Accounting For AR AP Transactions

Accounting for AR Transactions
This essay describes 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
AutoInvoice clearing (suspense) accounts using the information
specified in your AutoAccounting structure.
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, Receivables

creates the following journal entry:
In the first period of Rule:
DR Unbilled Receivables
CR Revenue
In all periods of Rule, for the portion that is recognized:
DR Receivables
CR Unbilled Receivables
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
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. See: Crediting Transactions.
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 AutoAccounting to
determine the Freight, Receivables, Revenue, and Tax accounts.
Receivables uses the account information for on-account credits that
you specified in your AutoAccounting structure to create your journal
entries.
Receivables lets you update accounting information for your credit

memo after it has posted to your general ledger. Receivables keeps
the original accounting information as an audit trail while it creates an
offsetting entry and the new entry.
Commitments
When you enter a deposit, Receivables creates the following journal

entry:
DR Receivables (Deposit)
CR Unearned Revenue
When you enter an invoice against this deposit, Receivables creates
the following journal entries:
DR Receivables (Invoice)
CR Revenue
DR Unearned Revenue
When you apply an invoice to a deposit, Receivables creates a

receivable adjustment against the invoice. Receivables uses the
account information you specified in your AutoAccounting structure to
create these entries.
When cash is received against this deposit, Receivables creates the

following journal entry:
DR Cash
CR Receivables (Deposit)
When you enter a guarantee, Receivables creates the following journal

entry:
DR Unbilled Receivables
CR Unearned Revenue
When you enter an invoice against this guarantee, Receivables creates

the following journal entry:
CR Revenue
DR Unearned Revenue
CR Unbilled Receivables
When you apply an invoice to a guarantee, Receivables creates a

receivable adjustment against the guarantee. Receivables uses the
account information you specified in your AutoAccounting structure to
create these entries.
When cash is received against this guarantee, Receivables creates the

DR Cash
Receipts
When you enter a receipt and fully apply this receipt to an invoice,
DR Cash
CR Receivables
When you enter an unapplied receipt, Receivables creates the

DR Cash
CR Unapplied
When you enter an unidentified receipt, Receivables creates the

DR Cash
CR Unidentified
When you enter an on-account receipt, Receivables creates the

DR Cash
CR On-Account
When your receipt includes a discount, Receivables creates the

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

Activity.
When you enter a receipt and combine it with a positive adjustment,

DR Cash
CR Write-Off
When you enter a receipt and combine it with a Chargeback,

DR Cash
DR Receivables (Chargeback)
DR Chargeback
CR Receivables (Chargeback)
You set up a Chargeback account when defining your Receivables

Activity.
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 creates 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,

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
DR Cash
DR Bank Charges
CR Short-Term Debt
On the maturity date, Receivables reverses the short term liability and
DR Short-Term Debt
CR Factor
Adjustments
When you enter a negative adjustment against an invoice, Receivables
DR Write-Off
When you enter a positive adjustment against an invoice, Receivables

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)
DR Receivables
CR Finance Charges
On-Account Credits
When you enter an on-account credit in the Applications window,

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 uses the Freight, Receivable, Revenue, and Tax accounts

that you specified in your AutoAccounting 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)

Accounting for AP
Invoice journal entries, debit the expense or other account entered

on an invoice distribution line, and credit the liability account
nominated on the invoice.
Payment journal entries, debit the liability account and credit the
cash account of the bank account used to pay and invoice.
Example 1 - Reconciling a Functional Currency Payment

You enter an invoice for 100 USD, approve, pay, and post the invoice.
Below are the accounting entries created during each activity.
Activity Accounting Entries
Enter invoice for 100 USD DR Expense 100 USD
CR AP Liability 100 USD
Pay invoice, taking 5 USD DR AP Liability 100 USD
discount CR Discount 5 USD
CR Cash Clearing 95
USD
Reconcile payment with bank DR Cash Clearing 95
statement, including bank USD
charges of 2 USD DR Bank Charges 2
USD
CR Cash 97 USD
Example 2 - Reconciling a Foreign Currency Payment

