6. Annexure A - Accounting Entries and Advices

This section contains details of the suggested accounting entries that can be set up, for the FA module of Oracle FLEXCUBE. The details of the suggested accounting entries are listed event-wise.

This chapter contains the following sections:

6.1 FA Events

The following is an exhaustive list of events that can take place during the lifecycle of an FA contract. In the subsequent paragraphs we shall examine the accounting entries and advices for each of the events listed below.

Sl No Event Code Event Description Remarks
1 BOOK Booking an FA contract (Mandatory) All Types
2 CAPT Capitalization of an asset All Types
3 DEPR Depreciation Processing for Booking All Types
4 AMND Amendment of a contract All Types
5 SALE Sale of an asset All Types
6 WRTO FA Write off All Types
7 DPTX Depreciation for Tax purposes (no accounting entries are passed for this event) All Types
8 REVC Reversal of a contract All Types.
9 TSFR Transfer of Asset  

6.2 Amount Tags

The amount tags listed below are hard-coded in Oracle FLEXCUBE.

Amount Tag Description
FA_CAPT_AMT Asset Cost Capitalized
FA_DEPR_ACC Accumulated depreciation
FA_DEPR_ADD Additional depreciation to be charged
FA_DEPR_RED Reduction in depreciation amount already charged
FA_SALE_AMT Net Sale Value
FA_SALE_LOS Loss on account of sale (Book Value-Sale Value)
FA_SALE_PFT Profit on account of Sale
FA_WR­TO_AMT Amount Written Off (Book Value)
FA_TSFR_AMT Transfer Amount (Asset Amount – Accumulated Depreciation)

In addition to these you can define amount tags as per your requirements for charges that will be attached to the product.

Amount Tags and their usage during various events

Listed below are the various Events along with the Amount Tags that would be used during the respective events.

Event Amount Tag Explanation of the Amount Tags
BOOK FA_CAP­T_AMT Asset Cost
DEPR FA_­DEPR_ADD Additional depreciation to be charged on account of increase in depreciation rate or change in depreciation method or change in capitalization date
DEPR FA_­DEPR_RED Reduction in cumulative depreciation on account of reduction in rate, change in capitalization date or change in deprecia­tion method
CAPT FA_CAP­T_AMT Asset Cost capitalized
SALE FA_­SALE_AMT Net Sale Value
SALE FA_­SALE_LOS Loss on Account of Sale (Book Value-Net Sale Value)
SALE FA_­SALE_PFT Profit on Account of Sale (Net Sale Value-Book Value)
SALE FA_­DEPR_ACC Accumulated depreciation
WRTO FA_WR­TO_AMT Amount Written off (Book Value)
WRTO FA_CAP­T_AMT Asset Cost capitalized
WRTO FA_­DEPR_ACC Accumulated depreciation
TSFR FA_­DEPR_ACC Accumulated depreciation
TSFR FA_TS­FR_AMT Transfer Amount (Asset Amount – Accumulated Deprecia­tion)

6.3 Accounting Roles

In this section we have provided a list of sample accounting roles that can be used for all types of products in the FA module:

Accounting Role Description Role Type
FAASSETACC Asset Account Asset
FAWIPACC Work-In-Progress Account Liability
FACUSTACC Customer Account Customer
FADEPREXP Depreciation Account Expense
FAACCDEPRLIB Accumulated depreciation Acct Liability
FASALEEXP Loss on Sale Account Expense
FASALEINC Profit on Sale Account Income
FAWRTOEXP Asset Written Off Account Expense
FATSFRACC Transfer Account Asset

6.4 Event-wise Accounting Entries and Advices

In the subsequent sections we have defined suggested accounting entries and advices for each of the events in the life-cycle of an FA contract.

