Basic Concepts in Oracle AR - Part1

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Oracle 11i Financials: AR

The Accounts Receivable (AR) module is a part of the Oracle Financial Applications 11i. This
module enables you manage the tasks related to raising invoices, debit notes, credit notes,
deposit notes, and guarantees. It also helps you manage transactions, receipts, and collections
and track payments from customers after a sale is complete. You can integrate AR with the
Oracle General Ledger, Order Management, Oracle Inventory, Oracle Cash Management, and
Oracle Party Model/Customer modules, but you do not need to install these modules to work
with AR. You can also install AR as an independent module.
This ReferencePoint explains how to record and track information pertaining to transactions and
receipts in an organization and how to record the remittance to the bank. It also explains how to
record customer information using the AR module.

Customers
Before you start the process of tracking Account Receivables in Oracle, you need to enter
customer information in the database. All information related to a customer must be entered
when customer makes the first purchase from your organization. When entering this information,
you can also define customized fields. For example, you can create fields to store multiple
addresses for each customer.Figure below shows the different types of customer information:

Customer Information
Entering Customer Information
The only mandatory information required for a new customer is the name, customer number, and
address. To enter customer information:
1. From the main menu, select Customers->Standard. You are prompted to enter the name
of the customer.
2. Enter the name and click the Find button. If a customer with that name does not exist,
then a message box appears asking whether you want to create a new customer.
3. Click New, if you want to create a new customer. The Customers window appears, as
shown –

The Customers Window

4. Select the customer type, which can be either an organization or a person. If the new
customer is a person, not an organization, you can enter information, such as prefix, first
name, middle name, last name, and suffix.
5. If the Generate Party Number profile option is set to No, enter the unique customer
number. If the option is set to Yes, a unique number will be assigned to the customer
when you save the form.
6. Enter an alternate name for the customer, if required. You can only enter this field if the
profile option AR:Customer Enter an Alternate Name, is set to Yes.
7. Enter the name of the customer.
 8. Select the Status check box to specify the customer as an active customer. For inactive
customers, you cannot enter new transactions, but can apply and process payments for
existing transactions.
9. Enter the TaxpayerID information as an additional reference. This field is used to query
customer using Taxpayer ID.
10. Enter the unique tax registration number, also known as the VAT number.
11. Enter the customer address. Enter classification information, such as profile class,
primary sales person, tax code, and tax calculation in the information.
You can enter several types of information when creating a customer. These include customer
addresses, business purpose, contacts and contact roles, customer relationships, and profile
classes.
When using the Multiple Organization support feature (multi-org), you
cannot enter a salesperson or a tax code at the time of creating the customer.
Note You can assign this information to the customer site only after the customer
is created. If you are not using the multiple organizations feature, then you
can assign a salesperson and tax code at both the customer and site levels.

Entering Customer Address

For each customer, you can enter multiple addresses. You can also provide one or more Business
Purposes for each address. When an address is created, its status is Active by default. When an
address is inactive, you cannot enter new transactions for that address but can continue to process
existing transactions.
You can validate addresses using flexible address formats or the address validation system
option. The validation rules for address information are:
The home country is defined in the Default Country field of the Systems Options window.
You can use this information for tax calculation, flexible bank structures, flexible address
formats, and taxpayer ID and tax registration number validation.
The Sales Tax Location Flexfield structure validates addresses within the home country and
calculates the sales tax based on the shipping address of the customer. You must enter a
Location Flexfield Structure in the System Options window so that you can determine
whether the Tax Method is Sales or VAT.
If you are using a location-based tax method and you enter the value for your home country
in this field, the system requires you to enter a value for every component of your Sales
Tax Location Flexfield. If you have implemented the Flexible Address Formats feature,
then enter a value in the Country field that is assigned to an address style.
You can specify how the system will respond, if an invalid address is entered.
Note The system can display an error message, a warning, or perform no validation
when an invalid address is entered.
Assigning Business Purpose
Customers may have multiple addresses. For each address, you can assign a business purpose.
Functions performed at a particular customer site are described by the business purpose. Table
below describes common business purposes:

Table : Business Purpose Types

Business Purpose
Description
Type

Send Invoice to this address. There can be only one primary active
Bill-to
Bill to site for a customer.

Ship-to Send goods or services to this address.

Send customer statements to this address. There can be only one

Statements
active statement business purpose for each customer.

Send dunning letter for a customer to this address. There can be only
Dunning
one active dunning business purpose for each customer.

Marketing Send marketing collateral on this address.

Drawee Send the bills receivable at this address.

