The following scenario illustrate a short example of a Revenue / COGS matching for a sales order where
Accounting rule used is: 3 Months, Deferred
Navigation
1. Inventory>Item Master>Define item MM-ITEM65 (Purchase Item)
Figure 1
2. Miscellaneous Receipt
Navigation: Miscellaneous Transactions>Receive MM-ITEM65 in Subinventory Store.
Qty 100@15USD
3.View Material Transactions
Figure 2
4.
View Material Distribution
Figure 3
5. Review the Item cost : Costs>Item Cost
Figure 4
6. Define Accounting Rules in Account Receivables
Account Receivables>Setup>Transactions>Accounting Rules
There are two Predefined Accounting rules
a-3 Months , Deferred
b-Immediately
Figure 5
Figure 6
7. Enter a SO (eg 63849)
Figure 7
8. SO 63849 booked with
Ordered item MM-ITEM65/qty=5/ price=15/ Accounting rule=3 Months, Deferred
Shipping warehouse=M3
Figure 8
9. Pick Release the SO
Figure 9
10. Ship Confirm the SO
Figure 10
11.Item is shipped
12. Line is closed
13. Review the Material Transactions form
14. Distribution of the SO issue
When a Sales order is shipped the following accounting takes place:
Inventory Valuation Account: Credit.
Deferred COGS account: Debit
15. Run the Workflow Background Process request
16 . Create the Invoice with the Autoinvoice request
Sales Order Accounts Receivables>Interfaces>Autoinvoice
17.Check the Invoice in AR
Accounts Receivables>Control>Accounting
18. Invoice generated:
Invoice= 10033708
19. Recognize the revenue in AR
20. After recognizing the revenue.
We need to accept it.
Manage Revenue:
21. Now the revenue has been recognized according to our accounting rule: 3 Months, Deferred
50% August
25%September
25%October
For August 50% of the revenue has been recognized
22. 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.
23. Record Order Management Transactions: records new sales order transaction
activity such as shipments and RMA returns in Oracle Order Management.
24. Collect Revenue Recognition Information: determines the percentage of
recognized or earned revenue related to invoiced sales order shipment lines
in Oracle Receivables.
25. 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.
26. 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:
Deffered COGS : Debit y 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.