Oracle General Ledger – Configuration

In previous post we discussed about the concept of Legal Entity in Oracle R12. Now we see the configuration steps involved in Oracle General Ledger.

Oracle General Ledger provides highly automated financial processing. It can import and post millions of journal lines per hour, making it the fastest and most scalable general ledger on the market. It provides tools for effective management control and real-time visibility to financial results. It also helps to meet financial compliance.

Following steps are involved in Oracle General Ledger configuration:

Step#1-Legal Entity Creation (Its detail is already discussed in previous post naming Legal Entity Concept in Oracle R12)

Navigation path: Legal Entity Manager>Legal Entity Configurator

 

Step#2-Accounting Flexfield

Accounting Flexfield is a Key Flexfield which is created to define your Chart Of Accounts (COA). A chart of accounts is a list of accounts used by a business to classify financial transactions. A good chart of accounts provides flexibility for recording and reporting accounting information, provides structure for managing business uniformly, and enhances communication across all parts of the business.

(In next post we will discuss the detail about the determinants which should be kept in mind while finalizing the structure of Chart Of Accounts)

When you first define your chart of accounts, you must enable Dynamic Insertion. This will enable you to create the necessary account combinations when you define your ledgers using Accounting Setup Manager. After you complete your ledger options, you can optionally disable dynamic insertion for your chart of accounts.

NOTE: You can define multiple charts of accounts per installation, or you can define a single chart of accounts that is shared by multiple ledgers within a single instance. If you use multiple charts of accounts, it is recommended that you share the same value set for the balancing segment across all charts of accounts.

Every time when we create any Key Flexfield in Oracle we have to follow 6 steps:

  1. Create Key Flexfield Structure
  2. Assign qualifiers if required
  3. Create Value Set for each segment of Flexfield
  4. Assign Value Set to each segment
  5. Add Values in each Value Set
  6. Create combinations for all segments in each structure

First step is to create Flexfield Structure.

Navigation path: Oracle General Ledger>Setup>Financials>Key>Segments

After creating segments, select each segment and assign “Flexfield Qualifier” to each segment.

Following table show the mandatory Flexfield Qualifiers for Accounting Flexfield:

Flexfield Qualifier Purpose
Balancing Segment The segment on which Accounting Entry is balanced. Normally the segment which is representing operating unit is qualified as balancing segment.
Cost Center The segment which is representing departments/cost centers is qualified as Cost Center.
Natural Account The segment which represents nature of account i.e. Equity, Liability, Asset, Expense or Income is qualified as Natural Account. 

Recommendation as per Oracle Documentation: We recommend that you consider a standardized approach to accounting for your organization in the Oracle ledgers by using a global chart of accounts.

A global chart of accounts is a designated account structure format and set of values that all entities (Legal Entities) in a group will use. Some values within the segments will differ according to local requirements. However, each segment is designated for a specific use and therefore is consistent in its function across all ledgers.

 

Step#3- Opening Values in Accounting Flexfield

After creating the Accounting Flexfield structure and their value sets, we have to add values for each value set.

Navigation path: General Ledger>Setup>Financials>Key>Segments>Values

 

Step#4- Define Currency

Ledgers have a definitive currency used to construct the balances and can accommodate an infinite number of transaction denomination currencies. The transactions, activity, or balances can be valued in several currencies. There are three types of currencies which are:

         i.            Transaction currency: Transaction currency is the currency of denomination for a transaction document. We sometimes refer this as entered currency. When an item is denominated in a currency that is different than the local accounting currency, you might think of this as a “foreign currency” item. Transactions that are entered in currencies other than the accounting currency are automatically valued and recorded in the accounting currency using conversion rates that are stored in daily rate tables. Gains and losses based on changes in the exchange rates are calculated at settlement. Revaluation is calculated at the various dates on which you need to record unrealized exchange gains.

