Accounting Entries in Oracle Receivables

Accounting for Transactions in Receivables

The accounting entries created when you enter transactions in Receivables using the Accrual method of accounting.

Receivables creates default accounts for revenue, receivable, freight, tax, unearned revenue, unbilled receivable, finance charges, and Auto Invoice clearing (suspense) accounts using the information specified in your Auto Accounting structure.

Note: This section does not include examples of accounting for tax on discounts, adjustments, miscellaneous receipts, and cash applications.

Invoices: When you enter a regular invoice through the Transactions window, Receivables creates the following journal entry:

DR Receivables

CR Revenue

CR Tax (if you charge tax)

CR Freight (if you charge freight)

If you enter an invoice with a Bill in Arrears invoicing rule with a three month fixed duration accounting rule, Receivables creates the following journal entries:

In the first period of the rule:

DR Unbilled Receivables

CR Revenue

In the second period of the rule:

DR Unbilled Receivables

CR Revenue

In the third and final period of the rule:

DR Unbilled Receivables

CR Revenue

DR Receivables

CR Unbilled Receivables

CR Tax (if you charge tax)

CR Freight (if you charge freight)

If you enter an invoice with a Bill in Advance invoicing rule, Receivables creates the following journal entries:

In the first period of the rule:

DR Receivables

CR Unearned Revenue

CR Tax (if you charge tax)

CR Freight (if you charge freight)

DR Unearned Revenue

CR Revenue

In all periods of the rule for the portion that is recognized.

DR Unearned Revenue

CR Revenue

Credit Memos: When you credit an invoice, debit memo, or chargeback through the Credit Transactions window, Receivables creates the following journal entry:

DR Revenue

DR Tax (if you credit tax)

DR Freight (if you credit freight)

CR Receivables (Credit Memo)

DR Receivables (Credit Memo)

CR Receivables (Invoice)

When you credit a commitment, Receivables creates the following journal entries:

DR Revenue

CR Receivables

When you enter a credit memo against an installment, Receivables lets you choose between the following methods: LIFO, FIFO, and Prorate. When you enter a credit memo against an invoice with invoicing and accounting rules, Receivables lets you choose between the following methods: LIFO, Prorate, and Unit.

If the profile option AR: Use Invoice Accounting for Credit Memos is set to Yes, Receivables credits the accounts of the original transaction. If this profile option is set to No, Receivables uses Auto Accounting to determine the Freight, Receivables, Revenue, and Tax accounts. Receivables use the account information for on-account credits that you specified in your Auto Accounting structure to create your journal entries.

Receivable lets you update accounting information for your credit memo after it has posted to your general ledger. Receivable keeps the original accounting information as an audit trail while it creates an offsetting entry and the new entry.

Commitments:

Deposits: When you enter a deposit, Receivables creates the following journal entry:

DR Receivables (Deposit)

CR Offset Account

Use the AR: Deposit Offset Account Source profile option to determine how Receivables derives the Offset Account to credit for this deposit.

When you enter an invoice against this deposit, Receivables creates the following journal entries:

DR Receivables (Invoice)

CR Revenue

CR Tax (if you charge tax)

CR Freight (if you charge freight)

DR Offset Account (such as Unearned Revenue)

CR Receivables (Invoice)

When you apply an invoice to a deposit, Receivables creates a receivable adjustment against the invoice. Receivable uses the account information that you specified in your Auto Accounting structure to create these entries.

When cash is received against this deposit, Receivables creates the following journal entry:

DR Cash

CR Receivables (Deposit)

Guarantees: When you enter a guarantee, Receivables creates the following journal entry:

DR Receivables

CR Revenue

Receivable uses the Receivable Account and Revenue Account fields on this guarantee’s transaction type to obtain the accounting flexfields for the Unbilled Receivables and Unearned Revenue accounts, respectively.

When you enter an invoice against this guarantee, Receivables creates the following journal entry:

DR Receivables (Invoice)

CR Revenue

CR Tax (if you charge tax)

CR Freight (if you charge freight)

DR Revenue

CR Receivables

When you apply an invoice to a guarantee, Receivables creates a receivable adjustment against the guarantee. Receivable uses the account information you specified in your Auto Accounting structure to create these entries.

When cash is received against this guarantee, Receivables creates the following journal entry:

DR Cash

CR Receivables (Invoice)

Receipts: When you enter a receipt, Receivables creates the following journal entries:

DR Cash

CR Receivables

When you fully apply a receipt to an invoice, Receivables creates the following journal entry:

DR Cash

DR Unapplied Cash

CR Unapplied Cash

CR Receivables

Note: These examples assume that the receipt has a Remittance Method of No Remittance and a Clearance Method of Directly.

When you enter an unidentified receipt, Receivables creates the following journal entry:

DR Cash

CR Unidentified

When you enter an on-account receipt, Receivables creates the following journal entry:

DR Cash

CR Unapplied

DR Unapplied

CR On-Account

When your receipt includes a discount, Receivables creates the following journal entry:

DR Receivables

CR Revenue

DR Cash

CR Receivables

DR Earned/Unearned Discount

CR Receivables

Receivables uses the default Cash, Unapplied, Unidentified, On-Account, Unearned, and Earned accounts that you specified in the Remittance Banks window for this receipt class.

When you enter a receipt and combine it with an on-account credit (which increases the balance of the receipt), Receivables creates the following journal entry:

DR Cash

CR Unapplied Cash

To close the receivable on the credit memo and increase the unapplied cash balance, Receivables creates the following journal entry:

DR Receivables

CR Unapplied Cash

When you enter a receipt and combine it with a negative adjustment, Receivables creates the following journal entries:

DR Cash

CR Receivables (Invoice)

DR Write-Off

CR Receivables (Invoice)

You set up a Write-Off account when defining your Receivables Activity.