BOOK: Booking

Accounting Entries

Condition Accounting Role Amount Tag Dr./Cr. Indicator
No PO required FAWIPACC FA_ASST_AMT Dr
for Purchase FACUSTACC FA_ASST_AMT Cr

 

CAPT: Capitalization of Asset

Accounting Entries

Condition Accounting Role Amount Tag Dr./Cr. Indicator
None FAASSETACC FA_CAPT_AMT Dr
  FAWIPACC FA_CAPT_AMT Cr

 

DEPR: Depreciation processing

Condition Accounting Role Amount Tag Dr./Cr.
Increase in depreciation FADEPREXP FA_DEPR_ADD Dr
FAACCDEPRLIB FA_DEPR_ADD Cr
Decrease in depreciation FAACCDEPRLIB FA_DEPR_RED Dr
FADEPREXP FA_DEPR_RED Cr
If Acquired depreciation is entered FAWIPACC FA_DEPR_ACQ Dr
FAACCDEPRLIB FA_DEPR_ACQ Cr

AMND: Amendment of the contract

No Accounting Entries need to be captured at this stage since all the adjustments to be done will be taken care of by the depreciation processing event.

SALE: Sale of Asset

Condition Accounting Role Amount Tag Dr./Cr.
Loss on Sale FAACCDEPRLIB FA_DEPR_ACC Dr
Loss on Sale FACUSTACC FA_SALE_AMT Dr
Loss on Sale FASALEEXP FA_SALE_LOS Dr
Loss on Sale FAASSETACC FA_CAPT_AMT Cr
Profit on Sale FAACCDEPRLIB FA_­DEPR_ACC Dr
Profit on Sale FACUSTACC FA_SALE_AMT Dr
Profit on Sale FAASSETACC FA_CAPT_AMT Cr
Profit on Sale FAASSETACC FA_SALE_PFT Dr
Profit on Sale FASALEINC FA_SALE_PFT Cr

In Oracle FLEXCUBE, all Credit and Debit entries have to be paired up. So the entries will be as follows:

Condition Accounting Role Amount Tag Dr./Cr.
Loss on Sale FACUSTACC FA_SALE_AMT Dr
Loss on Sale FAASSETACC FA_SALE_AMT Cr
Loss on Sale FAACCDEPRLIB FA_DEPR_ACC Dr
Loss on Sale FAASSETACC FA_DEPR_ACC Cr
Loss on Sale FASALEEXP FA_SALE_LOS Dr
Loss on Sale FAASSETACC FA_SALE_LOS Cr
Profit on Sale FACUSTACC FA_SALE_AMT Dr
Profit on Sale FAASSETACC FA_SALE_AMT Cr
Profit on Sale FAACCDEPRLIB FA_DEPR_ACC Dr
Profit on Sale FAASSETACC FA_DEPR_ACC Cr
Profit on Sale FAASSETACC FA_SALE_PFT Dr
Profit on Sale FASALEINC FA_SALE_PFT Cr

Advices

A Payment message would be generated for the customer to whom the asset is sold.

WRTO: FA Write off

Condition Accounting Role Amount Tag Dr./Cr.
None FAACCDEPRLIB FA_DEPR_ACC Dr.
FAWRTOEXP FA_WRTO_AMT Dr
FAASSETACC FA_CAPT_AMT Cr

Since all debit and credit entries have to paired up in Oracle FLEXCUBE, the entries will be reflected as follows:

Condition Accounting Role Amount Tag Dr./Cr.
None FAWRTOEXP FA_CAPT_AMT Dr
FAASSETACC FA_CAPT_AMT Cr
FAACCDEPRLIB FA_DEPR_ACC Dr
FAWRTOEXP FA_DEPR_ACC Cr

TSFR: Transfer of asset from one branch/location to another

The Transfer event is automated and the transferred asset will be automatically created in the branch/location on save of transfer.

This event will be triggered when the asset is transferred from one branch/ location to another.

The Accounting entry setup for the asset in Transferor and Transferee branch will be as described below.

