oracle r12 multi period accounting

Subledger Accounting: Multi Period Accounting (MPA) of 37

Subledger Accounting White Paper on Multi Period

Accounting (MPA) in R12 Author: Sanjay Prasad and Sriram Ramanujam

Creation Date: February 2, 2011

Last Updated: March 16, 2011

Version: 1.1

Status: FINAL


Table of Contents

1. OBJECTIVE .......................................................................................................................................................... 3

2. SCOPE/OUT OF SCOPE ....................................................................................................................................... 3

3. OVERVIEW OF THE MULTI PERIOD ACCOUNTING FEATURE ............................................................................... 3

3.1 AN EXAMPLE OF A BUSINESS CYCLE WHERE MULTI PERIOD ACCOUNTING FEATURE CAN BE USED ........................................... 4

3.2 MAPPING OF THE BUSINESS SCENARIO IN ORACLE APPLICATIONS ...................................................................................... 5

3.3 OVERVIEW OF EXAMPLE FOR MPA CONFIGURATION ....................................................................................................... 6

3.4 STEPS TO BE PERFORMED TO MAP THE BUSINESS SCENARIO ............................................................................................. 7

4. STEP BY STEP GUIDE TO MAP BUSINESS SCENARIO EXAMPLE ............................................................................ 8

4.1 INVOICE LINE FLEX FIELD (DFF) CONFIGURATION ............................................................................................................ 8

4.1.1 Define Invoice Line DFF ................................................................................................................................ 8

4.1.2 Define Values for Value Set .......................................................................................................................... 9

4.2 SUBLEDGER ACCOUNTING METHOD (SLAM) CONFIGURATION ....................................................................................... 10

4.2.1 Define Accounting Derivation Rule (ADR) .................................................................................................. 10

4.2.2 Define Journal Line Type (JLT) .................................................................................................................... 11

4.2.3 Define Journal Line Definition (JLD) ............................................................................................................ 17

4.2.4 Define Application Accounting Definition (AAD) ........................................................................................ 25

4.2.5 Define Sub Ledger Accounting Method (SLAM) ......................................................................................... 28

4.2.6 Attach SLAM to Ledger definition .............................................................................................................. 30

5. SAMPLE TRANSACTION TO TEST MPA CONFIGURATION .................................................................................. 32

5.1 AP INVOICE CREATION ............................................................................................................................................ 32

5.2 INVOICE ACCOUNTING ............................................................................................................................................. 35

6. REFERENCES ..................................................................................................................................................... 37


1. Objective

To provide:

a) An overview of the “Multi Period Accounting (MPA)” feature in R12

b) A Step by step guide to configure the Multi Period Accounting Feature

c) An explanation of MPA configuration for a business transaction

2. Scope/Out of Scope

This paper will cover

a) The need to have a Multi Period Accounting Feature

b) A Step by step guide to setup Multi Period Accounting

c) Explaining creation of an invoice that uses Multi Period Accounting

d) Accountings of Transaction showing accrual and recognition accounting over

multiple periods

Note: Oracle does not seed any Subledger Accounting Method (SLAM) with ‘Multi Period

Accounting’. This feature is available and customer / consultant can use this feature and setup

the system accordingly.

3. Overview of the Multi Period Accounting Feature

Multi Period Accounting enables users to create accounting for a single accounting event for more than

one GL period. The functionality is primarily used to recognize revenue or a prepaid expense or revenue

across multiple GL periods.


Multi Period Accounting Process Flow

3.1 An Example of a Business Cycle Where Multi Period Accounting Feature Can Be Used

There can be multiple business scenarios where MPA can be used; one of them is a business cycle of an

Insurance premium payment. Normally an insurance premium is paid Quarterly, Half Yearly, Annually

and so on. A premium paid annually is an advance payment of insurance for 12 months. When we pay

the premium, at that time actual expense does not occur, rather it occurs as and when the month for

which insurance is paid completes.