When you enter a receipt and combine it with a positive adjustment, Receivables creates the following journal entries:

DR Cash

CR Receivables (Invoice)

DR Receivables (Invoice)

CR Write-Off

When you write off the unapplied amount on a receipt, Receivables creates the following journal entries:

DR Unapplied Cash

CR Write-off

When you enter a receipt and combine it with a Chargeback, Receivables creates the following journal entries:

DR Cash

CR Receivables (Invoice)

DR Receivables (Chargeback)

CR Chargeback (Activity)

DR Chargeback (Activity)

CR Receivables (Invoice)

You set up a Chargeback account when defining your Receivables Activity.

To move funds between receipts, you can apply one receipt to another open receipt (also called netting receipts). For example, you can move funds from Receipt 1 to Receipt 2 by opening Receipt 2 in the Applications window, and selecting Receipt 1 in the ApplyTo field.

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Following the example above, Receivables creates these journal entries:

DR Unapplied Cash (Receipt 1)

CR Netting (Receipt 1)

DR Netting (Receipt 2)

CR Unapplied Cash (Receipt 2)

After this receipt-to-receipt application completes, Receipt 2 gains additional funds that you can then apply to a debit item.

You set up a Netting account when defining your Receivables Activity.

Important: When netting receipts, both receipts must be in the same currency.

If both receipts are in a foreign currency, however, then you could have an exchange gain or loss when you net the receipts. The exchange gain or loss is realized on the main receipt (Receipt 2) at the time of receipt application (netting).

If you later adjust the exchange rate on Receipt 1 or 2, then Receivables:

• Rolls back all accounting for both receipts.

• Re-creates the accounting, including the netting application, using the adjusted exchange rate.

• Recalculates the exchange gain or loss on whichever receipt is open in the Applications window.

Remittances:

When you create a receipt that requires remittance to your bank, Receivables debits the Confirmation account instead of Cash. An example of a receipt requiring remittance would be a check before it was cashed. Receivables create the following journal entry when you enter such a receipt:

DR Confirmation

CR Receivables

You can then remit the receipt to your remittance bank using one of the two remittance methods: Standard or Factoring. If you remit your receipt using the standard method of remittance, Receivables creates the following journal entry:

DR Remittance

CR Confirmation

When you clear the receipt, Receivables creates the following journal entry:

DR Cash

DR Bank Charges

CR Remittance

If you remit your receipt using the factoring remittance method, Receivables creates the following journal entry:

DR Factor

CR Confirmation

When you clear the receipt, Receivables creates a short-term liability for receipts that mature at a future date. The factoring process let you receive cash before the maturity date, and assumes that you are liable for the receipt amount until the customer pays the balance on the maturity date. When you receive payment, Receivables creates the following journal entry:

DR Cash

DR Bank Charges

CR Short-Term Debt

On the maturity date, Receivables reverses the short term liability and creates the following journal entry:

DR Short-Term Debt

CR Factor

Adjustments:

When you enter a negative adjustment against an invoice, Receivables creates the following journal entry:

DR Write-Off

CR Receivables (Invoice)

When you enter a positive adjustment against an invoice, Receivables creates the following journal entry:

DR Receivables (Invoice)

CR Write-Off

Debit Memos:

When you enter a debit memo in the Transactions window, Receivables creates the following journal entries:

DR Receivables

CR Revenue (if you enter line amounts)

CR Tax (if you charge tax)

CR Freight (if you charge freight)

DR Receivables

CR Finance Charges

On-Account Credits:

When you enter an on-account credit in the Applications window, Receivables creates the following journal entry:

DR Revenue (if you credit line amounts)

DR Tax (if you credit tax)

DR Freight (if you credit freight)

CR Receivables (On-account Credit)

Receivables use the Freight, Receivable, Revenue, and Tax accounts that you specified in your Auto Accounting structure to create these entries.

Once the on-account credit is applied to an invoice, the following journal entry is created:

DR Receivables (On-account Credit)

CR Receivables (Invoice)

Credit Card Refunds:

Creating a credit card refund

When you unapply a receipt and reapply the receipt to a credit card refund, Receivables creates these journal entries:

DR Receivables

CR Unapplied

DR Unapplied

CR Receivable Activity (Clearing Account)

After you apply the receipt to a credit card refund, Receivables automatically creates a negative miscellaneous receipt in the amount of the refund and creates this journal entry:

DR Receivable Activity (Clearing Account)

CR Cash

Reversing a credit card refund:

When you reverse a credit card refund, either by reversing the negative miscellaneous receipt or by unapplying the credit card refund activity, Receivables creates this journal entry for the negative miscellaneous receipt:

DR Cash

CR Receivable Activity (Clearing Account)

And Receivables creates this journal entry for the original payment receipt:

DR Receivables Activity (Clearing Account)

CR Unapplied

Claims:

Creating an invoice related claim

When you record an invoice related short payment as a claim in the Applications window, Receivables creates the standard accounting entries for the invoice and for the receipt application. There are no additional accounting entries for the invoice related claim.

Creating a non-invoice related claim

When you record a non-invoice related short payment or over payment as a claim investigation application in the Applications window, Receivables creates these journal entries:

DR Claim Investigation

CR Unapplied Cash

Receivables derive the accounting flexfield for the claim investigation application from the receivable activity that you assigned in the Applications window.