and cost

When you deliver a receipt to its final destination, no accounting is created. The expense will be recorded after matching to the purchase order, running the Payables Accounting process and subsequently running the Payables Transfer to General Ledger process.

4Period end accrual

If an invoice is not entered by period end, the Receipt Accruals - Period End process will generate accruals and transfer the accounting for them to the GL Interface. Use the Journal Import program to create unposted journals. This journal is created with a reversal date in a subsequent period. The journal must be reversed so your receipt liability is not overstated.

5Reverse accrual in the general ledger

In the subsequent period, reverse the prior period accrual.

6Invoice and match

Entering an invoice and matching creates a debit to the Inventory AP Accrual account to clear the liability for the uninvoiced receipt (you now have an invoice).

The entire credit is to the AP Liability account that defaults from the supplier site if the invoice unit price is the same as the purchase order line unit price. Any difference is charged to the Invoice Price Variance account.

For items with destination type of Expense, the Invoice Price Variance account will be the same as the charge account. The AP Liability account is cleared when a payment is processed.

Posted in Oracle Payable | 5 Comments »

TGIGF: Thank God it’s Good Friday!

Posted on March 19th, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Well, it’s been a hectic month that I last wrote something bigger on the blog. Have been very busy at my workplace, new project kickoff for another entity, user discussion workshop, month end closure and discussion with FICO(Controller) for some reporting need as part of public listed company's quarterly reporting.....

Next couple of months is going to yet another tight me...still I hope I get more time now on to write a little bit more on my blog!

TGIGF: Thank God it’s Good Friday! ......it is long weekend, it is perfect time to clear all emails, blog comments and write few small post which was requested by some of my readers.

Posted in Misc | 1 Comment »

100,000th Visitor

Posted on March 10th, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Thats only in last 8 months, finally visitor number 100,000 stopped by my blog, which I neverthought to be a major success so early.Blog

12 April 2007, I moved my wordpress to 'oracleappshub' domain and since 13 June 2007 I started Counting.

They says: "MOVITATION IS WHAT GETS YOU STARTED,HABIT IS WHAT KEEPS YOU GOING "

Statistics counts, what you say.. Blog statistics and blog comments have always been special for me . It keeps me reminding that there are people across the world who read my blog .That's motivation factor for me which keeps me sharing through this Web 2.0 platform.

I would like to thank everyone across the world who have visited my blog.

Thank you all for stopping in, and a big thank you for those who send a word of encouragement and a thankyou for my efforts - THANK YOU!

blog2

Posted in Misc | 9 Comments »

…XBRL Network

Posted on March 3rd, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Extending the last discussion in one of my post for XBRL,one of my visitor mention ,there is a new site for discussions and professional networking on XBRL, thought to let this known to Oracle community. Interested one welcome to join & participate

double-arrowXBRL Network

This is network of financial officers, accountants, security analysts, software engineers, investors, employers and employees who's interest is in current developments and comments regarding XBRL. The site is very similar to Eddie's Oracle community .

The url is :http://www.xbrlnetwork.com

The url is : http://xbrlnetwork.ning.com

 

xbrl

double-arrowLooking for more information Here are some link:

Posted in XBRL | 1 Comment »

XBRL & Reporting

Posted on March 3rd, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

If you are still in R11i , you might be heard something like "XBRL", which is technically known as eXtensible Business Reporting Language (XBRL).

eXtensible Business Reporting Language (XBRL) is an open specification for software that uses Extensible Markup Language (XML) data tags, together with a taxonomy, to describe business reporting, including financial information.

double-arrowXBRL and XML

An XBRL taxonomy is a standard description and classification system for the contents of accounting reports, and both kind of reporting can be easily performed.

