The Average Balance feature of Oracle General Ledger provides organizations with the ability to track average and end-of-day balances, report average balance sheets, and create custom reports using both standard and average balances. Average balance processing is particularly important for financial institutions, since average balance sheets are required, in addition to standard balance sheets, by many regulatory agencies. Many organizations also use average balances for internal management reporting and profitability analysis.
The difference between an average and standard balance sheet is that balances are expressed as average amounts rather than actual period-end amounts. An average balance is computed as the sum of the actual daily closing balance for a balance sheet account, divided by the number of calendar days in the reporting period.
With General Ledger you can maintain and report average balances daily, quarterly, and yearly. General Ledger tracks average balances using effective dates which you enter for each of your transactions.
General Ledger stores both average and end-of-day balance amounts. These amounts can be used with many other General Ledger features, such as translation, consolidation, multi-currency accounting, and formula journals.
You can use General Ledger's on-line inquiry features to display information about average balances for specified effective dates. You can also request standard average balance reports, as well as create your own custom reports.
The following publications provide additional information about some of the concepts presented in this overview:
Oracle General Ledger User Guide
Oracle General Ledger Technical Reference Manual (e-TRM)
Oracle E-Business Suite User's Guide
Oracle E-Business Suite Setup Guide
Related Topics
General Ledger provides you with the features you need to satisfy the following basic average balance needs:
Use average balance processing only in those ledgers which require it.
Maintain average balances for all balance sheet accounts automatically.
Create and maintain a transaction calendar to ensure that all postings have effective dates which are valid business days.
Ensure that input is balanced by effective date, as well as by period.
Calculate average balances based on the effective date of transactions, not the posting or accounting date.
Calculate period, quarter, and year averages-to-date based on the balances for each day within the period, quarter, or year.
Calculate the impact of net income on the average balance for retained earnings.
Retrieve average and ending balances for any effective date, via on-line inquiry and reports.
Translate average balances from your ledger currency into any reporting currency.
Consolidate average balances from one accounting entity into another.
Calculate allocations and other formula journals, using average balances as the basis.
Archive and purge average and end-of-day balances, as well as actual journal batches, entries, lines, and associated journal references for one or more fiscal years.
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The next few pages present several examples which illustrate the concepts of average balance processing. We start with a general example, then move on to illustrate period, quarter, and year average-to-date balances. Throughout the examples, we will explain how average balance processing takes place in General Ledger.
Related Topics
Relationship Between Aggregate and Average Balances
Example: Period Average-to-Date Balance
Example: Quarter Average-to-Date Balance
Example: Year Average-to-Date Balance
Assume that you have three balance sheet accounts (Account A, Account B, and Account C). Each has an opening period balance of $0.00.
The transaction shown in the following table is the only activity which takes place on the first day of an accounting period:
| Account | Debit | Credit |
|---|---|---|
| Account A | 1,000 | |
| Account B | 1,000 |
The above activity yields the results shown in the following table:
| Account | Activity | End-of-Day Balance | Aggregate Balance | Average Balance |
|---|---|---|---|---|
| Account A | 1,000 | 1,000 | 1,000 | 1,000 |
| Account B | (1,000) | (1,000) | (1,000) | (1,000) |
Note that on day one the aggregate balance for each account is the same as the end-of-day balance. The average balance equals the aggregate balance divided by 1, the number of days in the period.
On day 2, the following transaction takes place, as shown in the table below:
| Account | Debit | Credit |
|---|---|---|
| Account A | 100 | |
| Account C | 100 |
The above activity yields the results shown in the table below:
| Account | Activity | End-of-Day Balance | Aggregate Balance | Average Balance |
|---|---|---|---|---|
| Account A | 100 | 1,100 | 2,100 | 1,050 |
| Account B | 0 | (1,000) | (2,000) | (1,000) |
| Account C | (100) | (100) | (100) | (50) |
Note that the aggregate balance for each account equals the end-of-day balance for day 1, plus the end-of-day balance for day 2. Another way to state this is: aggregate balance equals the previous aggregate balance plus the current day's end-of-day balance.
The average balance for each account equals the aggregate balance divided by 2, the number of days in the period-to-date.
On day 3, the transaction, shown in the table below, takes place:
| Account | Debit | Credit |
|---|---|---|
| Account B | 200 | |
| Account C | 200 |
The above activity yields the results shown in the following table:
| Account | Activity | End-of-Day Balance | Aggregate Balance | Average Balance |
|---|---|---|---|---|
| Account A | 0 | 1,100 | 3,200 | 1,066.66 |
| Account B | 200 | (800) | (2,800) | (933.33) |
| Account C | (200) | (300) | (400) | (133.33) |
Note that the aggregate balance for each account equals the sum of the end-of-day balances for days 1 through 3. The average balance for each account equals the aggregate balance divided by 3, the number of days in the period-to-date.