1) Asset still in WIP stage

Transferor branch – Event TSFR

DR/CR Accounting Role Description Amount Tag Description
DR FATSFRACC Transfer Account (Transferee Branch) FA_ASST_AMT Original Asset cost
CR FAWIPACC Work in Progress Account (Trans­feror Branch) FA_ASST_AMT Original Asset cost

Transferee Branch – Event BOOK

DR/CR Accounting Role Description Amount Tag Description
DR FAWIPACC Work in Progress Account (Transferee Branch) FA_ASST_AMT Original Asset cost
CR FACUSTACC Customer Account FA_ASST_AMT Original Asset cost
DR FAWIPACC Work in Progress Account (Transferee Branch) FA_TSFR_AMT Original Asset cost
CR FATSFRACC Transfer Account ( Trans­feror Branch) FA_TSFR_AMT Original Asset cost

Only the second set of entries will be passed in case of an asset transfer.

2) Capitalized Asset

Transferor branch – Event TSFR

DR/CR Accounting Role Description Amount Tag Description
DR FATSFRACC Transfer Account (Transferee Branch) FA_CAPT_AMT Original Asset cost
CR FASSTACC Asset Account (Transferor Branch) FA_CAPT_AMT Original Asset cost
DR FAACCDEPRLIB Accumulated depre­ciation Account FA_­DEPR_ACC Accumulated Dep.
CR FATSFRACC Transfer Account (Transferee Branch) FA_­DEPR_ACC Accumulated Dep.

Transferor Branch – Event DEPR (Along with TSFR)

DR/CR Accounting Role Description Amount Tag Description
DR FADEPREXP Dep. Expense FA_DEPR_ADD Depreciation Addition
CR FAACCDEPRLIB Accumulated deprecia­tion Account FA_DEPR_ADD Depreciation Addition
DR FAACCDEPRLIB Accumulated deprecia­tion Account FA_DEPR_RED Depreciation Reduction
CR FADEPREXP Dep. Expense FA_DEPR_RED Depreciation Reduction

Transferee Branch – Event BOOK

DR/CR Accounting Role Description Amount Tag Description
DR FAWIPACC Work in Progress Account (Transferee Branch) FA_ASST_AMT Original Asset cost
CR FACUSTACC Customer Account FA_ASST_AMT Original Asset cost
DR FAWIPACC Work in Progress Account (Transferee Branch) FA_TSFR_AMT Original Asset cost – Acquired Depreciation
CR FATSFRACC Transfer Account (Trans­feror Branch) FA_TSFR_AMT Original Asset cost - Acquired Depreciation

Only the second set of entries will be passed in case of an asset transfer.

Transferee Branch – Event DEPR (Along with BOOK)

DR/CR Accounting Role Description Amount Tag Description
DR FAWIPACC Work in Pro­gress Account (Transferee Branch) FA_DEPR_ACQ Acquired Depreciation
CR FAAC­CDEPRLIB Accumulated depreciation Account FA_DEPR_ACQ Acquired Depreciation

Capitalization entries will be passed as usual for the new asset.

Examples

Formula for calculating depreciation to be passed / reversed:

Depreciation already done for current period =

YTD depreciation – (Depreciation per period * No. of previous periods)

 

Depreciation to be reversed (If Dep. Effective date <= Cut Off date) =

Depreciation already done for the current period

 

Depreciation to be passed (If Dep. Effective date > Cut Off date) =

Depreciation per period - Depreciation already done for current period

 

The above formula will be valid for WDV method of depreciation also since the depreciation process considers the Written Down Value of the asset only as of the beginning of the current financial year.

 

Consider the following parameters –

Financial Year - 01-Jan-2008 to 31-Dec-2008

Depreciation period - Quarterly

Cut off Month - 1

Cut off Date - 20

Depreciation effective date - 17-Apr-2008

Transfer Date - 25-Aug-2008

Asset Cost - 12000

Depreciation rate - 10%

Now according to the above parameters,

If asset is acquired in current year, we need to find out the period when depreciation started.

Depreciation Start period = 2 (2nd quarter of the year)

Transfer is happening in the 3rd Period, So No of previous periods = 3-2 =1

Total depreciation for the year = 12000*10/100 =1200

Actual depreciation for the year = 1200 * Applicable periods/No of periods in a year

= 1200 * 3/4

= 900

Depreciation per period = 900 / 3

= 300

Let us assume that when the transfer is happening on 25-Aug-2008 YTD depreciation is 475. Since transfer is happening after the cut off date (10-Jul-2008) for the 3rd period, we need to complete depreciation for this period. According to the above formula –

 

Depreciation already done for current period = 475 – [(300 * (2-1)]

= 175

 

Extra depreciation to be passed = 300-175

= 125

This is the amount for which depreciation entry is passed on transfer.

