Few Concepts on General Ledger
February 14, 2011 1 Comment
Few Concepts on General Ledger
What is General Ledger?
The Oracle General Ledger is the central repository of accounting information. The main purpose of a general ledger system is to record financial activity of a company and to produce financial and management reports to help people inside and outside the organization make decisions.
General Ledger Accounting Cycle:
- Open period
- Create/reverse journal entries
- Review/correct balances
- Run accounting reports
- Close accounting period
What are Set of Books?
A set of books determines the functional currency, account structure, and accounting calendar for each company or group of companies. It is replaced by the Ledger Sets in R12.
Set of Books consists of the following Three elements
- Chart of Accounts: COA can be designed to match the Organizational Structure and dimensions of the business.
- Currency: GL enables to define one currency as Functional Currency and use other currencies for transactions.
- Calendar: Calendar has to be defined to control the accounting year and its periods.
Types of Journal Entries:
Within Oracle General Ledger, you can work with the following types of journal entries:
Manual Journal Entries
The basic journal entry type is used for most accounting transactions. Examples include adjustments and reclassifications.
Reversing Journal Entries
Reversing journal entries are created by reversing an existing journal entry. You can reverse any journal entry and post it to the current or any future open accounting period.
Recurring Journal Entries
Recurring journal entries are defined once, then are repeated for each subsequent accounting period you generate. You can use recurring journal entries to define automatic consolidating and eliminating entries. Examples include intercompany debt, bad debt expense, and periodic accruals.
Mass Allocations are journal entries that utilize a single journal entry formula to allocate balances across a group of cost centers, departments, divisions or other segments. Examples include rent expense allocated by headcount or administrative costs allocated by machine labor hours.
Foreign Currency Concepts:
The three key foreign currency concepts in Oracle General Ledger are:
Conversion refers to foreign currency transactions that are immediately converted at the time of entry to the functional currency of the set of books in which the transaction takes place.
Revaluation adjusts liability or asset accounts that may be materially understated or overstated at the end of a period due to a fluctuation in the exchange rate between the time the transaction was entered and the end of the period.
Translation refers to the act of restating an entire set of books or balances for a company from the functional currency to a foreign currency.
What are Financial Statement Generator Reports (FSG)?
Oracle General Ledger’s Financial Statement Generator (FSG) is a powerful and flexible tool you can use to build your own custom reports without programming. You can define custom financial reports, such as income statements and balance sheets, online with complete control over the rows, columns, and content of your report. You can control account assignments, headings, descriptions, format, and calculations in addition to the actual content. The reusable report components make building reports quick and easy. You can copy a report component from one report, make minor edits, then apply the report component to a new report without having to create a new report from scratch.
What is Applications Desktop Integrator(ADI)?
Applications Desktop Integrator combines the power of Oracle General Ledger journal entry, budgeting, and report creation, submission, publishing, and analysis within an Excel spreadsheet environment.
Every journal entry in Oracle General Ledger has three components.
- Every journal entry belongs to a batch. You create a batch of journal entries by entering a name, control total and description for the batch.
- This step is optional. If you do not enter batch information, Oracle General Ledger automatically creates one batch for each journal entry, defaulting the name and the latest open period.
- All journal entries in a batch share the same period.
- Entering a batch control total and description are optional.
- If you do not enter a batch name, you must recall the journal entry by date.
- Batch information is stored in the GL_JE_BATCHES table.
Journal Header Information
- The header information identifies common details for a single journal entry, such as name, effective date, source, category, currency, description, and control total.
- Group related lines into journal entries
- All lines in a journal entry must share the same currency and category.
- If no journal entry-level information is entered, Oracle General Ledger assigns a default name, category, and the functional currency.
- Header information is stored in the GL_JE_HEADERS table.
Journal Line Information
- Journal lines specify the accounting information for the journal entry.
- Total debits must equal total credits for a journal entry for all journal entries except budget journal entries and statistical journal entries.
- Description for each line can be entered optionally.
- Information for journal entry lines is stored in the GL_JE_LINES table.
Journal Posting Methods:
You have three methods to post journal batches.
Batch Posting: Navigate to the Post Journals window to post a group of journal batches.
(N) Journals > Post
Manual Posting: Select the More Actions button from either the Journals window or the Batch window to post a journal batch at the time of entry. This option is available only if the profile option Journals: Allow Posting During Journal Entry has been set to Yes.
When you post journals, Oracle General Ledger posts all journals in a batch. You cannot post individual journal entries in a batch.
(N) Journals > Enter (B) More Actions
Automatic Posting: Run the AutoPost program to post journal batches automatically based on a schedule you define.
(N) Setup > Journals > AutoPost