You can deactivate a business purpose for an address if that particular site is not to be used later.
The information that you enter for a customer is stored using the customer site. This information
is used as default customer information in different windows in the application. When accessing
this information, the system uses a hierarchy to determine the order in which the default values
are selected for a transaction entry. The order is:
Ship-To address
Bill-To address
Information at the customer level
You can enter the business purpose for the selected address in the Usage field of the customer
form. Each business purpose chosen is active and non-primary by default. You can set a business
purpose as primary by selecting the Primary checkbox. If Automatic Site Numbering in the
System Options window is set to No, then you must enter a number for this business purpose in
the Location field. If you do not enter a number, then the system automatically assigns a location
number when the data is saved. Location names are used as shortcuts to refer to a customer
address.
Entering Customer Contact Roles
The Oracle application enables you to enter, add, change, or deactivate information for customer
contact roles. A contact role enables you to assign a contact person to a particular business
purpose or function. For example, you may have a customer address with a Ship-To and Bill-To
business purpose. If there are two different contact persons assigned to each address, then you
can assign the Ship-To role to one person and the Bill-To role to the other. When entering this
information, you can:
Enter any number of contacts as required for a customer.
Enter the contact details, including last and first name, title, job, mail stop, and reference.
Assign a specific customer contact for a business purpose.
Enter several telephone numbers for each contact. There can be only one primary telephone
number.
Enter the telephone Type. The types of telephone numbers are:
General
Fax
Inbound Watts
Outbound Watts
Telex

The various the fields in the Contacts and Roles tabbed region of the Customers and Customer
Addresses windows are:
Active: Indicates whether the contact information is active. You can choose only the contact
persons whose status is Active in the Contact fields of the Sales Orders window.
Description: Sets the role of the contact person, such as Bill-To, Ship-To, Statements, or
Marketing.
Email: Specifies the e-mail address for the contact.
Job: Displays the default job title for the contact person, when you select a contact person.
This field is available in the Customer Calls window.
Mail Stop: Sets the mail address for the selected contact.
Reference: Sets the reference information for the contact. This field is for informational
purpose only, but the value of this field must be unique for each contact.
Creating Customer Relationships
You can define relationships among customers to control payment and commitment applications.
You can create relationships between any numbers of customers and specify the relationship as
either one-way or reciprocal.
In a one-way relationship, the company can apply receipts only to the invoice of the customer for
whom the receipts are generated. The invoice for the related customer cannot be applied to the
parent customer. In addition, a customer can only apply invoices to commitments that it owns or
to commitments of a parent customer to which it is related. In reciprocal relationships, customers
can pay each other's debit items. They can also enter invoices against each other's commitments.
For example, you might have two customers who are business partners, but individually conduct
business with your company. In this case, you can create a relationship between these two
customers.
In the system option window, if you set the Allow Payment of Unrelated Invoices option to Yes,
then the relationship for each customer need not be defined. If you do not want a relationship to
be active, then clear the Active check box in the Customer Relation Tab.
Customer Profile Class
The customer profiles class groups customers with similar creditworthiness, business volumes,
and payment cycles. A Profile class is defined from the Customer Profile Class window, as
shown below in screenshot. Every customer has an associated profile class. Each class provides
information, such as credit limits, payment terms, invoicing, statement cycles, and discount
information. You can also define amount limits for finance charges, dunning, and statements for
each currency in which you do business.

The Customer Profile Class Window

You need to assign a profile class and address for each customer in the Customers window. The
customer profile class provides default values when entering customer information. You can
optionally customize these values for each customer or address. The default values set by the
profile class take precedence over the values set when creating a customer.
Most of the fields in the Define Customer Profile Classes window are self-explanatory. Some
important fields in this window are:
Account Status: Checks the status of this account. If required, you can define the account
status for a customer in the Receivable Lookups window by selecting the lookup type,
Account Status.
Credit Limit: Sets the credit limit of the customer to whom this profile class is assigned. If
credit limit check is active and the outstanding credit balance for a customer exceeds the
 limit, then all new orders for this customer are automatically put on hold in Oracle Order
Management.
Credit Rating: Sets the credit rating for this customer. You can define additional credit rating
names in the Receivables Lookups window by selecting the lookup type, Credit Rating
for customers. For example, the default credit ratings for a customer include, average and
excellent.
Currency: Sets the currency to define credit limits.
Finance Charges Interest Rate (%): Sets the interest rate to be charged to customers assigned
to the profile class. Finance charges are calculated on statements and dunning letters.
Maximum Interest per Invoice: Sets the maximum interest to be charged from the customers.
This value overrides the value that you specify in the Finance Charges Interest Rate field.
Minimum Customer Balance for Finance Charges: Determines whether or not the finance
charges will be assessed when a customer submits dunning letters or statements. If the
customer balance of past due items in a particular currency is less than the minimum
amount specified in this field then the finance charges are not assessed.
Minimum Receipt Amount: Sets the minimum amount due from a customer. The system will
not generate automatic receipts in a particular currency that is less than the minimum
receipt amount. You can also define a minimum receipt amount for a payment method.
When creating automatic receipts, AR uses the greater of the two minimum receipt
amounts.
Minimum Statement Amount: Sets the minimum outstanding balance for Receivables to
generate a statement for customers assigned to a particular profile.
Minimum Dunning Amount: Sets the minimum dunning for a customer. If a customer has a
past due amount that is greater than the minimum dunning amount specified, then AR
selects this customer for dunning.
Minimum Dunning Invoice Amount: Customers with this profile option do not receive
dunning letters if the amount in this filed is greater than the balance of their past due
payments.
Percent Collectable: Sets the percentage amount of the customer account balances that you
regularly collect for customers assigned to a particular profile.
Assign a profile class to an address that already has a Bill-to location
Important
defined.
You can also update specific information for a customer. This information
can differ from that provided for the assigned Profile Class. When you
Note change the information for a certain customer assigned to a particular profile,
the changes affect only that customer and not the other customers assigned to
the same profile.
When you modify an existing Profile class in the Customer Profile Classes window, the system
displays a pop-up window that lets you decide how to apply changes. You can choose one of
these options:
 Do Not Update Existing Profiles: Prevents update of existing customer profiles with the new
profile class values. When you choose this option, the system assigns the new profile
values to only the new customers assigned to this profile class.
Update All Profiles: Updates new profile class values for all the customers assigned to the
profile class.
After the customer profiles are updated, AR generates the Update Customer Profiles report
that helps you track changes made to a profile.
Update All Uncustomized Profiles: Updates customer profiles for only those options that
currently have the same original setting as the profile class. After the customer profiles
are updated, AR generates the Update Customer Profiles report. The Exceptions section
of this report mentions the customized profile classes that were excluded from the update
process but can be updated manually.
For the AR module to function, you must enter the customer name, number, and address in a
profile class. If you do not specify this information or do not assign a profile class, then the
system assigns the profile class, Default, to each new customer entered.