This can be explained with the following example:


Let’s say every year on 20-Dec, the Insurance premium (amount USD 1200) for next year (Jan-Dec)

becomes due.

1) On 20-Dec an Invoice is created. Accounting of this invoice should not hit the actual expense

account due to the following reasons:

a. The Invoice is created for an advance payment

b. Insurance service is yet to be availed. It will be availed during Jan –Dec of next year

2) On 31-Jan of next year, insurance service for one month is availed. So expense should be booked

with respective amount (prorated insurance premium) to the actual expense account.

3) At the end of the next month (28/29-Feb) again insurance service for one month is availed. So

expense should be booked with respective amount (prorated insurance premium) to the actual

expense account. This kind of actual expense recognition will keep on happening until 31-Dec.

Accounting entry in Books for event (1), Accounting date – 20-Dec

Prepaid expense Dr USD 1200

Liability Cr USD 1200

Accounting entry in Books for event (2), Accounting date – 31-Jan

Insurance expense Dr USD 100

Prepaid expense Cr USD 100

=> There can be different methods to calculate the accounted amount (here we are assuming the

basis of Calculation is monthly. We will be discussing different options for calculations in the

coming section.

Accounting entry in Books for event (3), Accounting date – 28/29-Feb

Insurance expense Dr USD 100

Prepaid expense Cr USD 100

and so on until 31-Dec.

A point to note here, this complete set of accounting is a result of ONE transaction only.

3.2 Mapping of the Business Scenario in Oracle Applications

The above mentioned scenario is mapped in Oracle Applications by configuring the Multi Period

Accounting feature. Referring to the example mentioned in section 3.1, after configuring MPA a single

standard AP invoice (valid for MPA) will have the following accounting entries:

Accounting entry in Books for event (1), Accounting date – 20-Dec

Accrual Dr USD 1200



=> Here Accrual means a Journal Line Type enabled for MPA and having “Accrual” enabled as

Multi Period Accounting attribute in the Journal Line Type definition.

Accounting entry in Books for event (2), Accounting date – 31-Jan

Recognition Dr USD 100

Accrual Cr USD 100

=> Here Recognition means a Journal Line Type enabled for MPA and having “Recognition” enabled as

Multi Period Accounting attribute in the Journal Line Type definition.

3.3 Overview of Example for MPA Configuration

Organization creates an AP Invoice of USD 36000 for the following insurance:

1) Insurance for Building (USD 12000)

2) Insurance for Vehicle (USD 24000)

Organization wants to account the above transactions as follows:

a) Accounting Date: 25-Dec-2010

Accrual Dr USD 36000


b) Accounting Date: 31-Jan-2011

Recognition (Insurance for Building) Dr USD 1000

Accrual Cr USD 1000

Recognition (Insurance for Vehicle) Dr USD 2000

Accrual Cr USD 2000

c) Accounting Date: 28-Feb-2011


Accrual Cr USD 1000


Accrual Cr USD 2000

And so on for every month until Dec-2011

d) Accounting Date: 31-Dec-2011


Accrual Cr USD 1000


Accrual Cr USD 2000


Account codes:

Accrual: 01-000-1340-0000-000 (01 is Company, 1340 is Natural Account)

Liability: 01-000-2210-0000-000

Recognition (Insurance for Building):

Natural Account: 6501 and all other segments from Accrual account.

“01-000-6501-0000-000”

Recognition (Insurance for Vehicle):

Natural Account: 7420 and all other segments from Accrual account.

“01-000-7420-0000-000”

3.4 Steps to Be Performed to Map the Business Scenario

The following needs to be done to map the business scenario discussed above:

a) In the example discussed above, the requirement is to generate different Natural accounts for

Recognition line for “Insurance for Building” and “Insurance for Vehicle”. We must have an

identifier in the transaction to identify respective invoice lines. There can be different ways of

achieving this; we will be using “Invoice line flex fields” to capture identifiers for different kinds

of Insurance.

b) Sub Ledger Accounting Method (SLAM) configuration: Seeded SLAM does not come with an

MPA enabled Journal line type. So we need to copy seeded SLAM and do changes as per

requirement.

c) Invoice transaction and its accounting


4. Step by Step Guide to Map Business Scenario Example

4.1 Invoice Line Flex field (DFF) Configuration

We will be defining an Invoice line flex field to capture to what kind of Insurance Payment the invoice

line belongs. Applicable values for the DFF will be configured to be picked from a value set.

