Friday

All about Set of Books

You need to define at least one set of books before you can implement and use Receivables. A set of books includes an accounting calendar, a functional currency, and an Accounting Flexfield structure.

Complete the following steps:

1- Define your Accounting Flexfield
2- Define your Calendar Period Types
3- Define your Calendar Periods
4- Define your Currencies
5- Define your Accounting Flexfield Combinations (Optional)
6- Define your Set of Books
7- Assign your Set of Books to a Responsibility
8- Define your Daily Conversion Rate Types
9- Define your Daily Rates (Optional)

You specify which set of books your Receivables installation uses in the System Options window.
Additional Information: If you use the Oracle Applications Multiple Organization Support feature, you can use multiple sets of books for one Receivables installation.

A set of books determines the functional currency, account structure, and accounting calendar for each company or group of companies. If you need to report on your account balances in multiple currencies, you should set up one additional set of books for each reporting currency. Your primary set of books should use your functional currency. Each reporting set of books should use one of your reporting currencies.
When you define a set of books, you can also choose to enable budgetary control for the set of books. If you choose this option, encumbrances will be created automatically for your transactions in General Ledger, Oracle Purchasing and Oracle Payables. Enabling budgetary control is the first step in setting up funds checking.
When defining a set of books, you can also choose to enable average balance processing. If you choose this option, General Ledger will track and maintain average and end-of-day balances.

[Attention: Before you can use a newly defined set of books, your system administrator must associate the set of books with one or more responsibilities. This is done using the profile option GL Set of Books Name. Your responsibility determines which set of books you use.]

Prerequisites
Define your period types.
Define your accounting calendar.
Define a transaction calendar if you plan to use average balance processing.
Define or enable your functional currency.
If you use Multiple Reporting Currencies, define your reporting currencies before defining your reporting sets of books.
Define your account structure.
If you want to create Retained Earnings, Suspense, Translation Adjustment, Intercompany, and Reserve for Encumbrance accounts as you enter them for the set of books, allow dynamic insertion for your account segments.

Points:
1. The functional currency is also known as the base currency, local currency, or primary currency.
2. General Ledger uses the calendar periods that have the period type you specify for journal entry, budgeting, and reporting with this set of books. General Ledger will report an error if there are any gaps between periods in your accounting calendar or if any of your non-adjusting periods overlap.
3. General Ledger automatically assigns a status of Future Entry to accounting periods following the latest open period in your calendar, based on the number of future enterable periods you define here. If you change the number of future enterable periods for your set of books, General Ledger does not change additional period(s) to the Future Enterable status until you open a new period using the Open and Close Periods window. You can enter journal batches for a future enterable period, but you cannot post the batches until you open the period. Minimize the number of future enterable periods to prevent users from accidentally entering journal entries in an incorrect period.

Budgetary Control
Using budgetary control requires funds reservation for any transactions you enter in General Ledger, Oracle Purchasing or Oracle Payables. You can only post journal entries that pass funds reservation. If you enable this option, you must enter a reserve for encumbrance account for the set of books.
If you do not enable budgetary control, you cannot perform funds check or reservation in General Ledger, Oracle Purchasing or Oracle Payables.
Budgetary controls can be enabled or disabled even after a set of books has been defined and transactions entered.
Receivables does not use the Enable Budgetary Control or Require Budget Journals options.

Set of Books Standard Options

Each set of books has a number of flags that indicate the accounting practices you want to follow for that set of books.
Allow Suspense Posting: Allows users to post out-of-balance journal entries (debits do not equal credits), and automatically balance those journal entries by posting the offset against a suspense account. If you enable this option, you must enter a suspense account for the set of books. If you do not allow suspense posting, you can only post journal entries that balance.

Balance Intercompany Journals: Allows users to post out-of-balance intercompany journal entries (debits do not equal credits for a particular company or balancing entity), and automatically balance intercompany journals against an intercompany account you specify. If you enable this option, you must enter an intercompany account for the set of books.
If you do not choose to balance intercompany journals, you can only post intercompany journals that balance by balancing segment (usually the company segment).
Receivables does not use the Balance Intercompany Journals option.

Enable Average Balances: Allows you to use the set of books for average balance processing. Once average balance processing is enabled, General Ledger automatically stores the aggregate balances that are used to calculate average and end-of-day balances.

Enable Journal Approval: Allows you to use General Ledger's Journal Approval feature in your set of books. When Journal Approval is enabled and a journal entry's journal source requires approval, the journal must be approved by the appropriate level of management before any further action can be taken. If Journal Approval is not enabled, approval is not required, even if the journal source requires approval.
[When you mark the Enable Journal Approval check box, General Ledger will ask whether you want to require journal approval for the Manual journal source. Choose Yes or No. Note that this option applies only to manual journals with actual amounts. To require journal approval for budget or encumbrance journals, you must set the appropriate journal source to require journal approval.]

Enable Journal Entry Tax: Allows you to manually enter taxable journal entries in General Ledger. When you enable this feature for a set of books, the system will automatically calculate associated tax amounts and generate tax journal lines.


Set of Books Accounts
When you define your set of books, you always specify a Retained Earnings account. You also might set up other accounts depending upon the functionality you plan to use.

Retained Earnings account: When you open the first period of a fiscal year, General Ledger posts the net balance of all income and expense accounts from the prior year against your retained earnings account. If you have multiple companies or balancing entities within a set of books, General Ledger automatically creates a retained earnings account for each company or balancing entity.

Suspense account: If you choose to allow suspense posting of out-of-balance journal entries, General Ledger automatically posts the difference against this account. If you have multiple companies or balancing entities within a set of books, General Ledger automatically creates a suspense account for each balancing entity.
You can also define additional suspense accounts to balance journal entries from specific sources and categories using the Suspense Accounts window.
Note that if you update the suspense account in the Set of Books window, the default suspense account is updated in the Suspense Accounts window. Likewise, if you update the default account in the Suspense Accounts window, the account in the Set of Books window is updated.