  • Business Reporting
  • Including important financial information

double-arrowXBRL Financial Reporting Benefits

  • Achieve greater transparency and auditability of your company's financial information for better auditability.
  • Directly integrated with FSG – enabling XBRL Financial Reporting at the source:
    • Reuse existing FSG reports and components
    • Link your unique chart of accounts to the standardized elements of an XBRL taxonomy
    • Submit your XBRL Financial Reports in all of the FSG output options

double-arrowHow to Set Up XBRL Financial Reporting in EBS

We can generate XBRL output with the FSG(Financial Statement Generator), you must load one or more taxonomies into your Oracle instance. Once loaded, you select the taxonomy to use for a row set then assign XBRL elements to FSG row definitions.

Take a note , you will get taxonomies available from a number of sources,one of such is at www.xbrl.org.

Download a Taxonomy to your Oracle Instance (Adopted from Documentation)

  1. Create a new directory on the same server where the database is to be used for storing taxonomy files. The directory can be an existing directory but it is recommended you create a new one. Using SQL*PLUS run create directory xmldir as <directory name>.
  2. Make the directory public for read access. Using SQL*PLUS run grant read on directory xmldir to public with grant option.
  3. Place the taxonomy files (usually there are six) in the directory. You can transfer them using FTP, copy, or download from a url.
  4. Determine if the codeset of the taxonomy files are in the same codeset as that used in the database. If they are not the same, you must convert the taxonomy files so that they use the same codeset as the database instance.

Loading XBRL Taxonomies

1. Launch the XBRL – Load Taxonomy program from the Submit Request window. The program has three parameters:

  • Taxonomy Name: Enter a unique name for the taxonomy.
  • Taxonomy xsd File Name: Enter the file name, with or without the .xsd extension.
  • Taxonomy Description: Enter a description for the taxonomy.

2. If a taxonomy has imports (links to other taxonomies), you must load the imports first then load the parent taxonomy.

double-arrow Oracle GL 11.5.10.2 and XBRL

XBRL Publisher is a module in XML Publisher which parses the XBRL taxonomies, extracts XML schema from Oracle Reports RDFs and XML Publisher data templates, defines mapping between taxonomy elements and elements in XML-output reports and at last generate XBRL report concurrents to create XBRL instances.

patch

double-arrowReference Notes

Posted in XBRL | 4 Comments »

R12 : Management Reporting Security

Posted on March 2nd, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Do you know, in R12 there is a new management segment qualifier for your chart of accounts. This would qualify a segment to be the management segment if that segment has management responsibility and you can facilitate setting of Read, Write access permissions while defining Data access set in GL.

With this new concept you can:

  • Enables management reporting and analysis
  • Provide a better controls access to specific MSVs based on management responsibility and this can be
    • prevents managers/line managers from viewing or updating data for cost centers, lines of businesses, product lines, etc. that are outside their responsibility
    • Secures access to ledgers and management segment values
    • Grants read only or read and write access to management segment values

This can be best understood as with this simple example,assume you Business COA is based out of three thing like

Segment

  • line of business
  • cost center
  • product line

segemt You can set Qualifier with any of the segement, The added benefit of using a management segment is that you can now secure management segment values using data access sets. So you can grant read only or read and write access to specific management segment values to prevent certain managers from viewing and updating data for cost centers, lines of business, or product lines outside of their management authority.

double-arrowDefining and Designing your Management segment qualifier

Define a management segment if you want to perform management reporting and secure read and write access to segment values for the managementsegment. This segment can be any segment, except the balancing segment, natural account segment, or intercompany segment.

double-arrowHow it works

This can be understood as, lets we have four cost center like C0699,C0101,C0201,C0312 and these cost center have Vice President, director A, director B and Director C respectively.The Orginaztional Chart of cost center hierarchy is as figure below.

mANAGEMENT hIREC

If you assign the cost center segment as the management segment, read and write access can be secured to certain management segment values based on the cost center manager.

In above example , Director A has read and write access to only cost center C101. Director A does not have access to Director B’s or Director C’s cost center or to the Vice President’s cost center. This will true for others when you set to other. This way you can secure Managment reporting.