       ii.            Primary currency: The currency used for accounting and reporting in a ledger is called “the ledger primary currency”, although it is often referred to as the ledger’s accounting currency. A primary ledger interfaces closely with the economy in which the entities that are using that ledger are trading. For example, your local banks issue bank statements that tie to the ledger. You account for local employees’ payroll, in local currency, in the primary ledger. Local contractors and vendors are reimbursed in local currency. For these reasons, we recommend that the primary currency of a primary ledger be the local business currency.

iii.            Reporting currency: You may need to report in additional currencies to satisfy management, legal, and statutory requirements. Reporting currencies represent the data of a ledger in other currencies. Reporting currencies reflect the same chart of accounts, calendar, and accounting convention as the primary ledger. Each ledger must be assigned a primary currency. Ledgers that are not primary should also have a primary currency.

After creating COA next step in setting up Oracle General Ledger is to enable or define currencies which will be used.

Navigation path: General Ledger>Setup>Currencies>Define

 

Step#5- Period/Calendar Type

After enabling/defining currency next step in setup General Ledger is to make period types. You can define your own period types to use in addition to the General Ledger standard period types Month, Quarter and Year. You use these period types when you define the accounting calendar for your organization.

Each set of books has an associated period type. When you assign a calendar to a set of books, the set of books only accesses the periods with the appropriate period type. Thus, you can define an accounting calendar with periods of more than one period type; however, each set of books will only use periods of a single period type.

Navigation Path: General Ledger>Setup>Calendars>Types

 

Step#6- Define Accounting/GL Calendar

After creating the period types, the next step in General Ledger setup is to define Accounting / GL Calendar. Balance sheets are snapshots of your assets and liabilities at points in time, and income statements are an analysis of the change in your net wealth between each balance sheet.

Each ledger has an accounting calendar, which represents a period of time in General Ledger, defined by a start and end date. You must design your calendar based on your business and management practice. Manufacturing businesses often use calendars with periods and quarters that end on weekends and are equal, for comparability and standards calculation. Service businesses often use the regular calendar.

Navigation path: General Ledger>Setup>Calendars>Accounting

NOTE: There is often a need for an adjusting period at year end to include General Ledger transfers, account reconciliations, adjusting journals, and other period end specific tasks. Some countries have specific requirements such as a closing journal voucher that can be accommodated in an adjusting period.

All Oracle subledgers depend on the General Ledger calendar. You can associate a common calendar with multiple ledgers.

 

Step#7- Define Transaction Calendar

Each set of books for which average processing is enabled, must be assigned a transaction calendar, which is used to control transaction posting. When you define the transaction calendar, you choose which days of the week will be business days. You can also specify other non-business days, such as holidays, by maintaining the transaction calendar.

After creating the Accounting Calendar, the next step in General Ledger setup is to define Transaction Calendar.

Navigation path: General Ledger>Setup>Calendars>Transactions

 

Step#8- Set Sequence Profile Option

For using document sequence a Profile Option is required to set from System Administrator responsibility. This profile option assigns a document number to the any document created in the sub-ledger. Sequential numbering provides a method of checking whether documents have been posted or lost. Not all forms within an application may be selected to support sequential numbering.

Navigation path: System Administrator>Profile>System

Following table explains the different variables for “Sequential Numbering” profile option:

Variable Description
Always Used You may not enter a document if no sequence exists for it.
Not Used You may always enter a document.
Partial Used You will be warned, but not prevented from entering a document, when no sequence exists.

 

Step#9- Create Ledger

Now, create the Ledger for legal entity. A fundamental concept in Oracle Applications is Ledger. The Ledger represents an accounting representation for an organization that is accountable in a self-contained way. A legal Entity accounts for itself in a Ledger. A Ledger provides balance ledger accounting for the accounting entity and serves as the repository of financial information.

Navigation path: General Ledger>Setup>Financials>Accounting Setup Manager>Accounting Setups

 

Step#10- Run Replicate Seed Data

The purpose of the Replicate Seed Data Concurrent Program is to populate the Installed modules seeded values, so that new organizations can use the seeded data.