Cumulative Translation Adjustment account: This account is necessary if you choose to translate your functional currency balances into another currency for reporting. General Ledger automatically posts any net adjustments as a result of currency translation to this account in accordance with SFAS 52 (U.S.). If you have multiple companies or balancing entities within a set of books, General Ledger automatically creates a translation adjustment account for each company or balancing entity.
Set the account type of your Cumulative Translation Adjustment account to Owner's Equity to create a translation adjustment on your balance sheet. Set the account type of this account to Revenue or Expense to create a translation gain/loss on your income statement.

Intercompany account: If you choose to automatically balance intercompany journals, General Ledger ensures that all journal entries balance (debits equal credits) within a balancing entity within your set of books. If a journal entry is out-of-balance for a particular balancing entity, General Ledger automatically posts any difference against the appropriate intercompany account. If you have multiple companies or balancing entities within a set of books, General Ledger automatically creates an intercompany account for each balancing entity.
You can define additional intercompany accounts that are used to balance journal entries from specific sources and categories using the Intercompany Accounts window.
Note that if you update the intercompany account in the Set of Books window, both debit and credit default accounts are updated in the Intercompany Accounts window. Likewise, if you update the debit default account in the Intercompany Accounts window, the account in the Set of Books window is updated. However, if you update the credit account in the Intercompany Accounts window, the account in the Set of Books window is not updated.

Reserve for Encumbrance account: If you enter an out-of-balance encumbrance entry, General Ledger automatically posts the difference against the account you specify here. If you have multiple companies or balancing entities within a set of books, General Ledger automatically creates a Reserve for Encumbrance account for each balancing entity.

Net Income account: General Ledger uses this account to capture the net activity of all revenue and expense accounts when calculating the average balance for retained earnings.


Designing Your Accounting Flexfield

Use Accounting Flexfields to design the structure of your General Ledger accounts. By providing flexible account structures, Accounting Flexfields enable you to take advantage of General Ledger flexible tools for recording and reporting accounting information. You can design an account structure that best meets the needs of your organization.
Accounting Flexfields let you:
1- Define a flexible account structure that accommodates your current organization, and anticipates the way you will run your organization in the future.
2- Define an account structure large enough to reflect the important aspects of your organization, but small enough so that it is manageable and meaningful.
3- Define an account structure that accommodates and properly classifies information from your other financial information sources.
4- Create an account structure that provides a logical ordering of values by grouping related accounts in the same range of values. Additionally, create an account structure that allows for expansion and development of new categories.

Major Features

Account Structure Define the Accounting Flexfield to create accounts that fit the specific needs of your organization. You choose the number of segments, the length of each segment, and the name and order of each segment in your account code structure.

Flexible Organizational Structures General Ledger let you quickly reorganize your company or agency. Not only can you change reporting structures, but you can also maintain the old structure for comparative purposes.
For example, if your company reassigns a product to a different division, you can easily produce reports for the division.
For example, if your company reassigns a product to a different division, you can easily produce reports for the division. If your agency reassigns a fund to a different fund group, you can easily produce reports on the revised fund group.

Multiple Rollups You can review your summary accounting information from multiple perspectives.
For example, you may want a summary account that shows the total of all product sales for each division. You can also summarize the same set of detail accounts in a different way and see instead, the total sales of personal computer products across all divisions.
For example, you may want a summary account that shows the total of all product sales for each division. You may also want to summarize the same set of detail accounts in a different way and see instead, the total sales of personal computer products across all divisions. If you are a governmental or not-for-profit organization, you may want to see all revenues and expenses within a fund, or you might want to see all revenues and expenses by grant, regardless of fund.

Financial Statement Generator You can build your custom reports without programming by using your Oracle General Ledger application Financial Statement Generator. You can define reports online with complete control over the rows, columns and contents of your report.

Account Ranges Throughout General Ledger, you can use ranges to quickly specify a group of accounts. With a well-planned account structure, you can use ranges to group accounts in reports, to specify validation rules and to define summary accounts and reporting hierarchies.

Determining Your Account Needs

To determine the account structure that best suits your organization:
1. Examine your organization structure to identify how you measure performance and profitability.
You may even want multiple organizational structures to allow views of the organization from multiple perspectives. For example, if you have both regional and country managers, you can set up one segment which is based on "Location". You can use summary accounts to roll up managers from each location to their respective country managers.
2. Visualize each segment of your account as a unit dimension of your business. Combine units that are based on similar dimensions to avoid using multiple segments that measure the same dimension.
3. Identify the functions, products, programs, funding sources, regions, or any other business dimensions you want to track.
4. Determine your reporting needs. Consider the following questions as you begin defining your account structure:
-What information will better help you manage your organization?
-What different ways can you look at your operations?
-What kinds of reports do managers ask for? Product or service managers may want to see a gross margin report for each of their products or services. Managers responsible for a particular functional area, such as the Vice President of Research and Development, might want to see an employee expense report for the entire division.
-What reports you now prepare with some difficulty?
-What reports do need that other financial information systems, such as a revenue tracking system, provide?
-What statistical reporting, such as headcount by division, or unit sales by product, do you want to perform?
-Do you need to perform project reporting?
-At what levels of detail do you produce reports?