Related Topics
Relationship Between Aggregate and Average Balances
Example: Period Average-to-Date Balance
Example: Quarter Average-to-Date Balance
Example: Year Average-to-Date Balance
When you enable average balance processing in General Ledger, the system calculates and stores three aggregate balances for each balance sheet account in your ledger, for every calendar day. The three amounts are the period-to-date, quarter-to-date, and year-to-date aggregate balances. Every time you post a transaction, General Ledger updates the standard period-end balances, as well as the three aggregate balances.
Note that General Ledger does not actually store average or end-of-day balances. Instead, the system performs a quick and simple calculation whenever you need one of these balances. For example, when you perform an on-line inquiry or run a report, the required average balances are quickly calculated from the aggregate balances, using the following simple formulas:
Average balance = aggregate balance divided by number of days in the range.
End-of-day balance = current day's aggregate balance minus previous day's aggregate balance.
This relationship between aggregate and average balances is a key concept in General Ledger average balance processing. Throughout the remainder of this document, whenever we refer to tracking average balances, average balance processing, or maintaining average balances, we are implicitly referring to the relationship described above.
To satisfy different reporting and analysis requirements, General Ledger can track three types of average balances:
Period average-to-date
Quarter average-to-date
Year average-to-date
Note: General Ledger tracks average balances for actual transactions only. You cannot track average balances for budget or encumbrance balances.
Related Topics
Example: Period Average-to-Date Balance
Example: Quarter Average-to-Date Balance
Example: Year Average-to-Date Balance
The following table illustrates how period average-to-date balances are calculated by General Ledger.
This example assumes that we are looking at the activity and balances for one account in a ledger. The ending balance for May 31st was $100,000.
| Day | Activity | Ending Balance | PTD Aggregate Balance | PTD Range |
|---|---|---|---|---|
| June 1 | $5,000 | $105,000 | $105,000 | 1 |
| June 2 | $8,000 | $113,000 | $218,000 | 2 |
| June 3 | $4,000 | $117,000 | $335,000 | 3 |
The period average-to-date balance for June 3rd:
= PTD Aggregate Balance (as of June 3) divided by PTD Range (number of days: period-to-date)
= $335,000 / 3 days
= $111,666.67
Note: The PTD aggregate balance is reset to zero at the beginning of each period.
Related Topics
Relationship Between Aggregate and Average Balances
Example: Quarter Average-to-Date Balance
Example: Year Average-to-Date Balance
Expanding on the period average-to-date example, the following table illustrates how quarter average-to-date balances are calculated by General Ledger.
In this example, the ending balance for March 31st was $70,000.
| Day | Daily Activity | Ending Balance | PTD Aggregate Balance | QTD Aggregate Balance | QTD Range |
|---|---|---|---|---|---|
| April 1 | $2,000 | $72,000 | $72,000 | $72,000 | 1 |
| April 2 | $3,000 | $75,000 | $147,000 | $147,000 | 2 |
| April 3 | ($1,000) | $74,000 | $221,000 | $221,000 | 3 |
| : | : | : | : | : | : |
| : | : | : | : | : | : |
| June 1 | $5,000 | $105,000 | $105,000 | $5,145,000 | 62 |
| June 2 | $8,000 | $113,000 | $218,000 | $5,258,000 | 63 |
| June 3 | $4,000 | $117,000 | $335,000 | $5,375,000 | 64 |
The quarter average-to-date balance for June 3rd:
= QTD Aggregate Balance (as of June 3) divided by QTD Range (number of days: quarter-to-date)
= $5,375,000 / 64 days
= $83,984.38
Note: The QTD aggregate balance is reset to zero at the beginning of each quarter. Accordingly, throughout the first period of a quarter, the PTD and QTD aggregate balances for any day are the same.
Note: Some financial institutions calculate quarter average-to-date balances by summing the three period ending averages-to-date for the quarter and dividing by three. You can use General Ledger's Financial Statement Generator to create a custom report using this calculation method for quarter average-to-date.
Related Topics
Relationship Between Aggregate and Average Balances
Example: Period Average-to-Date Balance
Example: Year Average-to-Date Balance
Expanding on the previous two examples, the following table illustrates how year average-to-date balances are calculated by General Ledger.