Setup for Entering Transactions

From the transaction window, you can enter invoices, debit memos, credit memos, and
commitments. You have to set up Receivables to enter transactions. To do this, you need to
define transaction types, accounting rules, and AutoAccounting.
Defining Transaction Types
Before entering a transaction, you need to define the transaction type with which transactions
will be associated in the transaction window. The transaction type defines the accounting for the
debit memos, credit memos, on-account credits, chargebacks, commitments, and invoices.
Screenshot below shows the Transaction Types window where you define a transaction type:

The Transaction Types Window

To define the transaction type:
1. Name the transaction type and choose the class. The classes are invoice, chargeback,
credit memo, debit memo, deposit, or guarantee.
2. Attach the payment terms to the transaction type.
3. Check the Open Receivables and post to GL option. These options determine whether or
not transaction entries update customers' balances and whether or not Receivables posts
these transactions to the general ledger.
4. Choose any one Transaction status from the options, Open, Closed, Pending, or Void.
5. Check the Allow Freight box to enable freight to be entered for this transaction type.
6. Determine the creation sign for the transaction.
7. Choose a Creation Sign from the options Positive Sign, Negative Sign, or Any Sign. For
transaction types of class Guarantee or Deposit, choose Positive Sign. You cannot update
this field after you enter transactions of a particular type.
8. Enter the flexfield GL code combination for the receivable, revenue, unbilled revenue,
tax, freight, clearing, and unearned revenue accounts.
When defining the Transaction type:
Define the transaction types in the order:
Credit memo transaction types.
Invoice, debit memo, and chargeback transaction types.
Commitment transaction types.

Enter a clearing account for invoice or debit memo transactions. Receivables use the clearing
account if you have enabled this feature for transaction sources that are used for imported
transactions.
AR uses the Unearned Account field to determine the Unearned Revenue account for
invoices with the rule, Bill In Advance.
AR does not require you to enter a revenue account for credit memo transaction types if the
profile option, Use Invoice Accounting for Credit Memos, is set to Yes. If the option is
set to No, you must enter a revenue account.
Freight account combinations must be defined. This field is skipped if the transaction type
class is deposit or guarantee. If the Allow Freight option is not checked, you do not need
to enter the Freight Account.
Defining AutoAccounting
You must define AutoAccounting before entering transactions in Receivables. AutoAccounting
specifies how AR determines the general ledger accounts for transactions that have been either
manually entered or imported using AutoInvoice. AR creates default account codes for revenues,
receivables, freights, taxes, unearned revenues, unbilled receivables, finance charges, and
AutoInvoice clearing accounts using the information provided in this window. When you enter
transactions in AR, you can override the default general ledger accounts that AutoAccounting
creates. AutoAccounting controls the value assigned to each segment. You can define
AutoAccounting rules in the window shown –

The AutoAccounting Window

To define the AutoAccounting rules:
1. Open the AutoAccounting window.
2. Enter the type of account to define or choose from the options Freight, Receivable,
Revenue, AutoInvoice Clearing, TaxUnbilled Receivable, or Unearned Revenue.
3. For each segment, either enter the table name or constant value that you want AR to use
to retrieve transaction information. When you enter an Account Type, Receivables
displays all the segment names in the Accounting Flexfield Structure. You can use
different table names for different accounts using Oracle Receivables. The table names
are:
Salesreps: Select this option for AutoInvoice clearing, tax, or unearned revenue
accounts, if you want AR to use the revenue account associated with this
salesperson. If you choose this option for unbilled receivable accounts, AR uses
the receivable account associated with this salesperson.
Transaction Types: Use the transaction types table to determine the segment of
revenue, freight, receivable, AutoInvoice clearing, tax, unbilled receivable, and
unearned revenue account.
 Standard Lines: Use the standard memo line or inventory item on the transaction to
determine this segment of revenue, AutoInvoice clearing, and freight, tax unbilled
receivable, and unearned revenue account.
Taxes: Specify this option if you want to use tax codes when determining tax account.
Bill-To Site: Enables you to use the Bill-to site of the transaction to determine this
segment of revenue, freight, receivable, AutoInvoice clearings, tax, unbilled
receivable, and unearned revenue accounts.
Defining Transaction Batch Sources
Batch sources control the standard transaction type assigned to a transaction and determine
whether or not AR automatically numbers the transaction and the transaction batches. Active
transaction batch sources appear as a list of values and choices in the Transactions, Transactions
Summary, and Credit Transactions windows. Screenshot below shows the window where you
define the transaction batch sources:

The Transaction Sources Window

To define a transaction source:
1. Name the batch source and choose the type of the batch source from the following
options:
Manual: Use manual batch sources with transactions that you enter manually in the
Transaction and Transactions Summary windows.
Imported: Use imported batch sources to import transactions into Receivables using
AutoInvoice.
 2. If the batch source is a Manual source, and you want to automatically number new
batches created using this source, check the Automatic Batch Numbering option, and
enter a Last Number. For example, to start numbering your batches with 100, enter 99 in
the Last Number field. If you are defining an Imported transaction batch source,
Receivables automatically numbers the batch with the batch source name, request ID.
3. For Imported transaction batch sources, define how AutoInvoice should handle imported
transactions that have Invalid Tax Rates. Choose Correct if you want AutoInvoice to
automatically update the tax rate and choose Reject if you want AutoInvoice to reject the
transaction.
4. Determine how you want AutoInvoice to handle imported transactions with Invalid Lines
by entering either Reject Invoice or Create Invoice.
5. Determine how you want AutoInvoice to handle imported transactions that have lines in
the Interface Lines table that are in a closed period. Enter Adjust in the GL Date in a
Closed Period field for AutoInvoice to automatically set the GL date to the first GL date
of the next open or future enterable period. Enter Reject to reject these transactions.
6. Enter a Grouping Rule to use for a transaction line.
7. Check the Create Clearing option. This option sets the revenue amount for each
transaction line. The revenue is equal to the selling price multiplied by the quantity
specified for that line.
8. In the Customer Information tabbed region, choose either Value or ID for each option to
indicate whether AutoInvoice validates customer information for this batch source.
Choose Value to import a record into the AutoInvoice tables using its actual name, or
choose ID to use its internal identifier.
9. In the Accounting Information tabbed region, choose ID, Value, or None to indicate how
AutoInvoice validates Invoice and Accounting Rule data for the batch source. Choose
either ID or Segment to indicate whether you want AutoInvoice to validate the identifier
or the flexfield segment for this batch source.
10. Check the Derive Date option to derive the default rule start date and default GL date
from the ship date, rule start date, order date, and the default date that you supply when
submitting AutoInvoice.
11. In the Other Information tabbed region, specify the validations for AutoInvoice data.
12. In the Sales Credits Data Validation tabbed region, specify validations for salespersons,
sales credit types, and sales credit.
Defining Accounting Rules
The accounting rules create revenue recognition schedules for invoices. You need to define
accounting rules depending upon the need of the organization where Receivables is installed.
Accounting rules determine the percentage of total revenue to record in each accounting period.
You can use accounting rules with transactions that have been imported into AR and with
invoices that have been created manually in the Transaction windows. You can define multiple
accounting rules. You can assign a default accounting rule to the items in the Master Item
window and to Standard Memo Lines in the Standard Memo Lines window.
The invoicing rules and accounting rules are not applicable if the cash basis method of
accounting is used. There are two types of Accounting rule types in AR, Fixed Duration and
Variable Duration. Screenshot shows the window where you can define Accounting rules:

The Invoicing and Accounting Rules Window

To enter accounting rules:
1. Open the Invoicing and Accounting Rules window and enter a name for the accounting
rule.
2. Choose Accounting Fixed Duration or Accounting Variable Duration Accounting rules.
The fixed duration is entered to prorate revenue recognition evenly over a predefined
period of time. The variable duration specifies the number of periods over which you
want to recognize revenue for the invoices to which you assign this rule.
3. Enter the periods for the accounting rule schedule.
4. Define the revenue recognition schedule for the accounting rule.
Setting up Document Numbering
To enter transaction information, you need to set the document numbering option. This option
generates document sequence numbers, which are unique numbers assigned to transactions
created in Receivables.
By assigning unique numbers to each transaction, you can ensure that no transactions are lost.
Document sequences also generate audit data. As a result, even if a transaction document is
deleted, it can be restored using audit records.
To number transactions, you can use either an automatic sequence or a manual sequence set.
Automatic sequences enable you to create an audit trail of unique, sequential document numbers
without manual data entry. Manual sequences let you decide which document numbers to assign
to transactions at the time of data entry, while ensuring that the numbers are unique.
You can assign document numbers to all types of transactions, imported, automatically
generated, and manual. You can also assign a different sequence for each transaction type,
payment method, adjustment, and finance charge activity. Document numbers can also be
assigned for every transaction or for selected categories of transactions.
You can assign document numbers at the time of:
Entering commitments
Entering credit memos
Entering invoice adjustments
Entering invoices
Entering miscellaneous transactions
Entering receipts
Entering quick cash
Creating reverse receipts
To ensure correct document sequencing:
1. Enable the Sequential Numbering Profile Option. You can set this option at the
application level. Valid values for this option are:
Not Used: Enables the cursor to skip the Document Number field when you enter
transactions. If you set the profile option to this value, you cannot use the
Automatic Receipts feature.
Always Used: Restricts you from entering a transaction if no sequence exists for it.
This option requires you to manually enter a document number when entering
transactions.
Partially Used: Allows you to enter a transaction even if no sequence exists for it.
2. Set Document Number Generation Profile Option. The option helps determine when to
generate a document number for the transactions. You can choose to generate a document
number when the transaction is committed or when the transaction is completed.
3. Choose whether the document number is the same as the transaction number.
When you create or import transactions, the transaction batch source determines whether to
automatically generate the batch and transaction numbers or to enter these numbers manually.
The transaction batch source also determines whether the same number is used for both the
document and the transaction number.
To ensure that the document number and transaction numbers are the same for the transactions of
a batch source:
1. Open the Transaction Sources window.
2. Enter or query the transaction source from this window.
 3. Mark the Copy Document Number to Transaction Number check box.
4. Save the data.
5. In the Document Sequences window, enter the name, type, and initial value for the
number sequence.
6. Assign a sequence to one or more combinations of Application, Document Category, and
Range of Transaction Dates. When you define a new payment method, transaction type, a
Receivables Activity of type Adjustment or Finance Charge, then Receivables
automatically creates a corresponding document category with the same name.
7. If the Oracle General Ledger module is installed, and you have sequential numbering
enabled for this application, then you can define sequences, categories, and assignments
for the journal entry categories.