Let us now assume that the cut off date is 27-Aug-2008. Since transfer is happening before the cut off date, we need to reverse the depreciation for this period

Depreciation already done for current period = 475 – [(300 * (2-1)]

= 175

Depreciation to be reversed = 175

 

1) Asset transferred before Cut off date

Consider the following parameters for a fixed asset –

Asset Cost – 12000

Acquisition Date – 10-Nov-2007

Capitalization date – 17-Jan-2008

Effective depreciation date – 17-Jan-2008 (Defaulted to Capitalization date)

Depreciation Period – Quarterly

Cut off date – 20

Cut off period – 1

Depreciation Frequency – Monthly

Frequency start date – 15

Depreciation Rate –10% Per Annum

Fin year start date - 01-Jan-2008

Fin year end date - 31-Dec-2008

According to the above parameters, the cut off date for depreciation is 20-Jan-2008. Any asset having effective depreciation date on or before 20-Jan-2008 will be depreciated for 4 periods in the first year. Any asset having effective depreciation date after 20-Jan-2008 will be depreciated will be depreciated only for the next 3 periods in the first year. Since our asset has effective depreciation date as 17-Jan-2008 which is before the cut off date, it will be depreciated for the full year. Since we are considering the case where transfer is done in the first year itself, accumulated depreciation will always be the same as YTD depreciation.

Depreciation on 15-feb-2008

 

Total depreciation for the year =

[(Asset cost * rate)* Applicable dep. Periods]/ No of depreciation periods I the year

= [(12000*.10)*4]/4

=1200

Total depreciation runs in the year =12 (Monthly frequency)

Future Depreciation runs left =10 (march Onwards)

Future depreciation =1200*10/12

=1000

Depreciation to be passed this time =1200-1000

=200

Depreciation accounting entries (DEPR event) on 15-feb-2008

Accounting entries passed on 15-Feb-2008

DR/CR Accounting Role Description Amount Tag Description
DR FADEPREXP Dep. Expense FA_DEPR_ADD 200
CR FAACCDEPRLIB Accumulated Dep. FA_DEPR_ADD 200

Accounting entries passed on 15-Mar-2008

DR/CR Accounting Role Description Amount Tag Description
DR FADEPREXP Dep. Expense FA_DEPR_ADD 100
CR FAACCDEPRLIB Accumulated Dep. FA_DEPR_ADD 100

Accounting entries passed on 15-Apr-2008

DR/CR Accounting Role Description Amount Tag Description
DR FADEPREXP Dep. Expense FA_DEPR_ADD 100
CR FAACCDEPRLIB Accumulated Dep. FA_DEPR_ADD 100

 

Now let us assume that the asset is transferred to another branch/location on 17-Apr-2008.

Cut off date for asset transfer will be taken from branch parameters. For this case it will be 20-Apr-2008.

Since the asset is transferred before the cut off date, any depreciation done for the asset in the 2nd depreciation period will be reverted back on transfer from the transferor branch.

YTD depreciation = 200+100+100

= 400

Depreciation already done for current period =

YTD depreciation - Depreciation for all previous periods

= 400 - 300

= 100

Acquired depreciation for the asset in new branch/location =

Accumulated Dep.- Dep. for current period

= 400-100

= 300

Accumulated Depreciation also now becomes 300.