In this example, the ending balance for December 31st of the previous year was $50,000.
| Day | Daily Activity | Ending Balance | PTD Aggregate Balance | QTD Aggregate Balance | YTD Aggregate Balance | YTD Range |
|---|---|---|---|---|---|---|
| Jan. 1 | $4,000 | $54,000 | $54,000 | $54,000 | $54,000 | 1 |
| Jan. 2 | $2,000 | $56,000 | $110,000 | $110,000 | $110,000 | 2 |
| Jan. 3 | $0 | $56,000 | $166,000 | $166,000 | $166,000 | 3 |
| : | : | : | : | : | : | : |
| : | : | : | : | : | : | : |
| April 1 | $2,000 | $72,000 | $72,000 | $72,000 | $5,711,000 | 91 |
| April 2 | $3,000 | $75,000 | $147,000 | $147,000 | $5,786,000 | 92 |
| April 3 | ($1,000) | $74,000 | $221,000 | $221,000 | $5,860,000 | 93 |
| : | : | : | : | : | : | : |
| : | : | : | : | : | : | : |
| June 1 | $5,000 | $105,000 | $105,000 | $5,145,000 | $10,784,000 | 152 |
| June 2 | $8,000 | $113,000 | $218,000 | $5,258,000 | $10,897,000 | 153 |
| June 3 | $4,000 | $117,000 | $335,000 | $5,375,000 | $11,014,000 | 154 |
The year average-to-date balance for June 3rd:
= YTD Aggregate Balance (as of June 3) divided by YTD Range (number of days: year-to-date)
= $11,014,000 / 154 days
= $71,519.48
Note: The YTD aggregate balance is reset to zero at the beginning of each year. Accordingly, for every day in the first period of a year, the PTD, QTD, and YTD aggregate balances are the same.
Also note that all three aggregate balances, for all asset, liability, and equity accounts, are reset to zero at the beginning of a new year.
Note: Some financial institutions calculate year average-to-date by summing all the period ending averages-to-date within the year and dividing by the number of periods, excluding any adjusting periods. Another alternative is to sum the four quarter averages-to-date and divide by four. You can use General Ledger's Financial Statement Generator to create a custom report using either of these calculation methods for year average-to-date.
Related Topics
Relationship Between Aggregate and Average Balances
Example: Period Average-to-Date Balance
Example: Quarter Average-to-Date Balance
Overview of Average Balance Processing
If you want to use average balance processing in General Ledger, you must enable the functionality for a specific ledger using Accounting Setup Manager. With this feature, you can enable average balance processing only for those ledgers that require it. This ensures that you incur no additional overhead unless you need average balance processing.
General Ledger calculates and stores the necessary aggregate balance information needed to compute average balance amounts as of any day in the year.
A transaction's effective date determines which end-of-day and aggregate balances are updated by General Ledger. These balances, in turn, determine the calculated values of your average balances.
Certain organizations that need average balance processing, such as financial institutions, are required to post transactions only on business days. Posting on weekends or holidays is not allowed, although some organizations do post period-end accruals on non-business days.
In General Ledger, you control transaction posting with a transaction calendar. When you define a transaction calendar, you choose which days of the week will be business days. You also specify the holidays, using a form provided for maintaining the transaction calendar.
Each ledger, for which average balance processing is enabled, is assigned a transaction calendar. When transactions are posted, General Ledger checks the effective dates against the transaction calendar. If the dates are valid, the transaction is posted. For invalid dates, you can tell the system how you want the transaction handled.
Other features of transaction calendar control are as follows:
Multiple ledgers may share a transaction calendar.
You can combine multiple ledgers in a ledger set to take advantage of processing efficiencies, such as opening and closing periods across multiple ledgers. All ledgers in a ledger set must share the same chart of accounts and accounting calendar, but can use different Transaction Calendars.
You can set a profile option to allow certain individuals to post transactions on non-business days.
Controls are applied to imported journals, as well as manual journals.
Normally, General Ledger requires that total transactions balance for an entire period. When average balance processing is enabled, the system checks total transactions for each effective date to ensure that debits and credits balance. When they do not, General Ledger rejects the transactions, or, if you have enabled suspense posting, the system creates a balancing entry to the suspense account.
Manual journals are balanced directly, since the effective date is entered at the journal level, not for individual journal lines.
Imported journals are sorted and must be in balance by effective date within each source.
The back-value date is not limited to the current period. It can be in the prior period or even in a period from a prior year as long as the effective date is posted in an open period.
When you post a Back-Value Transaction:
The change to average balances is calculated using the effective date, rather than the system or current accounting date.
General Ledger adjusts the ending and aggregate balances as of the effective date and all subsequent dates.