Designing Your Account Segments
The account structure helps you categorize your accounting information as you record it. You create an account structure by defining Accounting Flexfield segments that comprise the account. You should design your accounts to determine the number and characteristics of the segments you need.
Here are some common entities that many organizations define with separate account segments:
Company: A segment that indicates legal entities for commercial, for-profit organizations.
Fund: A segment that indicates a fiscal and accounting entity with a self-balancing set of accounts for governmental or not-for-profit organizations.
Cost Center or Department: A segment that indicates functional areas of your business or agency, such as Accounting, Facilities, Shipping, and so on.
Account: A segment that indicates your "natural" account, such as Cash, Accounts Payable, or Salary Expense.
Product: A segment that indicates products, such as disk drives, printer cables or magnetic tapes manufactured by a commercial, for-profit organization.
Program: A segment that indicates programs, such as, for a university, scholarship program, endowment program, or annual giving program.
Project: A segment that indicates projects such as work orders, contracts, grants, or other entities for which you want to track revenues and expenses.
District: A segment that indicates geographical locations, such as Northern California, Central Florida or Western New York.
Distribution Channel: A segment that indicates the method by which your product reaches your customer, such as Wholesale, Retail, OEM, and so on.

To determine your account segment needs:
1. Determine the segment that captures the natural account, such as assets, liabilities, expenses, and so on.
2. Define a separate Accounting Flexfield segment for each dimension of your organization on which you want to report, such as regions, products, services, programs, and projects.
For example, you may want to record and report on expenses by project. To do this, your account must categorize expenses by project. Define your account to include a "Project" segment. By doing this, you automatically categorize all your accounting information by project as you enter it, and you can easily report on project information.
3. Group similar business dimensions into one segment. This allows a more simplified and flexible account structure
For example, you only need one segment to record and report on both districts and regions, as illustrated below. Because regions are simply groups of districts, you can easily create regions within your district segment by defining a parent for each region with the relevant districts as children. Use these parents when defining summary accounts to maintain account balances and reporting hierarchies to perform regional reporting.
This method accommodates reorganizations. Using the previous example, if you want to move district 4 into the Western region, you simply redefine your parents so that district 4 rolls up into the Western region. You can even define new parents for your new organizational structure and retain your old organizational structure for comparative purposes.
4. Consider information you track in other accounting information systems. You may not need to capture certain organizational dimensions if another system already records and reports on this information.
For example, if you need to report on sales by product and your sales tracking system already provides this information, General Ledger account structure does not need to categorize information by product. If you are a government or not-for-profit agency using a labor costing system which captures work breakdown structure for reimbursable billing, you may not need to capture this in your account structure.
5. Identify segments that you might need in the future. Consider future expansion and possible changes in your organization and reporting needs. For example, you may not need a region segment now, but eventually you plan to expand you organization to cover multiple regions.
Remember, it is easier to build flexibility into your account structure during setup than to try to change your account structure in the future.
6. Determine the length of each segment. Consider the structure of values you plan to maintain within the segment. For example, you might use a 3 character segment to capture project information, and classify your projects so that all Administrative projects are in the 100 to 199 range, all the Facilities projects are in the 200 to 299 range, and so on. If you develop more than 10 classifications of projects, you would run out of values within this segment. You might want to add an extra character to the size of each segment to anticipate future needs.
7. If you want to perform multi-company or fund accounting within a set of books, choose a balancing segment. You must define one and only one balancing segment in your account. General Ledger automatically balances all journal entries for each value of this balancing segment and performs any necessary intercompany or interfund posting to the intercompany or interfund account you specify when you define your set of books.
8. If you plan to maintain and consolidate multiple set of books, think of common elements among your separate account structures. Consider which segments can share value sets, or where opportunities for rolling up segments from a subsidiary set of books into a parent set of books exist.
9. Plan your value sets. To reduce maintenance and to maintain consistency between sets of books, you can use value sets when defining multiple charts of accounts. Using the same value sets allow two different sets of books to reference the same segment values and descriptions for a specified segment. For example, the values in your natural account segment, such as Cash, Accounts Payable, and so on, may be equally applicable to each of your sets of books. Ideally, when you set up a new set of books you should consider how you will map you new Accounting Flexfield segments for consolidation. When a common natural account segment is used between sets of books, it is easier to map account balances from your subsidiary sets of books to a consolidating entity.


Defining Your Account StructureFollow these guidelines, in addition to generic flexfield definition instructions, when defining your Accounting Flexfield structure.
Warning: The Accounting Flexfield has several special requirements and limitations for its definition. Follow these recommendations carefully, since an incorrectly-defined Accounting Flexfield will adversely affect your chart of accounts, and application features such as Mass Allocations.


To define your account structure:

1. Define your Accounting Flexfield value sets using the Define Value Set form. General Ledger does not support the use of predefined value sets with the Accounting Flexfield.
You must specify a format type of Char for the segment value format type. If you want to use numbers, choose Char and allow alphanumerics. The Accounting Flexfield does not support format types other than Char.
Attention: The Accounting Flexfield does not support value set format types other than Char (the Accounting Flexfield uses special "T" values for summary templates).
We recommend that you set Right-justify Zero-fill Numbers to Yes for value sets you use with the Accounting Flexfield.
Value sets for the Accounting Flexfield must be independent, table, or dependent-type value sets. Do not use value sets with a validation type of None, Pair, or Special for the Accounting Flexfield.
Do not specify a hidden ID column for any value set used with the Accounting Flexfield.
You should not use a WHERE clause and/or ORDER BY clause for a table validated value set you intend to use with the Accounting Flexfield.
We recommend that you allow parent values for segments in your Accounting Flexfield. Parent values are used to create summary accounts and to increase the productivity of General Ledger.
2. Set the Allow Dynamic Inserts option. If you want to allow adding new accounts automatically as you enter them in transactions, including when you define a set of books, set this option set to Yes. To require users to define all accounts manually, set this option to No.
Attention: If you are defining an Accounting Flexfield for Oracle Projects, you must define your segments with the Allow Dynamic Inserts option set to Yes. Refer to the Oracle Projects User's Guide for further suggestions on using the Accounting Flexfield with Oracle Projects.
3. Define your Accounting Flexfield segments. You can define up to 30 segments for your account structure. You must define at least two segments for your account structure, one for the balancing segment and one for the natural account segment (the two required flexfield qualifiers).
When specifying the column you want to use for your Accounting Flexfield segment, do not use any columns other than those named SEGMENT1 through SEGMENT30. Since the names of these columns are embedded in the Oracle Applications products, using other columns may adversely affect your application features such as summarization.
Enter the segment number for this segment. The Accounting Flexfield requires consecutive segment numbers beginning with 1 (such as 1, 2, 3, ...).
Only Oracle General Ledger applications use the Indexed field for the Optimization feature. Enter Yes if you want the database column in the combinations table used to store this key segment to have a single-column index. You should create indexes on segments you expect to have many distinct values (instead of just a few distinct values).
You must enter a value set in the Value Set field for each segment of the Accounting Flexfield. Value sets for the Accounting Flexfield must be independent, table, or dependent-type value sets. Do not use value sets with a validation type of None for the Accounting Flexfield.
You must check the Required check box for each segment.
We recommend that you set the Description Size for each of your Accounting Flexfield segments to 30 or less so that your flexfield pop-up window does not scroll horizontally.
You must check the Display check box for each segment.
The segment you use as a balancing segment must be an independent segment (it cannot use a dependent value set).
4. Define your flexfield qualifiers for your Accounting Flexfield. Oracle Applications use flexfield qualifiers to identify certain segments in your Accounting Flexfield. You specify your flexfield qualifier values in the Qualifiers zone of the Define Key Flexfield Segments form.
If you are using globalization features, you may have additional segment qualifiers, such as "Reconciliation," which are created in post-installation steps. See: Oracle Applications Localizations Post-Install Manual.
5. Define the natural account segment. A natural account segment contains values representing account types, such as cash, accounts receivable, product revenue and salary expense. Enter Yes or No to indicate whether the segment you are defining is your natural account segment. You define only one natural account segment in your account.
6. Define the balancing segment. General Ledger uses your balancing segment to ensure that all journals balance for each value of your balancing segment. General Ledger also use your balancing segment to ensure that entries that impact more than one balancing segment use the appropriate intercompany or interfund accounting.
Indicate whether the segment you are defining is a balancing segment. You can define only one balancing segment for an account. The segment you use as a balancing segment must be an independent segment (it cannot use a dependent value set). Most users of General Ledger designate company/organization or fund as their balancing segment.
7. Define the Cost Center segment. Cost centers indicate functional areas of your organization, such as Accounting, Facilities, Shipping, and so on. Enter Yes or No to indicate whether the segment you are defining is a Cost Center segment.
Oracle Assets and Oracle Projects require you to qualify a segment as cost center in your account.
8. Define dependent segments to create context-sensitive segments. Context-sensitive segment values can have one meaning when combined with a particular segment value, and have a different meaning when combined with a different segment value.
You can define more than one dependent segment for an independent segment. You can also define more than one independent segment to have different dependent segments. You cannot, however, define a dependent segment for any segment with validation type other than Independent nor have multiple levels of dependency for the same segment.
9. Define your Accounting Flexfield segment values. Be sure to enter parent, rollup group and level information, and hierarchy details, if appropriate, for your segment values. Be sure you do not assign overlapping ranges of child values to the same parent value. You use rollup groups to create summary accounts.
Decide your segment hierarchy before you create parent and child segment values. You cannot change a child value to a parent at a later time.
10. Enter Accounting Flexfield segment value qualifiers. Segment value qualifiers hold extra information about individual Accounting Flexfield segment values.
11. Define cross-validation rules to control the combinations of values you use to create accounts. Refer to the Designing Your Cross-Validation Rules essay for suggestions on designing your Accounting Flexfield cross-validation rules.
12. Define Flexfield security rules to restrict entry and query access for specific segment values or ranges of segment values by responsibility for accounts. Security rules restrict query access to segment values for Account Inquiries, Funds Available inquiries, and Summary Account Inquiries. When you restrict access, you cannot query any combination that contains a secure value.


Defining Accounting Flexfield Segment Qualifiers

When you define an account segment value, you can identify it as a qualifying segment value. You must enter the segment qualifier information whenever you define values for any value set that is used by an account that uses segment qualifiers.
You can define the following segment value qualifiers for your Accounting Flexfield:
Account Type: Defines the account type for the natural account segment value. You can enter only valid account types.
Budget Entry Allowed: Indicates whether General Ledger should allow detailed budgeting to accounts with this segment value.
Posting Allowed: Indicates whether General Ledger should allow detailed posting to Accounting Flexfields with this segment value.
Other Segment Qualifiers: You may have additional segment qualifiers (such as Reconciliation) if your site uses localizations for your country or region.
General Ledger prevent you from changing these qualifiers for segment values that you already defined, unless you first unfreeze your Accounting Flexfield structure. When you change the Budget Entry or Posting Allowed qualifiers for segment values that you have already defined, you should also make a corresponding change to all accounts that include the value in the account definition.

To set the Account Type segment qualifier:
Enter a valid account type for this segment qualifier. This segment qualifier requires a value for the natural account segment only. Accounts have the same account type as the natural account segment value they include.
The default value for this field is Expense. Accept this value or change it to one of the other valid account types. Enter the type of your proprietary account (Asset, Liability, Owners' Equity, Revenue or Expense) or the type of your budgetary account (Budgetary Dr or Budgetary Cr) your segment value represents. Choose any proprietary balance sheet account type if you are defining a statistical account segment value. If you choose a proprietary income statement account type for a statistical account segment value, your statistical balance will zero-out at the end of the fiscal year.
You can change the Account Type segment qualifier by unfreezing all Accounting Flexfield structures that reference the natural account segment. Changing the account type only affects new accounts created with the reclassified natural account segment; it does not change the account type of existing accounts.