4.1.1 Define Invoice Line DFF

Navigation: Payables Responsibility->Setup->Flexfields->Descriptive->Segments

Query for: Application: Payables Title: Invoice Lines

Select the Global Data Elements code and click on the “Segments” Button


Select the Actual_Expense Segment Name and Click on “Value Set”

4.1.2 Define Values for Value Set


4.2 Subledger Accounting Method (SLAM) Configuration

To map the business scenario we need to have SLAM which has Journal Line Type (JLT) enabled for MPA.

Remember seeded SLAM does not come with MPA enabled JLT. To achieve this we will be defining the

following in Sequence:

1) Accounting Derivation Rule (ADR)

2) MPA enabled Journal Line Types (JLT)

3) Journal line definitions (JLD) containing MPA enabled JLT

4) Application Accounting Definition (AAD)

5) Sub Ledger Accounting Method (SLAM)

6) Attach SLAM to Ledger definition

4.2.1 Define Accounting Derivation Rule (ADR)

To meet the requirement of generating account codes (for Recognition line type) based on the kind of

insurance line, we need to define a rule to derive the Account.

Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup-

>Accounting Methods Builder->Journal Entry Setup->Account Derivation Rule

Define ADR “AP_MPA_RECOG_ADR”


Click on “Mapping Set” button to define the Mapping Set “AP_MPA_RECOG_ADR_MAP”. Once the

mapping set is defined attach the same to the ADR.

Input source: Invoice Line Flexfield Segment. This means based on the value for Invoice line flexfield in

the transaction, the mapping set will derive the value for the “Account” segment.

4.2.2 Define Journal Line Type (JLT)

As discussed earlier there are 2 types of Journal Line Types which are required in case of MPA:

1) Accrual Journal Line Type: This is the journal line type which is debited at first and then gets

credited in each subsequent period. In other words this is the JLT to store Prepaid expenses.

2) Recognition Journal Line Type: This is the actual expense account which gets debited in each

period of recognition.

4.2.2.1 Define MPA Enabled Accrual Journal Line Type


>Accounting Methods Builder-> Journal Entry Setup->Journal Line Types

Query for Seeded JLT

Application: Payables

Event Class: Invoices

Line Type Code: AP_ITEM_EXPENSE_INV


Click on “Copy” button

Click on “Done” button


Select “Accrual” in Multiperiod region and save the JLT definition.

4.2.2.2 Define MPA Enabled Recognition Journal Line Type


>Accounting Methods Builder->Journal Entry Setup->Journal Line Types

Query for Seeded JLT



Line Type Code: AP_ITEM_EXPENSE_INV



Click on Done button


Remove all the conditions of Journal Line Type:

Click on “Conditions” button

Select first condition and Navigate Edit->Delete


Repeat same above steps for each condition one by one to delete all the conditions.

Save the work, close the form.


Select “Recognition” in Multiperiod region.

Note: A Recognition type of JLT does not have any conditions as this JLT is linked (will be

discussed in later sections) with an Accrual type of JLT, so in fact no condition is needed for this

type of JLT to be selected for accounting.

4.2.3 Define Journal Line Definition (JLD)


>Accounting Methods Builder->Methods and Definitions->Journal Line Definition

Query for Seeded Journal Line Definition

Applications: Payables


Owner: Oracle

Definition Code: ACCRUAL_INVOICES_ALL

Click on “Copy Definition” button


User defined “ACCRUAL_INVOICES_ALL_1” JLD is defined.


Now add Accrual enabled MPA JLT defined earlier and add ADR for the user defined JLT

“AP_ITEM_EXP_INV_MPA_ACC”.