General Ledger adjusts both standard and average balances based on the same effective (back-value) date.
See: Back-Value Transactions for a transaction example.
If you use summary accounts, and choose to enable average balance processing, General Ledger will maintain average, as well as standard, balances for your summary accounts. General Ledger automatically updates your summary average balances, as well as the standard average balances. You can use summary average balances in allocations and financial reports.
You can use the Average Balance Inquiry form to review on-line information about the average or end-of-day balance of any balance sheet account for ledgers or ledger sets. You can view summary or detail balances, as well as drill down from your summary balances to see the detail. Also, you can customize your view of the average and end-of-day balances to show only the information you want, in the order you want it.
General Ledger provides two standard average balance reports:
Average Balance Trial Balance-displays standard and average balances for selected ledgers and accounts, as well as period, quarter, and year average-to-date balances, for any as-of date you specify.
Average Balance Audit Report-displays the detail account activity used to create aggregate balances and related average balances maintained by General Ledger.
With General Ledger's Financial Statement Generator, you can design custom reports that use average balances. You can even create reports which include average and standard balances.
Financial Statement Generator allows you to define the complex financial statements you need to analyze your business, including responsibility reports for business units, profit centers, and cost centers. You may also need to prepare consolidated and consolidating reports, funds statements, and cash flow reports. With Financial Statement Generator, you can do all of this, using average balances and standard balances.
With average balance processing enabled, you can use average balances as input to any formulas you use to create MassAllocations, MassBudgets, and recurring journals. You can use any of the three average balance types (Period, Quarter, or Year Average-to-date), as well as end-of-day balances.
General Ledger fully supports using average balances for foreign currency conversion, revaluation, and translation. General Ledger maintains average and end-of-day balances for all of your transaction currencies, as well as your ledger currency. Using these features, you can:
Convert foreign currency amounts in journal entries to your ledger currency at the time of entry. Converted values are factored into the computation of average balances.
Revalue accounts which are recorded on your books in a foreign currency. Revalued balances, as well as the unrealized exchange gain or loss, are factored into the computation of average balances.
Translate average balances from the ledger currency to reporting currency (balance level), making it possible to consolidate average balances for ledgers that do not use the same ledger currency.
General Ledger fully supports using average balances for consolidations, including both the transactions consolidation method and the balances consolidation method. You can consolidate average balances from different ledgers, using different currencies, calendars, and charts of accounts.
Related Topics
Overview of Average Balance Processing
The effective date on which transactions are posted has a direct impact on average balance computations. Effective dates are equally important when selecting inquiry or reporting criteria, since your report will display average balance amounts as of your specified effective date.
As noted earlier, when you post a back-value transaction, General Ledger adjusts the end-of-day and aggregate balances of the affected accounts, as of the effective date and all subsequent dates. The example below continues our general example (see: Average Balance Examples) and illustrates what happens when you post a back-value transaction.
The table below shows the end-of-day and aggregate balances from our previous example:
| Day | Account A End-of-Day Balance | Account A Aggregate Balance | Account B End-of- Day Balance | Account B Aggregate Balance | Account C End-of- Day Balance | Account C Aggregate Balance |
|---|---|---|---|---|---|---|
| Day 1 | 1,000 | 1,000 | (1,000) | (1,000) | 0 | 0 |
| Day 2 | 1,100 | 2,100 | (1,000) | (2,000) | (100) | (100) |
| Day 3 | 1,100 | 3,200 | (800) | (2,800) | (300) | (400) |
The average balance, as of Day 3, for each account is:
| Account | Calculation | Average Balance | |
|---|---|---|---|
| Account A | 3,200 / 3 | = | 1,066.66 |
| Account B | (2,800) / 3 | = | (933.33) |
| Account C | (400) / 3 | = | (133.33) |
Now assume that the back-value transaction shown in the table below occurs on Day 3, with an effective date of Day 1:
| Account | Debit | Credit |
|---|---|---|
| Account A | 500 | |
| Account B | 500 |
The transaction will have the effects shown in the following table:
| Day | Account A End-of-Day Balance | Account A Aggregate Balance | Account B End-of- Day Balance | Account B Aggregate Balance | Account C End-of- Day Balance | Account C Aggregate Balance |
|---|---|---|---|---|---|---|
| Day 1 | 1,500 | 1,500 | (1,500) | (1,500) | 0 | 0 |
| Day 2 | 1,600 | 3,100 | (1,500) | (3,000) | (100) | (100) |
| Day 3 | 1,600 | 4,700 | (1,300) | (4,300) | (300) | (400) |
The average balance, as of Day 3, for each account is now:
| Account | Calculation | Average Balance | |
|---|---|---|---|
| Account A | 4,700 / 3 | = | 1,566.66 |
| Account B | (4,300) / 3 | = | (1,433.33) |
| Account C | (400) / 3 | = | (133.33) |
You use the transaction calendar to tell General Ledger which days in the accounting calendar are business days versus non-business days. Non-business days:
May not be used for posting transactions, unless you explicitly tell General Ledger to allow this.