 

Accounting entries passed in the transferor branch –

Event – TSFR

DR/CR Accounting Role Description Amount Tag Description
DR FATSFRACC Transfer Account (Transferee Branch) FA_ASST_AMT 12000
CR FASSTACC Asset Account (Transferor Branch) FA_ASST_AMT 12000
DR FAAC­CDEPRLIB Accumulated depreciation Account FA_DEPR_ACC 300
CR FATSFRACC Transfer Account (Transferee Branch) FA_DEPR_ACC 300

Event – DEPR (Triggered along with TSFR)

DR/CR Accounting Role Description Amount Tag Description
DR FAACCDEPRLIB Accumulated Dep. FA_DEPR_RED 100
CR FADEPREXP Dep. Expense FA_DEPR_RED 100

 

Accounting entries passed in the transferee branch –

Event BOOK

DR/CR Accounting Role Description Amount Tag Description
DR FAWI­PACC Work in Progress Account (Trans­feree Branch) FA_TS­FR_AMT 11700
CR FATS­FRACC Transfer Account ( Transferor Branch) FA_TS­FR_AMT 11700

Event DEPR (Triggered along with BOOK)

DR/CR Accounting Role Description Amount Tag Description
DR FAWIPACC Work in Progress Account (Trans­feree Branch) FA_­DEPR_ACQ 300
CR FAAC­CDEPRLIB Accumulated depreciation Account FA_­DEPR_ACQ 300

 

From here onwards, the depreciation of the asset will be done in the new branch/location with the rule defined for the new category – location combination.

2) Asset transferred after Cut off date

Assume that everything remains the same as the previous asset but the asset is transferred on 10-May-2008 i.e after the cut off date. In this case, the system will depreciate the asset for the current period fully on transfer and depreciation in the new branch/location will start from the next period onwards only. Since we are considering the case where transfer is done in the first year itself, accumulated depreciation will always be the same as YTD depreciation.

YTD depreciation (after depreciation on 15-Apr) = 200+100+100

= 400

Total depreciation for current period = Dep. for the year/No of dep. Periods = 900/3

=300

 

Depreciation already done for current period

= YTD depreciation - Depreciation for all previous periods

= 400 -100

= 100

Remaining dep. For current period = 300-100 = 200

Acquired depreciation for the asset in new branch/location

= Accumulated Depreciation

= Current Accumulated Dep.+ Remaining Dep. for current period

= 400+200

= 600

 

Accounting entries passed in the transferor branch –

Event – TSFR

DR/CR Accounting Role Description Amount Tag Amount
DR FATSFRACC Transfer Account (Trans­feree Branch) FA_ASST_AMT 12000
CR FASSTACC Asset Account (Trans­feror Branch) FA_ASST_AMT 12000
DR FAAC­CDEPRLIB Accumulated deprecia­tion Account FA_DEPR_ACC 600
CR FATSFRACC Transfer Account (Trans­feree Branch) FA_DEPR_ACC 600

Event – DEPR (Triggered along with TSFR)

DR/CR Accounting Role Description Amount Tag Amount
DR FADEPREXP Dep. Expense FA_DEPR_ADD 200
CR FAACCDEPRLIB Accumulated Dep. FA_DEPR_ADD 200

 

Accounting entries passed in the transferee branch –

Event BOOK

DR/CR Accounting Role Description Amount Tag Amount
DR FAWIPACC Work in Progress Account (Transferee Branch) FA_TSFR_AMT 11400
CR FATS­FRACC Transfer Account ( Trans­feror Branch) FA_TSFR_AMT 11400

Event DEPR (Triggered along with BOOK)

DR/CR Accounting Role Description Amount Tag Amount
DR FAWIPACC Work in Progress Account (Transferee Branch) FA_­DEPR_ACQ 600
CR FAAC­CDEPRLIB Accumulated deprecia­tion Account FA_­DEPR_ACQ 600

From here onwards, the depreciation of the asset will be done in the new branch/location with the rule defined for the new category – location combination.

The following details the possible advices and the stage at which the advices are generated for the Accounting entries:

Advice Code Advice Description Receiver
PAYMENT_MESSAGE Payment Message Counter­party

This advice is generated on Book Event (If PO required is ‘N’ at product level) and on Sale Event.

On transfer of an asset, a transfer advice called FA_TRANSFER will be generated. Following details will be available in the transfer advice –

The receiver of the advice will be the Walk in Customer for the Transferor Branch.