Define Journal Line Types

Journal line types are defined for a particular event class and must then be assigned to:

• A journal lines definition along with supporting references 
• Account derivation rules, 
• Journal entry descriptions. 

The journal entry line can have any of the following balance types: 

• Actual
• Budget 
• Encumbrance

Journal line types specify if the journal line is to be one of the following:

• Debit: For example, when a Payables invoice is generated, the liability account should normally be credited. The journal line type must therefore specify the Side option as Credit. 

• Credit: For example, the payment of the Payables invoice must be accounted with a debit to the liability account. A separate journal line type must be defined to create this debit line. 

• Gain/Loss: The gain/loss amount is the difference in the ledger currency due to foreign currency fluctuations. Gain or loss amounts occur when two related transactions, such as an invoice and its payment, are entered in a currency other than the ledger currency, and the conversion rate fluctuates between the time that the two are accounted. 

Journal entry lines are transferred to General Ledger in summary or detail mode. 

Defining Journal Line Types

Users can define conditions to restrict the use of a journal line type by controlling when a particular journal line type is used by the Subledger Accounting program.

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Subledger Accounting: Accounting Setup >Accounting Methods Builder > Journal Entry Setups > Journal Line Types

To define journal line types, enter the following fields:

• Application: Automatically populated with the application name associated with the user's responsibility.

• Line Type Code: The list of values displays the component name and the owner to distinguish between seeded and user-defined components.

• Name: Appears in the list of values when assigning the journal line type to a journal lines definition.

• Accounting Class: Shared across applications and enables users to classify journal entry lines. For example, when a receipt is matched to a purchase order and the accrual method is On Receipt, an accrual journal line is created upon receipt creation. When the Payables invoice is matched to a purchasing document, Payables creates a journal line reversing the original accrual. In this case, Purchasing and Payables define journal line types to generate these accruals and both of them can assign the accounting class Accrual. Accounting classes are defined using an extensible AOL lookup type. The list of values for this field contains all accounting classes that are seeded but users can add new accounting classes.

• Rounding Class: Defaults to the accounting class. The rounding class, along with the transaction rounding reference accounting attribute, groups lines together in order to determine whether rounding is necessary.

• Enabled: If selected, makes this journal line type available for use.

• Encumbrance: If this balance type is selected and the business flow method is not Prior Entry, an encumbrance type must be selected from the drop-down list. See: Defining Encumbrance Types, Oracle General Ledger User Guide This field is disabled if Prior Entry is selected as the business flow method or if Accrual or Recognition is selected as the Multiperiod option.

• Side: A Gain/Loss journal line type creates a debit line for a loss and a credit line for a gain. The gain/loss side journal line type is used exclusively for the gain or loss amount automatically calculated by Subledger Accounting and can only be defined for the actual balance type. 

Note: For journal line types with a side of Gain/Loss, the following accounting attributes are not displayed in the Accounting Attributes Assignments window when accessed from this window: 

• Applied to Application ID 

• Applied to Distribution Type 

• Applied to Entity Code 

• Applied to First Distribution Identifier .

• Applied to First System Transaction Identifier 

• Multiperiod End Date 

• Multiperiod Option 

• Multiperiod Start Date 

• Conversion Date 

• Conversion Rate 

• Conversion Rate Type 

• Entered Amount 

• Entered Currency Code Note: If the business flow method Prior Entry or Same Entry is selected, the Gain/Loss option cannot be selected. The Gain/Loss option can only be selected if the business flow method is set to None and the Multiperiod option is also set to None.

• Switch Debit/Credit: Determines whether negative amounts will result in negative amounts on the same side or positive amounts on the opposite side. Note: If the Side is Gain/Loss, the Switch Debit/Credit field is disabled.

• Merge Matching Lines: Summarizes subledger journal lines within each subledger entry. Journal entry lines with matching criteria are merged. The possible values are:

• All: All matching lines within a subledger journal entry with the same values for the following attributes:

• Accounting Class 

• Rounding Class

• Transaction Rounding Reference

• Switch Side flag

• Gain or Loss flag

• Business Flow Class code

• Multiperiod Option

• Currency

• Conversion Rate Type

• Conversion Date

• Conversion Rate

• Third Party

• Third Party Site

• Third Party Type

• Accounting Flexfield

• Description

• Reconciliation Reference

• Gain/Loss Reference

• Encumbrance Type As a result of merging, a journal entry line with a net of zero amount can be created. 