You enter an invoice for 100 French francs (FF) and approve the
invoice with a Corporate exchange rate. The Corporate exchange rate
on the date you enter the invoice is 4:1. When you transfer the invoice
to General Ledger, Payables transfers accounting information in both
your foreign currency (100 FF) and your functional currency (25 USD)
and Journal Import creates a journal entry in your functional currency.
When you pay the invoice, the exchange rate has increased to 5:1,
representing a gain in your functional currency of 4 USD. You transfer
your payment information to General Ledger and Journal Import
creates a journal entry to record the invoice payment along with the
realized gain.
When you reconcile the payment, the exchange rate has increased
again, to 6:1, representing an additional gain in your functional
currency of 2.67 USD. You transfer your payment information to Oracle
General Ledger and Journal Import creates a journal entry to record the
reconciled payment along with the realized gain.
Note: This example assumes that you transfer data from Payables to
General Ledger after each activity.
Activity Accounting Entries
Enter invoice for 100 FF DR Expense 100 FF (25 USD)
(exchange rate 4 FF = 1 USD) CR AP Liability 100 FF (25 USD)
Pay invoice, taking 20 FF DR AP Liability 100 FF (25 USD)
discount CR Cash Clearing 80 FF (16 USD)
(exchange rate 5 FF = 1 USD) CR Discount 20 FF (5 USD)
CR Exchange Rate Gain 0 FF (4
USD)
Reconcile payment with bank DR Cash Clearing 80 FF (16 USD)
statement, including bank DR Bank Charges 6 FF (1 USD)
charges of 6 FF CR Cash 86 FF (14.33 USD)
(exchange rate 6 FF = 1 USD) CR Exchange Rate Gain 0 FF (2.67
USD)

Accounting For AR AP Transactions

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Accounting for AR Transactions

Receivables creates default accounts for revenue, receivable, freight,

When you enter a regular invoice through the Transactions window,

If you enter an invoice with a Bill in Arrears invoicing rule, Receivables

In the first period of Rule:

In all periods of Rule, for the portion that is recognized:

If you enter an invoice with a Bill in Advance invoicing rule,

In the first period of the rule:

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

When you credit an invoice, debit memo, or chargeback through the

When you credit a commitment, Receivables creates the following

When you enter a credit memo against an installment, Receivables lets

Receivables lets you update accounting information for your credit

When you enter a deposit, Receivables creates the following journal

When you apply an invoice to a deposit, Receivables creates a

When cash is received against this deposit, Receivables creates the

When you enter a guarantee, Receivables creates the following journal

When you enter an invoice against this guarantee, Receivables creates

When you apply an invoice to a guarantee, Receivables creates a

When cash is received against this guarantee, Receivables creates the

When you enter an unapplied receipt, Receivables creates the

When you enter an unidentified receipt, Receivables creates the

When you enter an on-account receipt, Receivables creates the

When your receipt includes a discount, Receivables creates the

Receivables uses the default Cash, Unapplied, Unidentified, On-

When you enter a receipt and combine it with an on-account credit

When you enter a receipt and combine it with a negative adjustment,

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

When you enter a receipt and combine it with a positive adjustment,

When you enter a receipt and combine it with a Chargeback,

You set up a Chargeback account when defining your Receivables

When you create a receipt that requires remittance to your bank,

If you remit your receipt using the factoring remittance method,

When you clear the receipt, Receivables creates a short-term liability

When you enter a positive adjustment against an invoice, Receivables

When you enter a debit memo in the Transactions window, Receivables

When you enter an on-account credit in the Applications window,

Receivables uses the Freight, Receivable, Revenue, and Tax accounts

Once the on-account credit is applied to an invoice, the following

DR Receivables (On-account Credit)

Invoice journal entries, debit the expense or other account entered

Example 1 - Reconciling a Functional Currency Payment

Example 2 - Reconciling a Foreign Currency Payment

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