Are included when determining the number of days in the range.
Even though transactions are generally not posted to accounts on non-business days, General Ledger still maintains and stores aggregate balances for non-business days, as well as business days.
Related Topics
Overview of Average Balance Processing
Average balance processing is enabled by selecting the Enable Average Balances option when defining the Ledger in Accounting Setup Manager. Once the accounting setup is complete, General Ledger automatically begins to store the aggregate balances which are used to calculate average and end-of-day balances for your ledger.
A transaction calendar is defined using the Transaction Calendar form. When you first define a transaction calendar, you specify a name and an optional description. Using this information, General Ledger creates a transaction calendar which includes an entry for every calendar day in the range of dates which exist in your General Ledger. Each entry includes three items:
Date: the actual calendar date.
Day of Week: the day of the week.
Business Day indicator: shows whether the entry is defined as a business day. The indicator defaults to Yes for Monday through Friday and No for Saturday and Sunday. You can change the initial default values to suit your own needs.
After the transaction calendar is created, you should specify your holidays by changing the Business Day indicator to non-business day.
Transaction calendars and accounting calendars are completely independent of each other. For example, you might have one accounting calendar, shared by your parent company and all its subsidiaries. However, each subsidiary might use a separate transaction calendar to accommodate their different Holiday schedules.
You define the attributes of a ledger, such as Accounting Calendar, Ledger Currency, Chart of Accounts and Subledger Accounting Method in Accounting Setup Manager. You can define a ledger with average balance processing enabled or you can define a consolidation ledger that will be used to consolidate average balances. In a typical ledger where average balance processing is enabled, the standard and average balances are linked, since the average balances are derived from the standard balances. To enforce this linkage, General Ledger prevents you from creating journal entries that directly manipulate average balances
In an average balance consolidation ledger, the links between standard and average balances are not enforced. As a result, you can create and post journal entries, such as eliminating entries, directly against your average balances.
See: Ledger Average Balance Options
If you choose to enable average balance processing, you must specify additional information when defining the Ledger, such as:
Transaction Calendar: A calendar used to ensure that transactions are posted only to valid business days.
Note: Average balance consolidation ledgers do not use Transaction Calendars.
Non-Postable Net Income Account: An account General Ledger uses to capture the net activity of all revenue and expense accounts when calculating the average balance for retained earnings.
(Optional) Rate Type: The conversion rate type you want to use for translating average balances. General Ledger comes with four predefined conversion rate types: Spot, Corporate, and User.
Note: You only need to specify a rate type if you plan to translate average balances.
(Optional) Maintain Translated Average Balances in Additional Amount Types: Period-Average-to-Date amount types are automatically maintained when translating average balances. Optionally, you can choose to maintain additional amount types, such as End-of-Day, Quarter Average-to-Date, and Year Average-to-Date Amounts.
Important: Each additional amount type you choose will slow processing time and increase storage requirements.
Retained earnings contains two components for any interim accounting period:
Current account balance, which is equal to the final closing balance from the previous year.
Net income, which is the net of all revenue and expense accounts.
General Ledger calculates the average balance for retained earnings the same way that it computes average balances for any other account. However, since the system does not maintain average balances for revenue and expense accounts, some special processing takes place to handle this particular component of retained earnings.
General Ledger uses a special non-postable net income account (similar to a summary account) to capture the net activity of all revenue and expense accounts. The account is treated as a balance sheet account, with account type of Owners' Equity. Its three stored aggregate balances are used to compute the net income impact on the retained earnings average balance for any given period, quarter, or year.
Note: You can also use the non-postable net income account in your reports and on-line inquiries.
Note: The primary difference between the non-postable net income account and other balance sheet accounts, is that its balance does not roll forward when you open a new year. Instead, General Ledger resets the account to zero when revenues and expenses are closed out to retained earnings at the end of the year.
There are two methods you can use to control transaction processing when effective dates fall on non-business days:
By User: Your system administrator can set up your system so that General Ledger allows transactions to be posted on non-business days. This option can be set at the Site, Application, Responsibility, or User level.