Note that choosing All only merges all lines within a given subledger journal entry. This does not impact the transfer to General Ledger of summarized data. The latter is decided by making a choice in the Transfer to General Ledger region.

 

• No: Matching lines are not merged.

• Dr/Cr: Matching lines with the same debit or credit side are merged to produce a single debit or credit line when the attributes listed above are matching across debit or credit lines. Note: Normally, users merge matching lines. However there are some exceptions. For example, in Italy, gain or loss amounts must be recorded for each invoice payment rather than at the total payment level. By setting the merge selection to No, users guarantee that journal entry lines are not merged, even though they are for the same transaction and entry

• Subledger Gain or Loss: Yes indicates that gain/loss is calculated in the primary ledger. The gain/loss amount is therefore not converted to the reporting currency and non-valuation method secondary ledgers. Select No for Subledger Accounting to calculate the gain or loss. Note: When Gain or Loss is set to Yes, multiperiod accounting is disabled.

• Transaction: Transaction chart of accounts.

• Method: Business flow method If Prior Entry or Same Entry is selected, the Gain/Loss option in the Side region cannot be selected. If Prior Entry is selected, then the following accounting attributes are inherited from an upstream journal entry and cannot be selected or updated in the Accounting Attributes Assignments window: 
• Currency Code 
• Conversion Rate Type 
• Conversion Date 
• Conversion Rate 
• Party Type 
• Party Identifier 
• Party Site Identifier 
• Encumbrance Types

• Class: Business flow class; required if the business flow method is Prior Entry

• Multiperiod:

• None: Journal line type will not create multiperiod accounting.
• Accrual: To create the accrual journal line for the originating entry, such as prepaid expense
• Recognition: To create the recognition journal line Note: When Gain or Loss is set to Yes, multiperiod accounting is disabled and defaults to None.

• Transfer to GL: Select Detail to maintain the same level of detail as the subledger journal entry line. Select Summary to summarize subledger journal entry lines by Accounting Flexfield. One journal line is created in General Ledger to record the subledger activity.

• Conditions: Opens the Journal Line Type Conditions window.

• Accounting Attribute Assignments: Note: This button is enabled when the conditions are entered. Opens the Journal Line Accounting Attribute Assignments window. When creating a journal line type, accounting attribute assignments are automatically established based on the default accounting attribute assignments for that journal line type's event class or entity. In the Journal Line Accounting Attribute Assignments window, override this default mapping of standard sources to accounting attributes. The list of values for the Source field contains all header level sources that are assigned by developers to the accounting attribute and event class associated with the journal line type. Users can assign a source to the Reconciliation Reference accounting attribute which is used to meet accounting requirements in continental Europe.

The Business Benefits of Oracle Subledger Accounting

Oracle E-Business Suite Release 12 introduces a new centralized function called Subledger Accounting (SLA) that works together with Oracle General Ledger (GL) to provide a world-class accounting system. Oracle Subledger Accounting allows you to:

• Lower costs with streamlined accounting processes
• Meet diverse global accounting requirements and maintain internal controls
• Access better information and provide better reporting

Lower Costs with Streamlined Accounting Processes

Simplify and Standardize Accounting Processes

When an organization standardizes its accounting policies, it needs to document the policy, communicate it to those who must apply it, and ensure the standard policy is enforced – not always an easy task. Oracle Subledger Accounting offers support for these initiatives by formalizing the generation of global accounting entries into centralized accounting rules. Corporate accounting policy is documented in the form of user-defined accounting rules within Oracle Subledger Accounting.

These rules can be distributed across database instances to insure the entire enterprise adheres to the same set of rules, even if they operate on multiple instances. Enforcement of the rules is automatically achieved because SLA creates the accounting entries for all subledger transactions using the accounting rules that the company has defined. Users without access to the rules cannot modify or override them, providing your enterprise centralized control.

Centralize Accounting Data from Third Party Systems

Oracle Subledger Accounting, in combination with Oracle Financial Services Accounting Hub, enables you to centralize accounting data from any third party transactional system. Together, they offer an open repository and a centralized accounting engine for transactional data from any third party source.

