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COGS Process Flow

The document outlines the steps to set up and run a revenue and cost of goods sold (COGS) matching example using an accounting rule of recognizing revenue over 3 months in a deferred manner. It involves defining an item, receiving inventory, setting the item cost and accounting rules, entering a sales order, shipping the order, generating an invoice, recognizing revenue over 3 months, and running processes to record transactions and generate a COGS recognition transaction to match the recognized revenue percentage.

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41 views

COGS Process Flow

The document outlines the steps to set up and run a revenue and cost of goods sold (COGS) matching example using an accounting rule of recognizing revenue over 3 months in a deferred manner. It involves defining an item, receiving inventory, setting the item cost and accounting rules, entering a sales order, shipping the order, generating an invoice, recognizing revenue over 3 months, and running processes to record transactions and generate a COGS recognition transaction to match the recognized revenue percentage.

Uploaded by

Rubini
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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The following scenario illustrate a short example of a Revenue / COGS matching for a sales order

where Accounting rule used is: 3 Months, Deferred

Please review attached file COGS1-Example

1.Define new Item


  Navigate to : Inventory>Define item MM-ITEM65 (Purchase Item)
  Assign to Organization  M3

2.  Do a Miscellaneous Receipt in Organization  M3.


  Navigate to : Navigation: Miscellaneous Transactions>Receive MM-ITEM65 in Subinventory
Store.
  Qty 100@15USD

3. Check  Item cost :


  Navigate to :  Costs>Item Costs>Enter Item MM-ITEM65 : Unit cost =15 USD

4. Define Accounting Rules in Account Receivables

  Navigate to :  Account Receivables>Setup>Transactions>Accounting Rules


  There are two Predefined Accounting rules
  a-3 Months , Deferred
  b-Immediately

5.Navigate to :  Sales Order screen > Enter a SO 


  Order Type =Mixed,
  Customer=xxx
  Ordered item MM-ITEM65/qty=5/ price=15/ Accounting rule=3 Months, Deferred,
  Date Ordered: 04-AUG-2009 ,
  Total Value =75
  Shipping warehouse=M3
  (eg 63849)

6. Book the SO: SO 63849 booked

7. Navigate to: Order Management >Shipping>Transactions >Enter SO


 a. Pick Release the SO
 b.Ship Confirm the SO

  Item is shipped
  Line is closed

8. Review the Material Transactions form

9. Distribution of the SO issue

  When a Sales order is shipped the following accounting takes place:

  Inventory Valuation Account: Credit.


   Deferred COGS account: Debit

10. Run the Workflow Background Process request


11. Create the Invoice with the Autoinvoice request
  Navigate to : Sales Order Accounts Receivables>Interfaces>Autoinvoice

12.Check the Invoice in AR


  Navigate to : Accounts Receivables>Control>Revenue Accounting>Enter reference number: SO
(ie.63849)

13. Invoice generated:


  Invoice= 10033708

14. Recognize the revenue in AR >


  Navigate to : Accounts Receivables>Control>Run Revenue Recognition request

15. After recognizing the revenue. We need to accept it.


   Navigate to : Accounts Receivables>Control>Revenue Accounting>Enter reference number: SO
(ie.63849)Manage Revenue>Schedule Revenue

16. Now the revenue has been recognized according to our accounting rule: 3 Months, Deferred
  GL Date                        Amount
  50% August                    37.5
  25%September               18.8
  25%October                   18.7

  For August:  50% of the revenue has been recognized

17. Now we run a set of concurrent processes to record sales order and revenue recognition
transactions and to create and cost COGS recognition transactions.  These COGS recognition
transactions adjust deferred and earned COGS in an amount that synchronizes the % of earned
COGS to earned revenue on sales order shipment lines.

18. Record Order Management Transactions: records new sales order transaction activity such as
shipments and RMA returns in Oracle Order Management.

19. Collect Revenue Recognition Information: determines the percentage of recognized or earned
revenue related to invoiced sales order shipment lines in Oracle Receivables.

20. Generate COGS Recognition Events: creates and costs COGS recognition events for new sales
order shipments/returns and changes in revenue recognition and credits for invoiced sales order
shipment lines.

21. A non-physical transaction has been generated Transaction Type= COGS Recognition

  The distribution for the COGS Recognition transaction associated with the Sales Order
transaction now would be as follows:

  Deferred COGS : Debit revenue percentage


  COGS : Credit (Actual revenue percentage )

  Thus, essentially the recognized COGS balance is to move the value from Deferred COGS to
COGS.
  This particular COGS recognition transaction actually corresponds to a revenue recognition
percentage change.
 

Note:

Make sure you are on the latest file version CSTRCMVB.pls 120.45.12010000.92 Patch
20770685:R12.BOM.C or higher                  

For additional information, please review the following Notes:

DCOGS AND COGS RECOGNITION ACCOUNTING USEFUL TIPS 

https://support.oracle.com/epmos/faces/DocumentDisplay?
_afrLoop=174009089646380&parent=DOCUMENT&sourceId=867912.1&id=1060202.1&_afrWind
owMode=0&_adf.ctrl-state=yp1orhgdb_53

R12 : Deferred COGS account Note 416678.1

https://support.oracle.com/epmos/faces/DocumentDisplay?
_afrLoop=174028461568810&parent=DOCUMENT&sourceId=867912.1&id=416678.1&_afrWindo
wMode=0&_adf.ctrl-state=yp1orhgdb_102

COGS Dataflow and Diagnostics Note 1307906.1

https://support.oracle.com/epmos/faces/DocumentDisplay?
_afrLoop=174052920330412&parent=DOCUMENT&sourceId=867912.1&id=1307906.1&_afrWind
owMode=0&_adf.ctrl-state=yp1orhgdb_151

COGS / Deferred COGS common problems Note 1314335.1

https://support.oracle.com/epmos/faces/DocumentDisplay?
_afrLoop=174066179904319&parent=DOCUMENT&sourceId=867912.1&id=1314335.1&_afrWind
owMode=0&_adf.ctrl-state=yp1orhgdb_200

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