You use this method to control non-business day processing for manually entered journals.
By Source: You can specify an effective date rule for each journal source when average balance processing is enabled. You can select one of three options which tell General Ledger how to handle transactions whose effective dates are non-business days:
Leave Alone- accept transaction dates and complete posting.
Fail- reject transactions; no posting.
Roll Date- roll transactions to the previous valid business day, within the same period, and complete posting.
Note: The roll date cannot cross periods to find a valid business day. The following example illustrates the behavior when the effective date is close to a period boundary.
If April 3 is a Monday and a transaction has an effective date of April 2 (Sunday), the effective date will be rolled to April 3 (Monday), not to March 31 (Friday) .
Use this method to control non-business day processing of automated journals from your subledger systems, such as Oracle Receivables and Oracle Payables.
When you open a new accounting period, General Ledger prepares the new period for journal entry. If you open a new period when average balance processing is enabled, the system also:
Populates the aggregates table. PTD, QTD, and YTD aggregate balances are created for each balance sheet account. As transactions are posted throughout the period, General Ledger updates these aggregates, using the transaction effective date to determine which daily balances to update.
Initializes aggregate balances. PTD aggregates are set to zero. QTD and YTD aggregates are only initialized if the new period is the beginning of a quarter or a year, respectively. Otherwise, the ending QTD and YTD aggregates from the previous period are carried forward as the beginning balance of the new period.
When you open a new year, General Ledger sets the non-postable income account back to zero. The beginning balance of retained earnings is set to the sum of the prior year's ending balance, plus the ending balance of the non-postable net income account (zero).
When you use average balance processing, a large volume of data accumulates in your General Ledger database. You can archive and purge any information you no longer need. General Ledger also provides some related safety and security features. For example, the system:
Produces reports you can review to verify that your archiving and purging processes complete successfully.
Ensures that only archived data can be purged.
Related Topics
Overview of Average Balance Processing
For each ledger, General Ledger maintains average balances in your selected ledger currency. The system also maintains separate average balances for each foreign currency you've used to enter transactions. The following section explains how General Ledger performs foreign currency conversion, revaluation, and translation when average balance processing is enabled.
Caution: It is not recommended to enable average balance processing for journal-level and subledger-level reporting currencies. Doing so will incur additional overhead to maintain average balances in both the source ledger and its reporting currencies.
If you enable average balance processing for your journal-level and subledger-level reporting currencies, average balances will be maintained similarly to how they are maintained for your primary or secondary ledgers. Each time a standard journal is posted in the source ledger, another journal will be created and posted for the reporting currency. General Ledger will then update the corresponding aggregate balances for both your source ledger and its reporting currency. For more information on Reporting Currencies, see: Overview of Reporting Currencies.
When you enter a journal, General Ledger automatically converts any foreign currency amounts to your ledger currency. When you post journals, the converted amounts update your accounts' standard balances. At the same time, General Ledger updates the corresponding aggregate balances for both your entered (foreign) and converted (ledger) currencies. These balances are used to compute your average balances.
When you revalue a balance sheet account that is denominated in a foreign currency, General Ledger automatically creates a journal entry to record the unrealized foreign exchange gain or loss. When this journal entry is posted, General Ledger updates both the standard balance and the corresponding aggregate balance of the revalued account. These updated balances are factored into the calculation of the account's average balance.
If you have average balance processing enabled, and choose to translate your accounts for consolidation or reporting purposes, General Ledger will translate both standard and average account balances to a balance-level reporting currency you specify as the reporting currency during Translation. You can translate both balances separately or in a single translation run, as part of the month-end cycle.
General Ledger maintains translated balances in your balance-level reporting currencies for each day of an accounting period. When translating each day's average balances, the system multiplies the ledger currency average by the average of the daily conversion rates for the period, up to and including the current day. The table below shows an example:
| Day | Daily Rate | Average of Daily Rates | Primary Ledger Currency Average | Translated Average Balance Maintained by the Balance-Level Reporting Currency |
|---|---|---|---|---|
| 1 | 1.10 | 1.100 | 1,000 | 1,100 |
| 2 | 1.12 | 1.110 | 1,000 | 1,110 |
| 3 | 1.15 | 1.123 | 1,000 | 1,123 |
| : | : | : | : | : |
| : | : | : | : | : |
| 31 | 1.17 | 1.148 | 1,000 | 1,148 |
Where necessary for specific accounts, you can use historical rates or amounts, rather than the averages of daily conversion rates. When you enter historical rates or amounts for an account:
You can specify separate values for standard and average balances, or you can use the same value for both.
General Ledger uses the specified value to translate the related balances.