To set the Budget Entry Allowed segment qualifier:
Enter Yes for Budget Entry Allowed to perform detailed budgeting for accounts with this segment value. If you do not allow budget entry for a segment value, you cannot assign accounts with this segment value to budget organizations, and you cannot define budget formulas for those accounts.
If you are defining a parent segment value, you must enter No. You cannot budget amounts to a segment value that references other segment values where detail budgeting is already allowed.

To set the Posting Allowed segment qualifier:
Enter Yes for Posting Allowed to allow detailed posting to accounts with this segment value. If you do not allow posting for a segment value, you cannot use accounts with this segment value when you enter journals, and you cannot use the accounts in recurring journals.
If you are defining a parent segment value, you must enter No. You cannot post amounts to a segment value which references other segment values where detail posting is already allowed.

Defining Hierarchy and Qualifiers Information
You only need to define hierarchy and qualifiers information if you are defining values whose value set will be used with the Accounting Flexfield.
Prerequisites: Define your segment values.

To define hierarchy and qualifiers information:
1. Determine whether this value is a parent value. If so, you can define and move child value ranges for this value, and you can assign this value to a rollup group. If not, you cannot define and move child value ranges for this value, and you cannot assign this value to a rollup group.
2. Enter the name of a rollup group to which you want to assign this flexfield segment value. You can use a rollup group to identify a group of parents for reporting or other application purposes. You can enter a rollup group name only if this flexfield segment value is a parent value and Freeze Rollup Groups in the Key Segments window is set to No. You can enter a range of child values for this flexfield segment value in the Define Child Ranges zone. You create rollup groups using the Rollup Groups window.
3. Enter the level for this value. This can be a description of this value's relative level in your hierarchy structure. This level description is for your purposes only.
4. If you are defining values for a value set used with the Accounting Flexfield, you must define segment qualifier information for each value.


Defining Summary Accounts
General Ledger uses summary templates to create summary accounts, whose balances are the sums of multiple detail accounts. Use summary accounts to perform online summary inquiries, as well as to speed the processing of financial reports, MassAllocations, and recurring journal formulas.
You specify when you want General Ledger to begin maintaining your summary account balances. You can also assign budgetary control options to a summary template for which you want to perform summary level budgetary control.
When you delete a summary template, General Ledger deletes all summary accounts created from that template and their associated balances.
Prerequisites
Define your account segments
Define your rollup groups

To define a new summary account template:
1. Navigate to the Summary Accounts window.
2. Enter a Name for the summary account template.
3. Enter the Template.
4. Enter the Earliest Period for which you want General Ledger to maintain your actual, encumbrance and budget summary account balances. General Ledger maintains summary account balances for this accounting period and for subsequent periods.
5. If you are using budgetary control for your set of books, set the budgetary control options for the summary template.
6. Save your work. General Ledger submits a concurrent request to add the summary accounts, and displays the Status of your summary template.


Planning Your Summary Accounts
A summary account is an account whose balance is the sum of balances from multiple detail accounts. Use summary accounts to perform online summary inquiries, as well as speed the processing of financial reports, MassAllocations, and recurring journal formulas.
To plan your summary accounts:
1. Determine your summary account needs.
2. Plan the summary account structure to meet your needs.
3. Plan the parent segment values and rollup groups you need for your summary accounts.
4. Plan your summary account templates to generate multiple summary accounts.


Determining Your Summary Account NeedsThe first step in defining your summary accounts is to determine your summary account needs. Summary accounts provide you with significant benefits when you produce summary reports and perform allocations.

To determine your summary account needs:
1. Consider the summary information you need for reports. Although you can easily define financial statements that sum a number of accounts together for a given row, you can use summary accounts for faster access to summarized balances.
For example, many of the reports for upper management in your company may include summary level amounts. You may have summary income or revenue statements and balance sheets, a summary overhead expense analysis and many other summary level reports in your management reporting package.
2. Identify the summary balances you need for online inquiries.
For example, you may need "flash" inquiries on the total of all cash balances for your domestic organizations to make daily decisions about investments or foreign currency hedging. You may also want to review the amount of working capital (current assets less current liabilities) for each division or department on a weekly basis.
3. Consider how you want to use summary accounts in formulas and allocations. You can use summary accounts as factors when defining journal formulas and allocations.
Use summary accounts to reference summary balances in a recurring journal formula. For example, to estimate a sales commission accrual based on the total of all product sales for each division, you can use a summary account that totals all product sales in each division.
Use summary accounts to reference summary budget balances in a budget formula. For example, to base the budget for employee benefits in each company on the total of all budgeted employee salaries, use summary accounts that total all employee salaries in each company.
Use summary accounts when entering budgets with budget rules. For example, you can base your budget for the current year's Salary account on a percentage of the prior year's total Overhead expense, a summary account.
Use summary accounts to indicate the total amount you want to allocate when defining your allocation formulas. Also, use summary accounts to help you calculate the allocation ratios to use in your allocation formulas.


Planning the Summary Account Structure
After determining your summary account needs, plan your summary account structure according to how you want to summarize your accounting information.

