6. Annexure A - Accounting Entries and Advices

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

This chapter contains the following sections:

Section 6.1, "Events"
Section 6.2, "Amount Tags"
Section 6.3, "Accounting Roles"
Section 6.4, "Event-wise Accounting Entries and Advices"

6.1 Events

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

Event Code	Event Description	Remarks
BOOK	Booking an Islamic Fixed Asset contract (Mandatory)	All Types
CAPT	Capitalization of an asset	All Types
DEPR	Depreciation Processing for Booking	All Types
AMND	Amendment of a contract	All Types
SALE	Sale of an asset	All Types
WROF	Islamic Fixed Asset Write off	All Types
DPTX	Depreciation for Tax purposes (no accounting entries are passed for this event)	All Types
REVC	Reversal of a contract	All Types
TSFR	Transfer of Asset
DEAW	Depreciation Wash
DEWR	Depreciation Wash Reversal

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)
FA_ASST_AMT	Asset Cost Capitalized
FA_DEPR_ACQ	Acquired depreciation to be charged
FA_DEPR_WASH	Depreciation Wash Amount

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
AMND	-	-
SALE	FA_SALE_AMT	Net Sale Value
	FA_SALE_LOS	Loss on Account of Sale (Book Value-Net Sale Value)
	FA_SALE_PFT	Profit on Account of Sale (Net Sale Value-Book Value)
	FA_DEPR_ACC	Accumulated depreciation
WRTO	FA_WRTO_AMT	Amount Written off (Book Value)
	FA_CAPT_AMT	Asset Cost capitalized
	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 Islamic Fixed Asset 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 a contract.

BOOK: Booking

Accounting Entries

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

The following accounting entries are passed for this event for Islamic inventory tracking:

Accounting Role	Amount Tag	Dr/Cr
FAWIPACC	FA_ASST_AMT	Dr
FACUSTACC	FA_ASST_AMT	Cr

CAPT: Capitalization of Asset

Accounting Entries

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

DEAW: Depreciation Wash

This event is used to wash off the depreciation that has been accumulated because of the depreciation entries posted during every principal payment schedule in the loan transaction an d this event would be triggered from Manual or auto liquidation of a loan resulting in the final liquidation of the loan account.

The following accounting entries are passed for this event:

Accounting Role	Amount Tag	Dr /Cr
FAACCDEPRLIB WASH (Accumulated Leasing Depreciation Account)	FA_DEPR	Dr
FAASSETACC	FAASSETACC	Cr

DEWR: Depreciation Wash Reversal

This event is used to reverse the wash entries posted during the final settlement of the loan. This will be invoked when we reverse the final payment of the loan and this event would be triggered from on reversing of the liquidation of a loan which had resulted in the final liquidation of the loan.

The following accounting entries are passed for this event:

Accounting Role	Amount Tag	Dr /Cr
FAACCDEPRLIB(Accumulated Leasing Depreciation Account)	-FA_DEPR_WASH	Dr
FAASSETACC	-FA_DEPR_WASH	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
	FACUSTACC	FA_SALE_AMT	Dr
	FASALEEXP	FA_SALE_AMT	Dr
	FAASSETACC	FA_CAPT_AMT	Cr
Profit on Sale	FAACCDEPRLIB	FA_DEPR_ACC	Dr
	FACUSTACC	FA_SALE_AMT	Dr
	FASALEINC	FA_SALE_AMT	Cr
	FAASSETACC	FA_CAPT_AMT	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_CAPT_AMT	Dr
	FAASSETACC	FA_CAPT_AMT	Cr
	FAACCDEPRLIB	FA_DEPR_ACC	Dr
	FACUSTACC	FA_DEPR_ACC	Cr
	FASALEEXP	FA_SALE_AMT	Dr
	FACUSTACC	FA_SALE_AMT	Cr
Profit on Sale	FACUSTACC	FA_CAPT_AMT	Dr
	FAASSETACC	FA_CAPT_AMT	Cr
	FAACCDEPRLIB	FA_DEPR_ACC	Dr
	FACUSTACC	FA_DEPR_ACC	Cr
	FACUSTACC	FA_SALE_AMT	Dr
	FASALEINC	FA_SALE_AMT	Cr

The following accounting entries are passed for this event for Islamic inventory tracking:

Accounting Role	Amount Tag	Dr/Cr
FACUSTACC	FA_SALE_AMT	Dr
FAWIPACC	FA_SALE_AMT	Cr

Advices

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

WRTO: Islamic Fixed Asset 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		Amount Tag
	Role	Description	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		Amount Tag
	Role	Description	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.

1) Capitalized Asset

Transferor branch – Event TSFR

DR/CR	Accounting Role		Amount Tag
	Role	Description	Tag	Description
DR	FATSFRACC	Transfer Account (Transferee Branch)	FA_ASST_AMT	Original Asset cost
CR	FASSTACC	Asset Account (Transferor Branch)	FA_ASST_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		Amount Tag
	Role	Description	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		Amount Tag
	Role	Description	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		Amount Tag
	Role	Description	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.

Advices

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 –

Original asset reference
Transferor Branch
Transferee Branch
Accumulated depreciation
Asset Cost
Current Book Value
Date of Transfer

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