The same historical rate or amount will be used to translate average balances for each day of the period.
General Ledger translates an account's quarter and year averages-to-date differently, depending on whether the daily average balances are translated using averages of daily conversion rates, or historical rates or amounts.
Averages of daily conversion rates- translate quarter and year averages-to-date using averages of daily rates for all days in the quarter or year. For example, if the first quarter of a year includes January, February, and March, General Ledger will translate the quarter average-to-date balance for March 16th by multiplying the quarter average-to-date ledger balance by the average of all of the daily rates between January 1 and March 16.
Historical rates or amounts- translate quarter and year averages-to-date using the average of the historical rates or amounts for the appropriate periods, weighted by the number of days in each period.
Related Topics
Overview of Average Balance Processing
You can use General Ledger's consolidation features to combine the financial results of multiple companies, even if their ledgers use different currencies, accounting calendars, and charts of accounts. General Ledger supports consolidating average balances using either the transactions or balances consolidation methods.
Standard and average balances can be consolidated at the same or different levels of detail. For example, you might want to consolidate standard balances at the detail level, but average balances at a summarized level.
If you consolidate standard and average balances at the same level of detail, you can apply the same chart of accounts mapping rules and consolidation definitions to both. If you consolidate at different levels of detail, you must define appropriate chart of accounts mapping rules and consolidation definitions for each.
When you consolidate transactions, you can only use the Standard Usage type. General Ledger creates a single consolidation journal batch, consisting of your subsidiary's transactions and their corresponding effective dates. When you post the consolidating journal entries in the parent ledger, General Ledger updates the standard balances and the corresponding average balances automatically (as they are when you post non–consolidation journal batches).
Note: To consolidate transactions, both your parent and subsidiary ledger must use the same ledger currency.
To consolidate average balances when you are using the balances consolidation method, you must use an ”average balance consolidation ledger.” You specify whether a ledger can be used for average balance consolidation purposes at the same time that you define your ledger.
Average Balance Consolidation ledgers, unlike other ledgers where average balance processing is enabled, do not enforce a link between standard and average balances. As a result, you can update standard and average balances independently. In ledgers that are not defined as average balance consolidation ledgers, both standard and average balances are updated automatically whenever transactions are posted
You can consolidate standard or average balances independently into an average balance consolidation ledger. You can also consolidate standard and average balances in a single consolidation run. When you run your consolidation, General Ledger will create two consolidation journal batches:
Standard-updates standard balances without affecting average balances.
Average-updates average balances without affecting standard balances.
The effective date of the journal entries in an average consolidation journal batch will always be the first day of an accounting period. When you post the batch, the journal amounts will be posted as average balances on the first day of the period, and will then roll forward through the remaining days. As a result, each day of the period will reflect average balances as of the end of the period in the subsidiary ledger.
You can use manual journal entries, recurring journals, and MassAllocations to create eliminating entries in an average balance consolidation ledger. You can eliminate standard and/or average balances, but the respective eliminating entries will be independent of each other. For example, if you eliminate an account's standard balance, the related average balance is not eliminated. Likewise, if you eliminate an average balance, there is no effect on the related standard balance. The effective date of eliminating entries is always the first day of the period.
With General Ledger, you can run multilevel consolidations of standard and average balances, as long as each ledger into which you consolidate is defined as an average balance consolidation ledger. Note that the consolidation process is the same as single-level consolidation. In both, General Ledger transfers subsidiary standard balances into parent standard balances, and subsidiary average balances into parent average balances.
When consolidating average balances, you will need to reverse the prior period's consolidation in the current period to avoid double counting. Period average balances represent standalone balances for each period, and is the same balance for every day within the same period. Without a reversal adjustment, the prior period's average balance will be incorrectly included in the current period's average balance.
For example, you are performing periodic average consolidation using PATD balances for Jan-01 and Feb-01. After consolidating Jan-01, and before consolidating Feb-01, you will need to reverse the Jan-01 PATD average consolidation journal as of Feb-01. This will set the Feb-01 PATD balance back to zero. You can then perform a PATD average consolidation for Feb-01.
This same reversal adjustment is required for quarterly QATD consolidations and yearly YATD consolidations. You will need to reverse the prior quarter's QATD average consolidation in the first day of the current quarter before running the current consolidation. For yearly YATD average consolidations, you will need to reverse the prior year's YATD average consolidation in the first day of the current year before running the current consolidation.