To determine your summary account structure:
1. Choose ways to summarize your accounting information depending on the structure of your account and your informational needs. Generally, organizations structure their accounts such that each segment represents a particular dimension, or a way of looking at their organization.
Here are some common dimensions and examples of ways you can summarize information within each dimension:
Company: A segment that indicates legal entities. You might summarize companies by major industry, such as Electronics Companies; by regions within a country, such as Eastern Companies; or by country group, such as European Companies.
Cost Center: A segment that indicates functional areas of your business, such as Accounting, Facilities, Shipping, and so on. You might keep track of functional areas at a detailed level, but produce summary reports that group cost centers such as Accounting, Planning & Analysis and Facilities, into one division called Administration.
Account: A segment that indicates your "natural" account, such as Cash, Accounts Payable, or Salary Expense. You will likely summarize your accounts by account type, namely your Assets, Liabilities, Equity, Revenues and Expenses. You might also summarize at a more detailed level, with summary accounts like Current Assets or Long-Term Liabilities.
Product: A segment that indicates products. You might want to summarize products into product groups such as personal computer components, storage devices, and so on.
District: A segment that indicates geographical locations, such as Northern California, Central Florida or Western New York. If you define segments that record data within smaller geographical areas, such as districts, you can easily summarize districts into states, or even into groups of states you can call regions.
2. For any organizational dimension you want to summarize, determine how many summarization levels you want within that dimension.
For example, you can summarize your natural accounts into Assets and Liabilities, or you can summarize at a more detailed level, such as Current Assets, Non-Current Assets, and so on. You can also summarize products into product groups and into larger groups called product categories. Likewise, you can summarize districts into states and then into regions.
You can also summarize at different levels within an organizational dimension. For example, you may decide to group your East Coast offices together, your West Coast offices into another group, and your Midwest offices into a third group. Each of these summary groups can then be included in separate rollup groups namely Eastern States, Western States and Midwestern States. Then, you may decide to combine these three groups into a higher level group, United States offices, and define a rollup group named Total Country Offices. If you have a single Canadian Office, you may decide to designate it as a group in itself and assign it to the rollup group Total Country Offices as well. In this example, your United States offices group is at the same summary level as your Canadian office group, but you have one summary level below the United States level, while you have no summary levels below your Canadian office.
3. To clarify your plans, sketch your summarization levels on paper. Indicate the segment value and description of each of the parents in your sketch. Also write the rollup group name or number and a description of the summary level next to each of your summarization levels. You do not need to include every parent value in a rollup group. You may define some parent values for reporting or formula definition purposes only.
For example, you may decide to group all of your cost centers under the parent value "All Cost Centers." However, if you do not plan to report on your cost centers at a summary level, there is no need to assign these parent values to a rollup group.
You can define multiple summary levels by assigning children that are parents themselves (grandparenting). For example, you can assign cost centers or departments 110, 120 and 130 as the children for cost center or department 100 - Western Region. General Ledger automatically maintains rollup relationships from the summary level to the lowest detail level so that when you transfer a child value from one parent to another, all the values assigned to the child are transferred as well. However, you can only drill down balances from the summary level to the lowest detail level, not to intermediate levels.
4. After considering how you want to summarize within each of your organizational dimensions, think about how you want to combine your summary views across different organizational dimensions. For example, if you summarize departments into divisions and districts into regions, you may wish to reference and report on divisions by region.
You can also combine a particular summary level for one organizational dimension with a different summary level for another organizational dimension. For example, you may wish to reference and report on departments by region.
To decide upon the combinations of summary views across your organizational dimensions, you can lay your summarization level sketches side by side so that you can consider your summarization levels conceptually. The following chart shows how you might roll up your account segments into several levels:
5. Consider whether you want to create these summary relationships with summary accounts, or with reporting hierarchies. You can achieve the benefits of summary reporting with reporting hierarchies instead of summary accounts. A significant benefit of using reporting hierarchies instead of summary accounts is easier reorganizations.
Use reporting hierarchies instead of summary accounts when:
You want to easily reorganize your summary views in the future.
Your primary use for summarization is reporting. You cannot reference reporting hierarchies in formulas, allocations or online.
Use summary accounts instead of reporting hierarchies when:
Your summary relationships are more permanent.
You want to use summary accounts in formulas and allocations, as well as reporting.
You want online inquiry of these summary amounts.
You want faster financial reporting of these summary amounts.
6. To define parents for each of your account segments, organize your account structure so you can use ranges to easily define the children for your parent values.
For example, if you know that all of your administration cost centers are between 100 and 199, you can define the Administration parent as the range of cost center values between 100 and 199.


Planning Parent Values and Rollup Groups
After determining your needs and organizing your summary account structure, define your parent values and your rollup groups.
If you installed the Account Hierarchy Editor, you can use it to create and edit your account hierarchies graphically. You can use the Account Hierarchy Editor to define parent and child segment values, as well as rollup groups.

To determine the parent values and rollup groups you need to define:
1. Plan your parent segment values. When determining the values of parents for each account segment, consider the structure of values within that segment. If your segment values are logically organized and the child values for your parent are all in a contiguous range, a logical value for the parent is the first or last value in the range. For example, if all of your Assets are between 1000 and 1999, an appropriate value for your Total Assets parent is 1999. If you want to use parent values like this, reserve the first or last value in your ranges for a summary value.
If your segment values do not follow a particular structure, and your segment allows alphabetic characters, you can use alphabetic characters for parent values. The alphabetic characters not only distinguish your parent values from your detail values, but they can also provide some description for the parent value.
For example, you could group your United States companies, companies 07, 12 and 18 into a parent with a value of "US."
2. Define the parent segment values, and enter meaningful segment value descriptions. For example, for rollup groups that summarize districts into states and regions you might use descriptions for your parent values such as "Washington State," and "Western Region."
3. Choose a naming or numbering method for rollup groups that is similar for all segments to establish a more memorable and logical rollup group structure. This consistent rollup group structure helps you know the approximate level of detail the parents in rollup groups provide. For example, where districts are your detail segment, states would be rollup group name States, regions would be rollup group name Regions, and so on.