User-Configurable Accounting Rules

Every company is different, there is no end to the variations and preferences that companies have when it comes to how accounts should be derived and the type of information that should be captured in journal entries for management and financial reporting purposes. Oracle Subledger Accounting offers maximum flexibility for generating accounting entries by making it possible for the user to configure accounting rules based on virtually any attribute of a transaction. For example, the expense account for a payables invoice could be derived based on any attribute of that invoice including item, item type, or PO distribution. The liability account can be based on the supplier, or even broken out into multiple liability accounts by supplier site.

Streamline Period-End Close and Improve Reconciliation

Closing the books at period end in a timely fashion is always given high priority. Problems such as accounting entries recorded to the wrong account, last-minute adjustments and reconciliation issues tend to slow down the process. Oracle Subledger Accounting offers a wide variety of features to help you expedite this process:

Accurate Accounting: Journal entries recorded to the wrong account are a common cause of reconciliation issues during the close process. SLA allows you to define, test and validate accounting rules; therefore, journal entries generated by SLA have very little risk of error.

Online Accounting: With Oracle Subledger Accounting, you can launch accounting directly from the transactions window to initiate those last minute journal entries. Straight through processing allows real-time, single step posting to all relevant ledgers (primary, secondary and reporting ledgers).

Preview Accounting: For tricky last-minute adjustment transactions that need to be recorded in the subledger, you want to be sure you don’t make a mistake because once the accounting is created for the transaction, it cannot be changed. If there is an error, it could mean another manual adjustment must be made in the general ledger, which may require another round of approvals, posting, etc. SLA resolves these issues by allowing you to preview the journal with the exact GL accounts that would be impacted by the transaction before you actually post it. 

Controlled Accounting: Transactions erroneously posted to the wrong account are another cause for reconciliation issues. For example, the supplier liability account may not reconcile to the supplier invoice totals if an erroneous manual journal was posted in general ledger that updated the liability account balance. You can prevent this from occurring with Oracle Subledger Accounting by designating any account as a ‘control account’. This flag prevents GL manual journals from posting to them as well as SLA journals from inappropriate subledgers. 

Streamlined Accounting: Bottlenecks in the close process sometimes occur when an account has been disabled, but existing transactions still use the disabled account and remain to be imported to the general ledger. In Release 12, Subledger Accounting in conjunction with Oracle General Ledger has introduced the ability for users to specify a replacement account for any account combination that has been disabled. 

Comprehensive Accounting: When you are ready to close the accounting period, how do you know there aren’t any lingering transactions in the subledgers that haven’t been processed yet? Oracle Subledger Accounting informs you of outstanding transactions in any of the subledgers for the period you are trying to close. This feature allows you to close the period with confidence. Oracle Subledger Accounting includes many features that minimize reconciliation issues and proactively helps you to close your books faster.

Meet Diverse Accounting Requirements and Maintain Controls

Enable Concurrent Compliance with Multiple Accounting Standards

Mergers and acquisitions and evolving compliance requirements in regulated industries such as Insurance and Telecom, also add new levels of complication to the mix. Multi-national enterprises operate in different countries, each often with its own set of accounting and reporting requirements. This results in the local accounting office having to produce multiple sets of financial statements to satisfy local, statutory, and parent company reporting needs. 

Oracle Subledger Accounting was designed precisely to address such dynamic and multifaceted business environments. It provides you with the ability to control and enforce your standard accounting practices, but also gives you the flexibility to handle the exceptions and define additional sets of accounting rules where needed. Together with Oracle General Ledger, Subledger Accounting enables compliance with multiple accounting requirements concurrently in a single instance or even across database instances. 

SLA enables you to satisfy different accounting regulations by maintaining and applying different sets of accounting rules to different sets of transactions or by accounting for the same transaction with multiple methods.

Increase Transparency and Enable Complete Auditability

Business and accounting processes must be clearly documented and material deviations from them are scrutinized by the auditors and must be explained. The transparency of Oracle Subledger Accounting rules and journal entries helps you stand up to the rigors of a visit from your auditors. SLA rules are defined and stored within the system and can be queried and reviewed at any time by interested parties. These rules are even date-effective, so changes to them over time can be recorded as historical backup. 

The journal entries that are created when the rules are applied are stored with references to the accounting rules that generated them and linked to the transactions from which they originated. These links allow you to drill down from journal entries to the underlying transactions so you can access the details quickly. The subledger journals combined with the accounting rules offer full disclosure of how the accounting was created for every subledger transaction and provide assurance that it was done correctly.

