Preparing Receivables
To prepare Receivables for Cash Basis accounting, perform the following setup steps.
Define your Accounting Method
Select Cash Basis as your accounting method in the System Options window.
Set up an Unallocated Revenue Account
Set up an Unallocated Revenue Account in the System Options window. This account will be credited when you overapply a cash receipt to an invoice with an outstanding balance equal to zero.
Consider the following example:
You have an invoice with 2 invoice lines which total zero.
Invoice Line #1 is for $100
Invoice Line #2 is for -$100
The transaction type allows overapplication, and you receive a payment for $50 against this invoice.
The payment should be prorated across the invoice lines, and the revenue accounts on the 2 invoice lines should be credited by (50*100)/0 and (50 * (-100) /)0. However since dividing by zero is not possible, Receivables cannot determine the amounts to be prorated. In such cases Receivables uses the Unallocated Revenue Account to credit the entire amount. Thus the journal entry created will be:
| DR
|
| Cash
|
| $50
|
|
|
| CR
|
| Unallocated Revenue Account
| $50
|
You will have to reconcile the balance of the Unallocated Revenue Account with the revenue accounts on the invoice lines by manually creating adjustments.
Set up your Transaction Types
Be aware of the following when creating transaction types to be used with Cash Basis accounting:
- If you set 'Open Receivable' to No, the transactions will never be posted. If you do not create a receivable, cash will never be collected, and therefore revenue will never be recorded.
- Cash Basis method of accounting does not permit you to set 'Open Receivable' to Yes and 'Post To GL' to No. Whenever cash is received (because Open Receivable is Yes), revenue will be recognized.
- Creation Signs must be either positive or negative for all transactions. They cannot be of type 'Any Sign'.
Make GL Transfer and Journal Entry Report Incompatible
If you are using Cash Basis accounting, the GL Transfer program and the Journal Entry report are incompatible with each other and must be run alone (two instances of the program cannot run simultaneously). For Accrual accounting this is not the case. The programs are installed to work in an Accrual Accounting environment.
Execute the following script to tell the concurrent manager that these two programs are incompatible with each other and must be run alone:
$ cd $AR_TOP/install/sql
$ sqlplus <AOL username>/<AOL password>
SQL> @arsedpcf.sql
See Also
Using Cash Basis Accounting
