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Difference between “Cash Clearing Account” and “Clearing Account” in AR

Posted on January 25th, 2008 by Sanjit Anand ||Email This Post Email This Post

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This is in response of one offline mail as one of consultant asked some more information for Cash Clearing Account and Clearing Account, so thought to share here. His question was:

What is difference between “Cash Clearing Account” and clearing account in AR?

If you are using Oracle Cash Management, you need to define

  • Bank Errors Account
  • Bank Charges Account
  • Cash Clearing Account

That mean for each bank account you plan on reconciling by using Cash Management. If you use Payables, you can override these accounts for
each payment document you define.Right.

If you set up Oracle Receivables to account for payments at clearing time, enter the cash clearing account you are associating with a bank account. When you create accounting entries for your unreconciled invoice payments, you credit your cash clearing account using this account. After you reconcile your invoice payments using Oracle Cash Management, when you create accounting entries for the cleared payments, you debit this cash clearing account and credit this bank account’s cash account. The account you enter here defaults to the Cash Clearing Account field in the GL Accounts region of the Payment Documents window.

If you are using future dated payment methods, enter the clearing account you are associating with a payment document. When you pay an invoice with a payment document that uses a Manual Future Dated or Future Dated payment method and post payments within Payables,Receivables automatically debits your liability account and credits this account. When you clear this payment using automatic or manual reconciliation within Oracle Receivables or Oracle Cash Management then post payments within Payables, Receivables debits this cash clearing account and credits this bank account’s cash account.

Clearing Accounts are used for AutoInvoice

The clearing account is for your imported transactions. Receivables uses the clearing account to hold any difference between the specified revenue amount and the selling price times the quantity for imported invoice lines. Receivables only uses the clearing account if you have enabled his feature for the invoice batch source of your imported transactions.

Normally, cash clearing account is used if your accounting is accrual Based.

Is there any relation between Cash Clearing and Reconciliation?

Cash clearing and reconciliation have no relation. You can use cash clearing if you want to account for the payment after its cleared in the bank and not on payment issue.

More over, you should note that reconciliation is a activity of matching a Payment / Receipt with bank statement.

Have a nice weekend.:)

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Posted in Oracle Receivable | 5 Comments »Email This Post Email This Post |

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5 Responses
  1. Melvin April Says:

    Hi there, would like to know the business flow for receivables for a company that give out study and personal loans to their employees and how money will be recovered. If the money is deducted from the payroll, where this will be handled. They also receive revenue by leasing out property, how will this be handled.

    Thanks in advance, your help will be highly appreciated.


  2. Sanjit Anand Says:

    melvin,I am not sure, what prompt you think for employee loan in receiable area.

    Both can be treated in two dimession:
    1. Employee Loan
    2. Leasing of Property

    Take a quick snapshots how its works:

    Many organisations provide loans to their employees as a form of employee benefit. I have seen some of the APAC countries like india, Singapore, Hong Kong and Korea heavly used in functionality. In view of the complexity in calculating, tracking and recovering monthly repayment amounts, many clients have requested automation , thus best case would be handled by Payroll as element entry.

    I came across few sitaution like in my few projects as the loan was based out of :
    (i)Different methods of calulating interests like Daily reducing balance, monthly . reducing balance, Fixed term, etc.
    (ii)The monthly repayment amount is linked to payroll as a voluntary deduction.

    Under this option:

    You have to do the following.
    1. Create Elements
    2. Create Balances
    3. upload this monthly deduction balance.

    If this is a need across Company, it better to handle there HR based fast formula.But on the top of this you need HRMS module in place, not sure what is there at your end.

    IF You don’t have HRMS. but believe Financial would be in place like GL,AP,AR,FA,Cash Mgt etc.

    You can use Prepayment invoice in AP to handle this.

    Prepayment is an advance, actual invoices provided by employees from time to time will be matched to the prepayment invoice.

    Any balance from employee to company can be handled using the new Refund Invoice in AP.

    Under This situation,What u need to do is

    1.setup the employee as supplier
    2.raise prepayment invoice against supplier created in step1
    3.when employee submits receipt, create a standard invoice and match it to the prepayment invoice

    Example –

    Advance paid is $2000
    First Receipt – $200
    Advance outstanding – $1800

    Do the same till all prepayment is adjusted, at the end if you owe the employee, create another standard invoice and payup,
    if employee owes to the company, create a refund invoice and a negative payment.

    Make sense…

    2. Leasing the property

    I am not very sure, how best we can handle in Finance, I know There is seperate module, which take care of such kind of leasing need.

    Property consists of the land, sections, and parcels, and the buildings, floors, and offices that you are managing with Oracle Property Manager,altogether a different product, which is tightly integrated with AR,FA,GL

    In AR, we can handle by two ways:

    1. If you have customer, use a contract short of invoice( invoice should be raised everymonth or any date in month) at regular interval.
    Receive the money , from Customer and thus it make revenue line in your system.

    2. Second Options
    create a Receiaable activity and create a MISC RECEIPT. This is yet another way you can handle.

    My exsiting customer who line of business is Hospital, they lease there car parking, cafeteria,small Clinc, labs to some third party vendors, and still they requires to recognize revenue.

    Couple of this, if you provide, i will help in greater extend.

    1. what module you have.
    2. what is business senarios for these two cases.

    Hope this would be trigger you thought process.


  3. Patrick Gresham Says:

    In response to the loans, you can either setup installments or recurring invoices in AR. You can then reduce the balance on those Receivables via an adjustment API or reconciliation with Cash Management. Although the Payments are not exactly coming from a bank, you could trick the system by creating a similar batch of the Payroll deductions via CM to be treated as a Quick Cash batch or automatic receipt in AR.

  4. Sanjit Anand Says:

    thanks patrick,

    Sharing some thoughts

  5. s.gopala krishnan Says:

    i need cash for to start any business so please give some instructions to start business for money needs

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