Get Better Information and Provide Better Reporting

Build Relevant End-User Reports

Similar to hard-coded accounting rules, hard-coded reports that are not user-configurable seldom meet the needs of most audiences. To address the gap, users often resort to creating expensive custom reports to extract the information that they need from their accounting systems. In order to eliminate the need for customized reports, Oracle Subledger Accounting has fully embraced Oracle BI Publisher. The combination of BI Publisher and SLA allows end-users to easily create reports that are relevant to the business requirements at hand with no expensive customizations required.

Build a Better Foundation for Reporting and Analysis

The general ledger is the foundation of any accounting system because it represents the convergence of accounting data from different sources and applications to provide a complete financial picture of a company or organization. In order to keep the general ledger streamlined, most enterprises typically store only summary level data. The downside of maintaining only summary level data in the general ledger becomes apparent when you need to see the detail behind the accounting data. You need to go back to each individual source system or application that affected the general ledger account balance to get the information you want. This can be a tedious and time-consuming task. Just as Oracle General Ledger stores balances and journals, Subledger Accounting stores subledger balances and subledger journals for all of your transaction systems that require accounting.

Report on User-Selected Attributes

Companies frequently want to analyze account balances and financial results by different transaction attributes. For example, they want revenue and receivables broken down by sales rep, profitability by customer, cost of goods and payables by vendor, and so on. However, transaction information like sales rep, customer, vendor, etc. is typically not stored in the general ledger due to the volume of GL data it would create, so users were not be able to analyze GL data categorized by transaction attributes. In Release 12, Oracle Subledger Accounting enables you to perform this type of reporting and analysis using supporting reference information from subledger transactions.


Reference: Oracle White Paper "The Business Benefits of Oracle Subledger Accounting" 