Basic Concepts in Oracle AR - Part2

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Defining Receivables Activities
Define Receivables activities to provide default accounting information for miscellaneous cash,
discounts, finance charges, and adjustments. Activities that are defined in this window appear as
lists of values in various Receivables windows, such as the bank, adjustment, and system options
windows. You can define multiple activities.Screenshot shows the window, where you can
define a Receivables activity:

The Receivables Activities Window

 For Bank Error type activities, you cannot implement tax accounting because
there is no business need to calculate tax on these activities. After you define
Note an activity, you cannot change its type. In addition, you cannot update the GL
account for an existing activity if you have assigned the activity to a
transaction.
To define the receivables activity:
4. Open the Receivables Activities window and enter a name and description for this
activity.
5. Choose the type of activity. An activity type determines whether it uses a distribution set
or GL account. The types of activities are:
Adjustment: Use these activities in the Adjustments window. At least one activity of
this type must be created.
Bank Error: Use these activities in the Receipts window. This activity is used when
you enter miscellaneous transactions.
Earned Discount: Use these activities in the Adjustments and the Remittance Bank
windows. These activities adjust a transaction if a payment is received within the
discount period.
Finance Charge: Use these activities in the Customers and System Options windows.
A finance charge activity is defined if you include finance charges on your
statements or dunning letters.
Miscellaneous Cash: Use these activities in the Receipts window when entering
miscellaneous transactions. You must define at least one activity of this type.
Unearned Discount: Use these activities in the Adjustments and the Remittance
Banks windows. These activities adjust a transaction if payment is received after
the discount period.
3. Specify how AR should derive the accounts for the expense or revenue generated by this
activity by determining a GL account source. Choose a GL account source from:
Activity GL Account: Allocates the expense or revenue to the general ledger account
that you specify for this AR Activity.
Distribution Set: Allocates the expense or revenue to the distribution set that you have
specified for this AR Activity. Choose this option only if the activity type is
Miscellaneous Cash.
Revenue on Invoice: Allocates the expense or revenue net of any tax to the revenue
accounts specified on the invoice.
4. Specify a tax code source from:
Activity: Allocates the tax amount to the Asset or Liability tax accounts specified by
the Receivables Activity.
Invoice: Distributes the tax amount among the tax accounts specified by the tax code
on the invoice.
 None: Allocates the entire tax amount according to the GL Account Source that you
specified. Select this option, if you do not want to separately account for tax.
5. Choose the Tax Recoverable radio button if the tax is deductible, otherwise, choose Non-
Recoverable.
6. Enter an Activity GL Account.

Entering Transaction Information

To make a record of the business with the customers, you need to enter information about
transactions from the Enter Transaction window. Entering transactions in Receivable enables you
to raise an invoice, debit memo, credit memo, deposit, or guarantee. Screenshot shows the
window where you enter the transaction information:

The Transaction Window

To enter invoices or debit memos:
4. Open the Transactions window.
5. If the batch source does not specify the Automatic Invoice Numbering profile option,
then you need to enter a transaction number. If the automatic batch source is specified,
AR automatically assigns a number when you save the transaction. A transaction number
is unique within this batch and it is not possible to modify this number after a transaction
is saved.
6. Enter the date and currency of this transaction. The default date is the batch date. If there
is no batch information, then the default date is the current date. The default currency is
the currency entered at the batch level. You can change the currency to any currency
defined in the system.
 7. Select a transaction source type with a class, either Invoice or Debit Memo.
8. If the transaction batch source has the Post to GL option set to Yes, then enter the GL
Date for this transaction.
9. Enter the customer Bill-To, Name, and Location for the transaction, in the respective
fields.
10. Enter the payment terms for the transaction. The hierarchy used by Receivables to
determine the default payment terms is:
Customer Bill-To site level
Customer address level
Customer level
Transaction Type
8. If manual sequence numbering is used, then open the More section of this window and
enter a unique Document Number.
9. Open the Remit To region from this window and enter the Remit To Address for this
transaction.
10. To enter the goods or services to bill this customer, choose Line Items, and enter the
Item, Quantity, and Unit Price for each item. AR automatically calculates the total
amount for each item.
11. If you have entered an inventory item, enter a Warehouse Name to indicate the ship-from
location for this item. This field is optional.
12. If you want to enter Freight information for an invoice line, select the line, then choose
Freight and complete the information.
13. Save the data. If you are ready to complete this transaction, press the complete tab.
Entering Commitments
A commitment may be an oral or written commitment for certain goods or services for a
prevailing rate. In AR, you can create two types of commitments, Deposits and Guarantee. You
need to follow the same steps to enter commitments as those used to create invoices. The only
difference is that you need to specify the transaction type as either Deposit or Guarantee.
Deposits
Deposits are created to record any advance payment made by customer for goods or services that
will be delivered in the future. The Invoice is raised for the goods or services and then the
deposit invoice is adjusted against it. The steps to create a Deposit Invoice are similar to that of
creating a regular Invoice. To create a deposit invoice, specify the transaction class, Deposit, in
the set up.
After a Deposit invoice is entered and payment is received against the deposit, several journals
are created for the transaction. These are Customers Deposit Account Debit, Revenue Account
Credit, Bank Account Debit, and Customer Deposit Account Credit.
When an order is placed and an Invoice is raised for the goods and services, against the deposit
then the customer's receivable account is debited and the revenue account is credited. The
unearned revenue account is also debited and the customer invoice account is credited.
Guarantees
A guarantee is created to record a contractual agreement with a customer to conduct business
over a specified period. The invoice for the guarantee is raised and it is adjusted against the
invoice raised for the goods or services. Creating an Invoice for guarantee is similar to creating a
regular Invoice. Commitments do not include tax or freight charges. Use the transaction class,
Guarantee, to enter Invoices for a guarantee. In the Commitment tabbed region, you can enter a
range of effective dates for this commitment. If you do not assign an end date, Receivables lets
you enter invoices and credit memos against this commitment until the amount due becomes
zero.
After the full cycle of Guarantees is complete, a set of accounting entries are generated in
receivables, when:
The Invoice for the Guarantee is raised, the unbilled receivable account is debited, and the
unearned revenue account is credited.
The Invoice is raised for goods or services for the guarantee. The customer account is debited
and the revenue account is credited.
Money is received against the goods or services. The bank account is debited and the
customer account is credited.
Entering Invoices with Rules
You can create invoices that span over several accounting periods. The accounting rule
determines the accounting period in which the revenue distributions for the invoice or the
Invoice lines are stored. The invoicing rule determines the accounting period in which the
receivable amount is stored. You can either manually assign invoicing and accounting rules to
transactions you create or import these rules into Receivables using the AutoInvoice utility.
You can also use the accounting rules to determine revenue recognition schedules. The duration
over a predefined number of periods and variable duration lets you define the number of periods
during invoice entry.
The invoicing rules determine when to recognize the receivables for invoices that span over
multiple accounting periods. There are two types of invoicing rules, bills in advance and bills in
arrears.
Bills in Advance
The bills in advance rule is used to recognize the receivables at the time when the bill is raised. It
is an invoice created before the revenue is recognized.
For example, if your company provides services and has to enter into a contract for the next three
months, then you should recognize revenues in that particular month even though you may have
received the payment when you started the service. The invoice raised is a bill in advance and
revenue is recognized in the months ahead. For example, in April you raise an invoice of $1,500
for a three-month contract. The Accounting rule is three months fixed duration. The entries
passed for this invoice are:
 In April, when the invoice is raised, the receivable account debit is $1,500 and the unearned
revenue credit is $1,500. The unearned revenue debit is $500 and the revenue credit is
$500.
In May, when the invoice is raised, the unearned revenue debit is $500 and the revenue credit
is $500.
In June, when the invoice is raised, the unearned revenue debit is $500 and the revenue credit
is $500.
Bills in Arrears
You use the bill in arrears rule if you want to record the receivables at the end of the revenue
recognition schedule.
For example, for the invoice of $1,500 raised for a three-month contract, the accounting entries
passed are:
In April, when the invoice is raised, the unbilled receivable debit is $500 and the revenue
credit is $500.
In May, when the invoice is raised, the unbilled receivable debit is $500 and the revenue
credit is $500.
In June, when the invoice is raised, the unbilled receivable debit is $500, the revenue credit is
$500, the receivable debit is $1,500, and the unbilled receivable is $1,500.
You need to run the revenue recognition program to generate the revenue distribution.
If the GL date for a transaction is in a period that has a status of either Closed
Note or Close Pending, then Revenue Recognition changes the revenue GL date to
the first subsequent period that has a status of Open, Future, or Not Open.