If you have given Read/Write to Parent Cost center 0699 to the Vice President, on the other hand, would have full read and write access to cost center C0101,C0201 and C0312 which is the parent of the direct reports. Thus,in that case the VP has full access to all direct reports’ data.

double-arrowBenefits of Management Reporting Security

The new management segment qualifier in combination with data access sets paves the way for management reporting and analysis.You can restrict access to different management segment values and assign them to different managers in your organization.

double-arrowHow this can be achieved in EBS

This can be achieved by setting three steps

  1. Fisrt step you have to to find designate a Management Segment for Chart of Accounts
  2. Then you have to define Data Access Set to Secure the above designate Specific Management Segment Values
  3. Then you have to assign Data Access Set To Responsibility.
    That all, to make security takes effect for that responsibility.

Your Naviagation should be from Responsibility: General Ledger

Navigation: Setup : Financials : Data Access Sets

double-arrow

Data Access Set and Management segment Value

As we know in Release 12,data access sets control which ledgers can be accessed by different responsibilities. Data access sets can also limit a user from accessing certain balancing segment values or
management segment values or grant read–only or read and write access to data in a ledger.

GL automatically creates a data access set when you define a ledger or ledger set. This system-generated data access set provides full read and write access to ledgers. You can also provide more limited access to your ledgers and ledger sets by defining your own data access sets.

double-arrowSuggested Reading

Posted in Oracle General Ledger, R12, Release12 | 1 Comment »

Understanding “Profit and Loss (P&L)” from Techies Mind

Posted on March 1st, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

  • In accounting world, an Income Statement is called as "Profit and Loss Report". In addition, the word Revenue is often used in place of the word Income. An Income Statement is used to inform you about the income earned, expenses incurred, and the total profit or loss in a particular period. Two common periods for creating an income statement are monthly and annually.
  • This report summarizes all Income (or sales), the amounts that have been or will be received from customers for goods delivered or services rendered to them, and all expenses, the costs that have arisen in generating revenues.
  • Normally Income Accounts accounts are used to track income earned during the process of operating your business. The income of a business comes from sales to customers or fees for services or both. Some of the common names for income accounts are: Income from Sales, Income from Freight, Income from misc. sources as property, shares.
  • As discussed in last post Balance Sheet is a ‘position’ statement whereas Profit & Loss Account is a ‘flow’ statement.
  • The need of P & L report is enforced because of companies Act, which enforce to produce Balance sheet and P&L account.
  • A Balance Sheet as on the last day of the financial year
  • A Profit & Loss Account for the financial year.

handProfit and Loss A/C

What you suppose to remeber is :

  • P&L A/c is also called ‘Income Statement’.
  • Income is calculated as the difference between revenues and expenses.
    • Revenues: from operations
    • Expenses: specific product/service/period
  • Accountants have agreed to use the accrual basis of accounting rather than the cash basis

The term Revenue and expense

  • Revenues - gross increases in owners’ equity arising from business operations/delivery goods-services to customers
  • Expenses - decreases in owners’ equity that arise because goods or services are delivered to customers

Transaction

In term of accounting, this can be described as:

arrow upRevenue Account :This is the income account. Whenever a revenue account balance is changed, it leads to a change in the Assets / Liabilities account. Revenue account is not a control account, it’s treated as an operative account. At the beginning of a new accounting cycle, this account is turned to zero. Entire balance is transferred to the retained earnings account.

arrow upExpense Account : This is the operations expenditure account. Whenever an expenditure account balance is changed, it leads to a change in the Assets / Liabilities account. This account behaves just like the Owner’s equity account as an increase in this account essentially means a decrease in owner’s equity. Expense account is not a control account, it’s treated as an operative account. At the beginning of a new accounting cycle, this account is turned to zero. Entire balance is transferred to the retained earnings account.