If you perform average consolidations on the most frequent basis, as in doing periodic PATD consolidations, you will automatically have available to you QATD and YATD consolidation balances. QATD and YATD information will be derived from the PATD balances. To review the correct QATD and YATD balances under this method, you need to select the date for the last day of the quarter or the year. For all other dates within the range, the balances will not be accurate.
When you consolidate average balances into a consolidation ledger, General Ledger creates separate consolidation journal entries for standard and average balances, with the properties shown in the following table:
| Standard Balance Consolidation Journal Entry | Average Balance Consolidation Journal Entry | |
|---|---|---|
| Journal Source: | Consolidation | Average Consolidation |
| Effective Date: | Period | First day of the period |
| Updates When Posted: | Standard balances in table GL_BALANCES | Average balances in table GL_DAILY_BALANCES |
Quarter average–to–date balances are always consolidated into the first period of a quarter. Year average–to–date balances are always consolidated into the first period of a year. Balances roll forward through the entire quarter or year, so every day in the quarter or year will show the same average balances.
You can choose to consolidate standard balances only, average balances only, or both standard & average balances. These three options are referred to as the Usage type. The Usage type you select will also affect amount types, dates, and periods, as noted in the table below:
| Standard Usage Type | Average Usage Type | Standard & Average Usage Type | |
|---|---|---|---|
| Amount Type | PTD, QTD, YTD, PJTD, EOD | PATD, QATD, YATD | PTD/PATD, QTD/QATD, YTD/YATD, EOD/PATD |
| Date | Disabled unless amount type is EOD, then date is closest business day in the subsidiary Period | Closest business day in the subsidiary Period. | Closest business day in the subsidiary Period. |
| Period | Standard Period can be any open or future enterable period in parent ledger. Average Period is disabled. | Standard Period is disabled. Average Period depends on the amount type: . PATD –– any open or future enterable period in parent ledger. QATD –– first non–adjusting period of a quarter in parent ledger. Must be open or future enterable. YATD –– first non–adjusting period of a year in the parent ledger. Must be open or future enterable. |
Standard Period can be any open or future enterable period in the parent ledger. Average Period is display only, must be open or future enterable, and depends on the amount type: PTD/PATD –– same as the Standard Period. QTD/QATD –– the first non–adjusting period of the quarter containing the Standard Period. YTD/YATD –– the first non–adjusting period of the year containing the Standard Period. |
Note: Consolidation uses the standard balances for the subsidiary Period specified on the Transfer Consolidation Data window. Consolidation uses average balances for the specified subsidiary Date.
Standard balances are consolidated into the parent ledger in the Standard Period specified on the Transfer Consolidation Data window. Average balances are consolidated into the specified Average Period.
Note also that EOD balances are stored as standard balances within a consolidation ledger, rather than as average balances.
Related Topics
Overview of Average Balance Processing
Defining Ledgers, Oracle General Ledger Implementation Guide
Defining Consolidation Definitions
Transferring Consolidation Sets
With General Ledger, you can perform on-line inquiries for both standard and average balances. You can enter any of the following criteria to control the information General Ledger displays:
Ledgers/Ledger Sets
Ledger Currencies
Date Ranges
Currency Types and Entered Currencies
Precision (Units, Thousands, etc.)
Accounts
To review translated average balances, you choose the balance-level reporting currency that was used as the target ledger during average balance translation with the Total Currency Type.
If you have defined summary accounts in your Oracle General Ledger, you can also select a summary account to use for your on-line inquiries. From the summary-level inquiry, you can drill down to see the average balances of the individual accounts that make up a summary average balance.
Related Topics
Overview of Average Balance Processing
With General Ledger, you can request standard reports, as well as create custom reports using Financial Statement Generator. These features are fully supported for both standard and average balances. You can also use Applications Desktop Integrator to submit and publish reports in a variety of formats.
General Ledger provides two standard average balance reports-the Average Balance Trial Balance and the Average Balance Audit Report.
This report provides a listing of standard and average balances for selected accounts based on an as-of date you specify. In addition, the report displays period, quarter, and year average-to-date balances. You can also request additional information on this report by specifying parameters such as balancing segments and account ranges.
This report displays the detail account activity which created the aggregate balances and related average balances maintained by General Ledger. You use this report when you need to research how General Ledger calculated the average balances for an account.
The report also displays daily average balance information for the selected accounts for the specified range of dates. You can also request additional information on this report by specifying parameters such as the as-of reporting date, average balance type (period, quarter, or year average-to-date), and account ranges.
With the Financial Statement Generator, you can easily design custom average balance reports. For example, you can:
Report average, as well as standard average balances.
Use average or standard balances in formulas.
Report standard and average consolidated balances together on the same report.
Related Topics