Crediting Transactions
Credit memos are created to reduce the balance due for a transaction. From the Credit
Transactions window, you can enter, update, and review credit memos against specific invoices,
debit memos, or commitments. When you credit a transaction, the appropriate accounting entries
are created. You can credit an entire invoice or specific invoice lines. Freight can also be credited
for an entire invoice or only for specific invoice lines.
You can also delete an incomplete credit memo if the Allow Invoice Deletion option is set to Yes
in the system option window. Before you create a credit memo for the transaction, the
transaction must be complete. Screenshot shows the window where you create crediting
transactions:
The Credit Transaction Window
To create a credit memo against a transaction:
1. In the Transactions Summary or Credit Transactions windows, query the transaction to
credit. If you chose Credit Transactions from the Main menu, enter the number of the
transaction to credit in the Find Transactions window.
2. Enter the batch source for the credit memo. The default is the batch source of the
transaction that is being credited.
3. Enter the date, which is printed on the credit memo. If the batch date is earlier than the
date of the credited transaction, then the default date is the current date. If the date of the
invoice is later than the credit memo date, then the default date is the invoice date.
4. If the batch source does not use the automatic transaction numbering option, then enter a
credit memo number. If you do not enter a number, AR automatically assigns a number
when you save the transaction.
5. Enter a transaction type for the credit memo. The default is the transaction type assigned
to the invoice. You can choose a transaction type with a class of credit memo.
6. Choose the rules method if you are crediting a transaction that uses invoicing and
accounting rules.
7. Enter the currency for the credit memo. If this credit memo is part of a batch, then the
default currency for this memo is the one assigned to the batch. You need to enter
exchange rates if a currency other than the functional currency is entered.
8. Enter a unique document number for this credit memo, if the automatic sequence
numbering is not used. If automatic sequence numbering is used, a number is
automatically assigned when the transaction is completed.
 9. Enter the percentage or amount of line, tax, or freight charges to credit for only the part
of the balance due. The balance due for each type of charge that is credited is created in
the interface table and the sales revenue and non-revenue credit assigned to your
salespersons are reversed.
10. Save the data and complete the transaction.

Setup for Entering Receipts

For creating receipts in receivables you need to record information about banks, receipt batch
sources, and receipt classes.
Defining Banks
Enter the bank information for bank branches with which you do business. Each bank branch can
have several bank accounts and each bank account defined can be associated with the payables
payment documents and receivables payment methods. If you are using Oracle Cash
Management, define a Bank Errors Account, a Bank Charges Account, and a Cash Clearing
Account for each bank account you plan to reconciliate. Screenshot shows the Banks window
where you enter information on the bank:

The Banks Window

To define a bank and bank branches:
1. In the Banks window, enter the basic bank information, such as the bank name, branch
name, bank number, branch number, and address, and select bank as the Institution.
2. Enter the Electronic Funds Transfer (EFT) number if required.
 3. Enter the name and other information about your bank contacts in the Contact region
and save the data.
4. Click the Bank Account button. The Bank Accounts window appears, as shown below-

The Bank Accounts Window

5. Enter the Bank Account Branch and Bank Account Number. The bank account numbers
must be unique within a bank branch.
6. Select Internal Account Use.
7. In the GL Accounts window, enter a cash account, clearing account, bank charges, bank
errors, confirmed receipts, and the future dated payments with a GL code combination.
8. In the More Receivables options, enter receipt and discount GL account information. You
can enter contact information in the Account Contact region.
9. Save the data.
Defining Receipt Batch Sources
The receipt batch source provides default values for the receipt class, payment method, and
remittance bank account fields for the receipts added to a receipt batch. Screenshot below shows
the Receipt Sources window:
The Receipt Sources Window
To define receipt sources:
1. In the Receipt Sources window, enter a unique name and description for this source.
2. Enter a receipt class in the appropriate text box. The receipt class determines the
processing steps for receipts you created using this batch source.
3. Enter a payment method. The accounting for automatic and manual receipts is
determined by the payment method.
4. Enter a bank account to associate a remittance bank. You remit receipts created using the
receipt batch source to the remittance bank.
5. Select either the manual or automatic batch numbering option. If automatic batch
numbering is selected, then you need to enter the last number you want to use when
numbering your receipt batches.
6. Enter the range of dates during which this receipt batch source will be active.
7. Save the data and close the window.
Defining Receipt Classes
Use receipt classes to store receipt information. You can specify the payment method in the
receipt class window. Screenshot shows the Receipt Classes window:
The Receipt Classes Window
To define the receipt class:
8. Open the Receipt Classes window and enter a name for the receipt class.
9. Select a Creation Method from this window. The automatic creation method creates
receipts using the Automatic Receipt program. The manual creation method enables you
to manually enter information in the Receipts or QuickCash windows, or import
information into Receivables using AutoLockbox.
10. Check the Require Confirmation option for this receipt class to be confirmed before these
receipts can be remitted.
11. Choose a remittance method according to the type of receipt class you want. The options
are Standard, Factoring, Standard and Factoring, and No Remittance
12. Check the Bill of Exchange box if creating a bill of exchange receipt class. You cannot
change this attribute after you assign a payment method.
13. Choose one of these Clearance Methods:
Directly: Use this method if you do not expect the receipts to be remitted to the bank
and subsequently cleared. These receipts will be assumed to be cleared at the time
of receipt entry and will not require further processing.
By Automatic Clearing: Use this method to clear receipts using the Automatic
Clearing program. Receipts using this method can also be cleared in Oracle Cash
Management.