Accounting for Material Transactions in an Average Cost Organization

Transaction	Accounting Entries			Average Cost Recalculated?
	Accounts		Value
PO Receipt	DB	Receiving Inspection	PO price	No, same as current.
	CR	A/P Accrual	PO price
PO Delivery to subinventory	DB	Subinventory Valuation	PO price +MOH	Yes.
	CR	Receiving Inspection	PO price
	CR	Material OH Absorption	calc’d MOH
Return to Receiving from subinventory	DB	Receiving Inspection	PO price	Yes, if MOH had changed since receipt, must use original rate— DOCUMENT.
	DB	Material OH Absorption	MOH
	CR	Subinventory Valuation	PO price +MOH
Return to Vendor from Receiving Inspection	DB	A/P Accrual	PO price	No.
	CR	Receiving Inspection	PO price
Subinventory Transfer—asset subinventory to asset subinventory	DB	Subinventory Valuation— receiver	Current average	No
	CR	Subinventory Valuation—sender	Current average
Subinventory Transfer—expense subinventory to expense subinventory		No Entries		Not Applicable
Subinventory Transfer—asset to expense or vice verse	DB	Subinventory Valuation or Expense—receiver	Current average	No
	CR	Subinventory. Valuation or Expense—sender	Current average
Miscellaneous Receipt	DB	Subinventory Valuation	Current average or U.S.	Yes, if user overrides, new average is calculated.
	CR	User-specified Account	Current average or user-specified (U.S.)
Miscellaneous Issue	DB	User-specified Account	Current average or U.S.	Yes, if user overrides, new average is calculated.
	CR	Subinventory Valuation	Current average or U.S.
RMA Receipt	DB	Subinventory Valuation	Average cost of original shipments on sales order line	Y es, if reference to sales order line exists.
	CR	Cost of Goods Sold	Average cost of original shipments on sales order line
RMA Return	DB	Cost of Goods Sold	Current average	No.
	CR	Subinventory Valuation	Current average
Direct Interorg Transfer—expense to expense	DB	No entries		Average Cost Recalculated? Not applicable. Applies to both standard and average organizations.
	CR
Direct Interorg Transfer— Std org to Average org except expense to expense	DB	Subinventory Valuation—receiver Standard	Current average	Yes
	CR	Subinventory Valuation—sender
	DB	Interorg Receivable
	CR	Interorg Payable
Direct Interorg Transfer— Average org to Average org excluding exp to expense	DB	Subinventory Valuation—receiver	Current average	Yes, (receiving org) recalculation of average cost is not applicable if receiving subinventory is expense.
	CR	Subinventory Valuation—sender
	DB	Interorg Payable
	CR	Interorg Receivable (sending org)
Direct Interorg Transfer— Average org to Standard org excluding expense to expense	DB	Subinventory Valuation—receiver		No. there is no PPV if receiving subinventory is expense.
	CR	Interorg Payable (sending org)
	DB	Interorg Receivable
	DB	PPV—receiving org
	CR	Subinventory Val—sender
Receipt from Intransit (Standard org) into Average org— FOB Receipt	DB	Subinventory Valuation—receiver	Standard	No, same as standard asset to average (intransit is an asset subinventory).
	CR	Interorg Payable
	DB	Interorg Receivable
	CR	Intransit Inventory
Receipt from Intransit (Average org) into Average org— FOB Receipt	DB	Subinventory Valuation—receiver		Yes, recalculation of average cost is not applicable if receiving subinventory is expense.
	CR	Interorg Payable	Current average
	DB	Interorg Receivable
	CR	Intransit Inventory
Shipment to Intransit from Average org—FOB Receipt	DB	Intransit Inventory	Current average	No, intransit is booked elementally, asset to intransit washes.
	CR	Subinventory Valuation or Expense
Receipt from Intransit into Average org—FOB Shipment	DB	Subinventory Valuation or Expense	Current average	No, intransit to asset in and out of the same accounts.
	CR	Intransit Inventory	Current average
Shipment to Intransit (Average org ) from Standard org asset subinv—FOB Shipment	DB	Intransit Inventory		Yes.
	CR	Interorg Payable	Standard
	DB	Interorg Receivable
	CR	Subinventory Valuation—sender
Shipment to Intransit (Avg org) from Std org expense subinventory—FOB Shipment	DB	Intransit Inventory	Standard	Yes.
	CR	Interorg Payable
	DB	Interorg Receivable
	CR	Subinventory Valuation—sender
Shipment to Intransit (Avg) from Avg org—FOB Shipment	DB	Intransit Inventory	Current average	Yes, unit cost recalculated in receiving organization.
	CR	Interorg Payable(sending organization)
	DB	Interorg Receivable
	CR	Subinventory Valuation—sender
Inventory Adj— cycle count or physical inv	DB	Inventory Adjustments	Current average	No, same as current
	CR	Subinventory Valuation
Sales Order Shipment	DB	Cost of Goods Sold	Current average	No.
	CR	Subinventory Valuation
Receipt of Vendor Invoice	DB	A/P Accrual	PO Price	Not applicable.
	CR	Accounts Payable	Invoice
	DB	IPV
Issue to Job from subinventory	DB	Work in Process Inv	Current average	No, expense subinventory to expense job carries no cost.
	CR	Subinventory Valuation
Component Return to subinventory	DB	Subinventory Valuation	Current average	No.
	CR	Work in Process Inv
Charge Labor Resource to WIP job	DB	Work in Process Inv	Actual	Not applicable. standard rate = No; charge type = Manual; actual employee rate.
	CR	Resource Absorption
Charge Non-Labor Resource to WIP job	DB	Work in Process Inv	User-defined	Not applicable. Pre-defined rate or actual rate.
	CR	Resource Absorption
Charge Overhead to WIP job	DB	Work in Process Inv	Calculated OH	Not applicable
	CR	Overhead Absorption
Charge Outside Processing to WIP job	DB	Work in Process Inv	PO price	No
	CR	OSP Resource Absorption
Complete Assemblies	DB	Subinventory Valuation	Calc avg +MOH	Yes, completion algorithm calculations based on job charges.
	CR	Work in Process Inv	calc avg
	CR	Material OH Absorption	calc’d MOH
Return Assemblies to WIP	DB	Work in Process Inv	Average cost of job completions	Yes.
	DB	Material OH Absorption
	CR	Subinventory Valuation
Scrap Assemblies from WIP	DB	Scrap	Calculated	Not applicable. If checkbox Require Scrap Account is checked, scrap calcs are based on job charges
	CR	Work in Process Inv
Reverse Scrap	DB	Work in Process Inv	Average cost of job scrap	No.
	CR	Scrap
Close WIP Jobs	DB	Variance		Not applicable. Entries only if job has a residual
	CR	Work in Process Inv
Average Cost Update	DB	Subinventory Valuation	User-specified	Yes, enter % or amount of change, or new unit cost.
	CR	Inventory Adjustment