As per definition above, for “AP_ITEM_EXP_INV_MPA_ACC” JLT, the distribution account of the

transaction will be taken as per Seeded Account Derivation Rule “Invoice Distribution Account”. This rule

enables to copy all account segments from Invoice distribution, as shown in below screen shot.


Disable the Seeded “Item Expenses” JLT so that on the same condition the system should not derive 2

JLTs for accounting. Remember “AP_ITEM_EXP_INV_MPA_ACC” has been created by copying seeded

“Item Expenses” JLT. If we do not deactivate the seeded JLT then the system will create 2 item expense

lines while performing accounting of an invoice.


4.2.3.1 Add Multi Period Accounting Elements

Select the Accrual JLT in JLD definition and click on “Multiperiod Accounting” button.


Click on the “Line Assignments” button.

By default “AP_ITEM_EXP_INV_MPA_ACC” gets attached in line assignments.


Add Recognition type of JLT in Line Assignments region. This is how the Recognition line type is linked to

the Accrual JLT, that is why a condition is not needed for the Recognition JLT (refer to the section on

Define MPA Enabled Recognition Journal Line Type).

Add ADR for Recognition Journal Line type.

Based on ADR attached above, for AP_ITEM_EXP_INV_MPA_RECOG JLT, the system will overlay the

Natural account (based on AP_MPA_RECOG_ADR) on the Invoice distribution account. This means for

Recognition JLT the system will derive the Natural account from AP_MPA_RECOG_ADR and all other

segments from Invoice distribution account.

This completes the Definition of JLD.


4.2.4 Define Application Accounting Definition (AAD)


>Accounting Methods Builder->Methods and Definitions->Application Accounting Definition

Query for a seeded AAD


Owner: Oracle

Definition Code: ACCRUAL

Click on the “Copy” button to create User defined AAD for Payables by copying seeded AAD. The idea is

to copy the complete AAD and modify AAD suitable for MPA.


AAD Definition code: ACCRUAL_1


As of now, in “ACCRUAL_1” AAD, event class has seeded all JLDs attached with it.

Attach user defined JLD (defined in step 4.2.3) in ACCRUAL_1 AAD for Invoices event class.

Now we have user defined AAD (ACCRUAL_1) which has a JLD ACCRUAL_INVOICES_ALL_1.

JLD ACCRUAL_INVOICES_ALL_1 has JLTs enabled for MPA.

Validate the AAD by clicking on “Validate” button.


4.2.5 Define Sub Ledger Accounting Method (SLAM)

Navigation: Payables Responsibility->Setup->Accounting Setup->Subledger Accounting Setup->Methods

and Definitions-> Sub Ledger Accounting Method

Query for a seeded SLAM

Query for:

Method Name: Standard Accrual

Owner: Oracle




For application “Payables” attach the AAD ACCRUAL_1 (defined in step 4.2.4)


4.2.6 Attach SLAM to Ledger definition

Payables Responsibility->Setup->Accounting Setup->Ledger Setup->Define->Accounting Setups

Query for Respective Ledger.

Click on “Update Accounting Options”.

Scroll down to “Primary Ledger” region and Click on “Update” link.


Attach the User defined SLAM “STANDARD_ACCRUAL_1” to “Subledger Accounting Method”

option.


5. Sample Transaction to Test MPA configuration

To test the MPA configuration let’s create an invoice as follows:

a. Invoice amount of USD 36000

b. 2 lines:

i. First line for “Insurance for Building” of amount USD 12000

ii. Second line for “Insurance for Vehicle” of amount USD 24000

c. Invoice date: 27-Dec-2010

d. Invoice is for Insurance premium for year 2011 (Jan-Dec). So respective expense needs to be

recognized every month from Jan-11 to Dec-11 on a prorated basis.

5.1 AP Invoice Creation

Invoice Number: TR200111-01


GL Date: 27-Dec-2010

Distribution account for both Lines: 01-000-1340-0000-000 (This is prepaid account)

Deferred Option: Yes, this means that respective invoice line is eligible for MPA.