Whenever new Organizations are created (under the Multi-org Setup, which is mandatory), running Replicate Seed data is a pre-requisite step before you can start working in the newly created organization.

The Replicate Seed Data Concurrent Program can be run for a particular Operating Unit or for all Operating Units (as it is not mandatory parameter) but you cannot run the program for a particular module, for example, Incentive Compensation.

Running this program will not damage the system because it is providing a new organization with the basic information required to set up the organization.

Caution: When running the Replicate Seed Data process ensure no users are logged-in.

Navigation path: System Administrator>View>Requests

 

Step#11- Create Security Profile

A security profile is created to give access to more than one operating unit.

Navigation path: Global HRMS Manager>Security>Profile

 

Step#12- Set Security Profile

Navigation path: System Administrator>Profile>System

Following table gives a little description of Security Profiles:

Profile Purpose
MO: Operating Unit To restrict access to specific Operating Unit
MO: Security Profile To give access of more than one OU
MO: Default Operating Unit To appear default

NOTE: Atleast one of the profile option is required to be set out of last 2

 

Step#13- Set GL Ledger Name

The ledger which we have created is required to be assigned to that responsibility which will make entries in that ledger. This profile is generally set t responsibility level because there may be multiple ledgers which are required to be set for different responsibilities.

Navigation path: System Administrator>Profile>System

 

Step#14- Set GL: Data Access Set Profile Option

This profile is set to restrict ledger access to a responsibility. There is a default Data Access Set which we applied.

Navigation path: System Administrator> Profile>System

 

Step#15- Create Data Access Set (Restriction for specific OU)

Data Access Set is created to allow or restrict the access to multiple ledgers or segments in the Accounting Flexfield.

Navigation path: General Ledger>Setup>Data Access Sets

 

Step#16- Create Journal Categories

Journal categories help you differentiate journal entries by purpose or type, such as accrual, payments or receipts. When you enter journals, you specify a category.

Navigation path: General Ledger>Setup>Journal>Categories

 

Step#17- Define Document Sequences

A document sequence uniquely numbers documents generated by an Oracle E-Business Suite product. Using Oracle E-Business Suite, you initiate a transaction by entering data through a form and generating a document, for example, an invoice. A document sequence generates an audit trail that identifies the application that created the transaction, for example, Oracle Receivables, and the original document that was generated, for example, invoice number 1234. Document sequences can provide proof of completeness. For example, document sequences can be used to account for every transaction, even transactions that fail.

Document sequences can also provide an audit trail. For example, a document sequence can provide an audit trail from the general ledger into the subsidiary ledger, and to the document that originally affected the account balance.

Document sequences generate audit data, so even if documents are deleted, their audit records remain.

Navigation path: General Ledger>Setup>Financials>Sequences>Document>Define

 

Step#18-Assign Document Sequences

After defining document sequences, you must assign a specific sequence to an application and category. You can assign sequence numbers to journal entries, but only to those journals created for actual transactions. You can choose to assign sequence numbers to journal entries that General Ledger automatically creates, or to journal entries you enter manually in the Enter Journals window. General Ledger automatically creates journal entries for actual transactions when you perform the following tasks:

  • Import Journals
  • Reverse Journals
  • Revalue Balances
  • Generate Recurring Journals
  • Generate Mass Allocation Journals
  • Consolidate Sets of Books

Note: You should not assign a manual sequence to an Automatic method.

Navigation path: General Ledger>Setup>Financials>Sequence>Document>Assign

 

Step#19- Define Security Rules

Define segment value security rules to restrict user access to certain segment values when entering journals, performing online inquiries, and running FSG and some standard reports. Segment value security rules can work alone or with data access set security that secures data in ledgers, balancing segment values, or management segment values.

Navigation path: General Ledger>Setup>Financials>Key>Security>Define

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