Spliting the above , the balance sheet can be drived on the basis of these. You can see the details in one of last post.

BS

where as Profit and Loss report can be best build and understand as:

PL account

handProfit and Loss A/c Concept

Profit and Loss can be based out of these basic concept as discussed in one of my post .

1ACCOUNTING PERIOD

  • Expenditure during A/c period which are also expenses of that period.
  • Expenditure during the A/c period which will become expense only in future periods
  • Expenditure during the previous A/c period which will become expenses during the current A/c period
  • Expense of the current A/c period which have not yet been paid

2REALIZATION CONCEPT

What is important here is

  • ‘point of time’ or revenues earned
  • recognition of revenues

3ACCRUAL CONCEPT

Normally companies measure there profits by change in Owners’ equity , revenues increases OE, expenses decreases OE

4MATCHING EXPENSES WITH REVENUE

  • Income (profit) - the excess of revenues over expenses
    • Revenues - Expenses = Profit
  • Retained earnings - additional owners’ equity generated by income or profits
    • Revenues increase owners’ equity.
    • Expenses decrease owners’ equity.

hand Balance sheet and P&L- Driven by Transaction

In last post we have seen BS provides a snapshot of an entity’s financial position at an instant in time., where as P&L A/c provides a moving picture of events over a span of time and explains the changes that have taken place between BS dates. This can be best described as below figure.

BS and PL

Posted in Basic Accounting, JumpStart | 1 Comment »

Understanding “Balance Sheet” from Techies Mind

Posted on March 1st, 2008 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Do you know one of Key Financial Report aka Balance Sheet is a basically ‘position’ statement, which describes the financial position of assets & liabilities of

  • your company/firm
  • as on a particular date

If you take any accounting book, this can be best defined as "a statement of the financial position of an enterprise as at a given date, which exhibits assets, liabilities, capital, etc."

handWhy Balance Sheet Required?

Obvious question why this is required? the Only reason is because the the legal rules (Companies Act) enforce companies to publish such report.

  • A Balance Sheet as on the last day of the financial year
  • A Profit & Loss Account for the financial year.

In accounting world , balance sheet should reflect ‘true and fair view’ in term of shareholder equity .

Balnacesheet

hand Balance sheet - techies definition

Assets and Liabilities are continuously changing with Business activity. To understand the financial position of the Business, it is necessary to ‘FREEZE’ the values of financial components at a certain point in time. These values, or Balances, are used to construct a balance sheet which shows how the owner’s equity is represented by the various categories of assets and liabilities.

balancesheet

handDo this have any Structure?

Yes, If you see different accounting book, we will find two different form of Balance sheet,

  • Horizontal
  • Vertical

The only difference between these two are required to give the corresponding amounts for the preceding financial year (‘Comparatives’) for all the items shown in the balance sheet.

A typical Balance sheet can be best represented as:

Horizontal BS

This is based out of accounting equation, which I have discussed in one of old post :

Assets = Owner’s Equity + Outside Liabilities

A = OE + OL

in the world of double entry system, the rule of thumb is "In the double-entry accounting system, every transaction is recorded by equal amounts of debits and credits"

A (DEBIT)= OE + OL(CREDIT)

ACCOUNTING

If you analyze the above sheet in term of accounting equation , this can be best understood as:

Balancsheet

handIs there any limitation for Balance sheet?

Yes, there are (adopted from Jep Robertson Notes)

  • As most most assets and liabilities are based out of historical cost.
  • Judgments and estimates are used in determining many of the items.
  • The balance sheet does not report items that can not be objectively determined.
  • It does not report information regarding off-balance sheet financing.

handWhere is my Balance sheet report within Oracle

Balancesheet

Balance sheet reports in Oracle are one of the FSG report which need to fine tune base out of the customer requirement, and this can be executed from the report section within GL responsibility.

Posted in Basic Accounting, JumpStart | 7 Comments »

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