Overview of Average Balance Processing

The Average Balance feature of Oracle General Ledger provides organizations with the ability to track average and end-of-day balances, report average balance sheets, and create custom reports using both standard and average balances. Average balance processing is particularly important for financial institutions, since average balance sheets are required, in addition to standard balance sheets, by many regulatory agencies. Many organizations also use average balances for internal management reporting and profitability analysis.
The difference between an average and standard balance sheet is that balances are expressed as average amounts rather than actual period-end amounts. An average balance is computed as the sum of the actual daily closing balance for a balance sheet account, divided by the number of calendar days in the reporting period.
With General Ledger you can maintain and report average balances daily, quarterly, and yearly. General Ledger tracks average balances using effective dates which you enter for each of your transactions.
General Ledger stores both average and end-of-day balance amounts. These amounts can be used with many other General Ledger features, such as translation, consolidation, multi-currency accounting, and formula journals.
You can use General Ledger's on-line inquiry features to display information about average balances for specified effective dates. You can also request standard average balance reports, as well as create your own custom reports.


Basic Business Needs
General Ledger provides you with the features you need to satisfy the following basic average balance needs:
Use average balance processing only in those sets of books which require it.
Maintain average balances for all balance sheet accounts automatically.
Create and maintain a transaction calendar to ensure that all postings have effective dates which are valid business days.
Ensure that input is balanced by effective date, as well as by period.
Calculate average balances based on the effective date of transactions, not the posting or accounting date.
Calculate period, quarter, and year averages-to-date based on the balances for each day within the period, quarter, or year.
Calculate the impact of net income on the average balance for retained earnings.
Retrieve average and ending balances for any effective date, via on-line inquiry and reports.
Translate average balances from your functional currency into any foreign currency.
Consolidate average balances from one accounting entity into another.
Calculate allocations and other formula journals, using average balances as the basis.
Archive and purge average and end-of-day balances, as well as actual journal batches, entries, lines, and associated journal references for one or more fiscal years.


Major Features

Enable Average Balance Processing for Specified Sets of Books If you want to use average balance processing in General Ledger, you must enable the functionality for a specific set of books. With this feature, you can enable average balance processing only for those sets of books that require it. This ensures that you incur no additional overhead unless you need average balance processing.

Capture Average Balances General Ledger calculates and stores the necessary aggregate balance information needed to compute average balance amounts as of any day in the year.

Effective-Date Transaction Processing A transaction's effective date determines which end-of-day and aggregate balances are updated by General Ledger. These balances, in turn, determine the calculated values of your average balances.

Transaction Calendar Control Certain organizations that need average balance processing, such as financial institutions, are required to post transactions only on business days. Posting on weekends or holidays is not allowed, although some organizations do post period-end accruals on non-business days.
In General Ledger, you control transaction posting with a transaction calendar. When you define a transaction calendar, you choose which days of the week will be business days. You also specify the holidays, using a form provided for maintaining the transaction calendar.
Each set of books, for which average balance processing is enabled, is assigned a transaction calendar. When transactions are posted, General Ledger checks the effective dates against the transaction calendar. If the dates are valid, the transaction is posted. For invalid dates, you can tell the system how you want the transaction handled.
Other features of transaction calendar control are as follows:
Multiple sets of books may share a transaction calendar.
You can set a profile option to allow certain individuals to post transactions on non-business days.
Controls are applied to imported journals, as well as manual journals.
Control Transaction Balancing by Effective DateNormally, General Ledger requires that total transactions balance for an entire period. When average balance processing is enabled, the system checks total transactions for each effective date to ensure that debits and credits balance. When they do not, General Ledger rejects the transactions, or, if you have enabled suspense posting, the system creates a balancing entry to the suspense account.
Manual journals are balanced directly, since the effective date is entered at the journal level, not for individual journal lines.
Imported journals are sorted and must be in balance by effective date within each source.

Allowing Back-Value Transactions You can post transactions with effective dates prior to the current date. When you do so, the effect on average balances is determined by the effective date, rather than the system or current accounting date. General Ledger adjusts the ending and aggregate balances of the affected accounts as of the effective date and all subsequent dates.
Additional Information: The back-value date is not limited to the current period. It can be in the prior period or even in a period from a prior year.

Maintain Averages for Summary Accounts If you use summary accounts, and choose to enable average balance processing, General Ledger will maintain average, as well as standard, balances for your summary accounts. General Ledger automatically updates your summary average balances, as well as the standard average balances. You can use summary average balances in allocations and financial reports.

On-line Inquiry You can use the Average Balance Inquiry form to review on-line information about the average or end-of-day balance of any balance sheet account. You can view summary or detail balances, as well as drill down from your summary balances to see the detail. Also, you can customize your view of the average and end-of-day balances to show only the information you want, in the order you want it.

Standard Reports General Ledger provides two standard average balance reports:
Average Balance Trial Balance--displays standard and average balances for selected accounts, as well as period, quarter, and year average-to-date balances, for any as-of date you specify.
Average Balance Audit Report--displays the detail activity used to create aggregate balances and related average balances maintained by General Ledger.

Custom Average Balance Reports With General Ledger's Financial Statement Generator, you can design custom reports that use average balances. You can even create reports which include average and standard balances.
Financial Statement Generator allows you to define the complex financial statements you need to analyze your business, including responsibility reports for business units, profit centers, and cost centers. You may also need to prepare consolidated and consolidating reports, funds statements, and cash flow reports. With Financial Statement Generator, you can do all of this, using average balances and standard balances.

Allocations and Recurring Journal Formulas With average balance processing enabled, you can use average balances as input to any formulas you use to create MassAllocations, MassBudgets, and recurring journals. You can use any of the three average balance types (Period, Quarter, or Year Average-to-date), as well as end-of-day balances.