By Matching: Use this method if you want to clear the receipts manually in Oracle
Cash Management.
 7. Enter the payment method for this receipt class.
8. Save the data and click the bank account button to assign remittance bank information.
When you click the bank account button, the Remittance Banks window is displayed, as
shown –

The Remittance Banks Window

In the Remittance Banks window:
1. Enter information related to the remittance bank, such as the bank name, branch, account
name, and a range of effective dates.
2. Enter a minimum receipt amount if the creation method of the receipt class is automatic.
3. Clear the Primary check box, if you do not want this account to be the primary remittance
bank account in this currency for the payment method.
4. Enter GL Account information for the remittance bank. When you select a receipt batch
source to enter receipts, AR automatically uses the cash, unapplied, unidentified, on-
account, or earned and unearned discount account information assigned to this payment
method.
5. Enter the formatting program information only if the creation method of the associated
receipt class is automatic.
6. Save the data and close the window.

Entering Receipts
You use the Receipts window to enter receipt transactions. There are two types of receipts:
 Cash receipts: Receipts, such as cash or cheques received from customers for goods or
services.
Miscellaneous transactions: Receipts earned from investments, interest, refunds, and stock
sales other than regular sales.
You apply receipts to invoices, debit memos, deposits, guarantees, on-account credits, and
chargebacks. You can apply receipts either fully or partially to a single debit item or to multiple
debit items from the Receipts window, as shown -

The Receipts Window

Receipts can have the status:
Approved: Receipt has been approved for automatic receipt creation.
Confirmed: Manually entered receipts that require remittance.
Cleared: Payment is transferred to the bank account and the bank statement has been
reconciled.
Reversed: Customer has stopped payment on a receipt.
To enter receipts:
1. Open the Receipts window and choose a receipt type.
2. Enter the receipt number, currency, receipt amount, GL date, and receipt date.
3. Enter a payment method. The payment method determines the accounting and remittance
bank accounts for this receipt.
 4. Enter a unique document number if you are using manual document numbering. If you
are using automatic document numbering, a unique number is assigned automatically.
5. Enter the transaction number of the customer for the receipt. The name customer
associated with this transaction appears in the Receipts window.
6. If you have not entered the transaction, apply the receipt number by pressing the
Application button and then choose the transaction.
7. From the remittance tabbed region enter the receipt deposit date. This value is optional.
8. The default remittance bank account is displayed from the payment method you enter.
Accept this value or enter any bank account assigned to the payment method if the bank
account is in the same currency as that of the receipt.
9. Save the data.
Manually Applying Receipts
If the receipt is not applied to the respective debit item in the Enter Receipt window, then you
need to use the Applications window to apply the receipts. You can apply all receipts, a part of
the receipt, or on account credit to a single debit item or to several debit items, as shown -

The Applications Window

To manually apply receipts:
1. In the Receipts window, click Application Button to apply the receipts.
2. Enter the name or number of the customer if the receipt is unidentified.
3. Select the transaction to apply this receipt from the list of values. AR enters the amount
applied for this receipt and updates the unapplied amount of the receipt and the balance
due for this transaction.
 4. Enter On Account in the Transaction Number field to place an amount on account.
5. Save the data and Receivables will update the customer's account balances.

Remittances
You need to perform the remittance process to initiate receipts to the bank from the bank account
of the customer. You have to create, approve, and format remittances. You can also combine
these tasks into a single task. Screenshot shows the Remittance window, where you perform the
remittance process:

The Remittance Window

You can create remittance batches to automatically select receipts for remittance to the
customer's bank and to initiate the transfer of funds. You can either create one remittance batch
for every remittance bank account or choose a clearing institution to get the receipts cleared. If
you choose to approve and format your batch when you create it, then AR initiates an additional
process that creates the formatted batch information.
To create a remittance batch:
1. Open the Remittances window and enter the currency for this batch.
2. Enter the batch and GL dates. The default batch date is the current date and the GL date
must be within an open accounting period.
3. Choose a remittance method. The standard method remits the batch of receipts on the
maturity date. The factoring method lets you borrow money against the receipts before
the maturity date.
 4. Enter or select from the list the information related to the receipt class, payment method,
and remittance bank for this batch. The default remittance bank is generally the primary
remittance bank account associated with the payment method.
5. Select Auto Create to create this remittance batch automatically.
6. Enter the selection criteria to create this remittance batch. AR selects all confirmed
automatic receipts and manual receipts that match the criteria.
7. Check the Approve and Format options to approve and format this remittance batch.
8. Click OK, and then select Yes from the Remittance window to acknowledge the message
that is displayed. A unique Request ID number is assigned for your concurrent request.
Manually Creating a Remittance Batch
To create a remittance batch manually:
1. Choose Manual Create from the main menu and specify the receipts to include in this
batch.
2. Using selection criteria, specify the transactions that will be displayed by AR.
3. Enter a range of payment methods and maturity dates to display or choose from:
Query Batch Only: Displays receipts that are associated with this batch.
Ignore Override: Displays all receipts matching the selection criteria.
Select All: Marks transactions that AR displays to be included in this remittance
batch.
4. Query the receipts.
5. To add the receipts to the batch, check the box next to each receipt.
6. Save the entered data to create the batch. A unique Request ID number is assigned for the
concurrent request. Using this Request ID, check the status of the remittance process in
the View Concurrent Requests window.
After you submit the request, AR creates the Automatic Receipts and
Note Remittances Execution report. The report lists the number and amount
of remittances in