Deferred Start Date: 01-Jan-2011

Number of Periods: 12

First line is for “Insurance for Building”, based on this DFF information ADR will derive respective

expense account for each period.


Second line is for “Insurance for Vehicle”, based on this DFF information ADR will derive respective

expense account for each period.

5.2 Invoice Accounting

System generates the following accounting entries:

Accounting Date: 27-Dec-2010

01-000-1340-0000-000 Dr USD 36000 (Prepaid)

01-000-2210-0000-000 Cr USD 36000 (Liability)

Following are accounting entries for recognizing the expenses on a prorated basis in respective periods

Accounting Date: 01-Jan-2011

1)

01-000-7420-0000-000 Dr USD 2000 (Actual expense for Insurance for Vehicle)

01-000-1340-0000-000 Cr USD 2000 (Reversal of Prepaid)

2)

01-000-6501-0000-000 Dr USD 1000 (Actual expense for Insurance for Building)


Accounting date: 01-Feb-2011

1)

01-000-7420-0000-000 Dr USD 2000 (Actual expense for Insurance for Vehicle)


2)

01-000-6501-0000-000 Dr USD 1000 (Actual expense for Insurance for Building)


and so on until last accounting date 01-Dec-2011.

For further details please refer to the accounting entries in the Create Accounting Output file below.


Subledger Journal Entries

Event Class Invoices Event Type Invoice Validated

Event Number 1 Event Date Dec 27, 2010

Party Name GE Plastics Party Site Name DANBURY

Invoice Number TR200111-01 Invoice Amount 36000

Invoice Currency USD Invoice Ledger Amount

Invoice Type STANDARD Invoice Date 2011-01-20T12:00:00

Cancelled Date Invoice Description

Ledger Vision Operations (USA) Ledger Currency

USD Balance Type

Actual

Application Accounting Definition

ACCRUAL_1 Version GL Date Dec 27, 2010

Journal Entry Description

Invoice Validated , Invoice Number: TR200111-01 , Date: 20-JAN-11 , Document Sequence Category: STD INV , Document Sequence Name: US_STD_INV , Invoice Voucher Number: 1520 , Invoice Description:

Line

Accounting Class Account

Entered Accounted

Currency Debit Credit Debit Credit

1 Item Expense

01-000-1340-0000-000 USD 36,000.00 36,000.00

2 Liability 01-000-2210-0000-000 USD 36,000.00 36,000.00

Journal Entry Total 36,000.00 36,000.00


USD Balance Type

Actual


ACCRUAL_1 Version GL Date Jan 1, 2011


Line


Entered Accounted


1 Item Expense

01-000-1340-0000-000 USD 1,000.00 1,000.00

2 Item Expense

01-000-6501-0000-000 USD 1,000.00 1,000.00



USD Balance Type

Actual


ACCRUAL_1 Version GL Date Jan 1, 2011


Line


Entered Accounted


1 Item Expense

01-000-1340-0000-000 USD 2,000.00 2,000.00

2 Item Expense

01-000-7420-0000-000 USD 2,000.00 2,000.00


Similar Recognition accounting entries would be created for each month until Dec 2011.



USD Balance Type

Actual




Line


Entered Accounted


1 Item Expense

01-000-1340-0000-000 USD 1,000.00 1,000.00

2 Item Expense

01-000-6501-0000-000 USD 1,000.00 1,000.00



USD Balance Type

Actual




Line Accounting Class Account

Entered Accounted


1 Item Expense

01-000-1340-0000-000 USD 2,000.00 2,000.00

2 Item Expense

01-000-7420-0000-000 USD 2,000.00 2,000.00


6. References

Refer to the following documentation for more information on the Multi Period Accounting feature:

Oracle Subledger Accounting Implementation Guide

Oracle documentation can be found at:

http://www.oracle.com/technetwork/documentation/applications-167706.html

oracle r12 multi period accounting

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