Multi-Currency Accounting General Ledger fully supports using average balances for foreign currency conversion, revaluation, and translation. General Ledger maintains average and end-of-day balances for all of your transaction currencies, as well as your functional currency. Using these features, you can:
Convert foreign currency amounts in journal entries to your functional currency at the time of entry. Converted values are factored into the computation of average balances.
Revalue accounts which are recorded on your books in a foreign currency. Revalued balances, as well as the unrealized exchange gain or loss, are factored into the computation of average balances.
Translate average balances from a functional currency into a reporting currency, making it possible to consolidate average balances for sets of books that do not use the same functional currency.

Consolidation General Ledger fully supports using average balances for consolidations, including both the transactions consolidation method and the balances consolidation method. You can consolidate average balances from different sets of books, using different currencies, calendars, and charts of accounts.



Effective Date Handling

The effective date on which transactions are posted has a direct impact on average balance computations. Effective dates are equally important when selecting inquiry or reporting criteria, since your report will display average balance amounts as of your specified effective date.


Enabling Average Balance Processing
Average balance processing is enabled by selecting the Enable Average Balances option on the Set of Books form. Once average balance processing is enabled, General Ledger automatically stores the aggregate balances which are used to calculate average and end-of-day balances.
Transaction Calendar A transaction calendar is defined using the Transaction Calendar form. When you first define a transaction calendar, you specify a name and an optional description. Using this information, General Ledger creates a transaction calendar which includes an entry for every calendar day in the range of dates which exist in your General Ledger. Each entry includes three items:
Date: the actual calendar date.
Day of Week: the day of the week.
Business Day indicator: shows whether the entry is defined as a business day. The indicator defaults to Yes for Monday through Friday and No for Saturday and Sunday. You can change the initial default values to suit your own needs.After the transaction calendar is created, you should specify your holidays by changing the Business Day indicator to non-business day.
Transaction calendars and accounting calendars are completely independent of each other. For example, you might have one accounting calendar, shared by your parent company and all its subsidiaries. However, each subsidiary might use a separate transaction calendar to accommodate their different Holiday schedules.
Set of Books You use the Set of Books form to define the parameters of a set of books, such as Accounting Calendar, Functional Currency, and Chart of Accounts. If you choose to enable average balance processing, you must specify additional information on the Set of Books form, such as:
Transaction Calendar: use to ensure that transactions are posted only to valid business days.
Non-Postable Net Income Account: assign an account which General Ledger will use to capture the net activity of all revenue and expense accounts when calculating the average balance for retained earnings.

Non-Postable Net Income Account Retained earnings contains two components for any interim accounting period:
Current account balance, which is equal to the final closing balance from the previous year.
Net income, which is the net of all revenue and expense accounts.General Ledger calculates the average balance for retained earnings the same way that it computes average balances for any other account. However, since the system does not maintain average balances for revenue and expense accounts, some special processing takes place to handle this particular component of retained earnings.
General Ledger uses a special non-postable net income account (similar to a summary account) to capture the net activity of all revenue and expense accounts. The account is treated as a balance sheet account, with account type of Owners' Equity. Its three stored aggregate balances are used to compute the net income impact on the retained earnings average balance for any given period, quarter, or year.
Note: You can also use the non-postable net income account in your reports and on-line inquiries.
Additional Information: The primary difference between the non-postable net income account and other balance sheet accounts, is that its balance does not roll forward when you open a new year. Instead, General Ledger resets the account to zero when revenues and expenses are closed out to retained earnings at the end of the year.



Multi-Currency Processing
For each set of books, General Ledger maintains average balances in your selected functional currency. The system also maintains separate average balances for each foreign currency you've used to enter transactions. The following section explains how General Ledger performs foreign currency conversion, revaluation, and translation when average balance processing is enabled.



On-line Inquiry
With General Ledger, you can perform on-line inquiries for both standard and average balances. You can enter any of the following criteria to control the information which General Ledger will display:
- Date ranges
- Currencies
- Precision (Units, Thousands, etc.)
- Accounts
If you have defined summary accounts in your Oracle General Ledger, you can also select a summary account to use for your on-line inquiries. From the summary-level inquiry, you can drill down to see the average balances of the individual accounts that make up a summary average balance.



Consolidation
You can use General Ledger's consolidation features to combine the financial results of multiple companies, even if their sets of books use different currencies, accounting calendars, and charts of accounts. General Ledger supports consolidating average balances using either the transactions or balances consolidation methods.
Standard and average balances can be consolidated at the same or different levels of detail. For example, you might want to consolidate standard balances at the detail level, but average balances at a summarized level.
If you consolidate standard and average balances at the same level of detail, you can apply the same consolidation mapping rules to both. If you consolidate at different levels of detail, you must define appropriate consolidation mapping rules for each.

4 comments:

David Haimes said...

interesting blog, some of this information changes in R12 so you might want to check out information around that.

I am building up an Oracle Financials blog at

davidhaimes.wordpress.com

BIGuru said...

eprentise has a product that can enable the Average Daily Balances even after the transactions are applied to the ledger/set of Books.
This product will also do a conversion of Average Daily Balances based on the transactions ...

Please contact akukreja@eprentise.com and we can talk about it.

chansara said...

Very interesting blog. Alot of blogs I see these days don't really provide anything that I'm interested in, but I'm most definately interested in this one. Just thought that I would post and let you know. Milton Barbarosh

Sridevi Koduru said...

Regards
Sridevi Koduru (Senior Oracle Apps Trainer Oracleappstechnical.com)
LinkedIn profile - https://in.linkedin.com/in/sridevi-koduru-9b876a8b
Please Contact for One to One Online Training on Oracle Apps Technical, Financials, SCM, OAF, SQL, PL/SQL, D2K at sridevikoduru@oracleappstechnical.com | +91 - 9581017828.

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