all about set of books

8/8/2019 All About Set of Books

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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 alsosummarize 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 intostates, 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

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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 fromthe 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




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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 theAdministration 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




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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 meaningfulsegment 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 detailsegment, states would be rollup group name States, regions would

be rollup group name Regions, and so on.

Overview of Average Balance Processing




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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 ascreate 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 accountsautomatically.

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.




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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




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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,




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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 includeaverage 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.




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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




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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,




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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 GeneralLedger 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 willdisplay:

- 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-




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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.

Posted by Ajeet Singh at 00:20

1 comments:

David Haimes said...

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

I am building up an Oracle Financials blog at

davidhaimes.wordpress.com

November 30, 2007 10:16 AM

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