How Account Balances Are Calculated

Account balances, when correctly calculated, create accurate financial statements that an entity can use to report its transactions.

Settings That Affect Account Balances

The initial ledger setup of the primary ledger controls how account balances are calculated. If implemented, accounting representations for secondary ledgers and currency conversion levels for reporting currencies are settings that affect account balances.

How Account Balances Are Calculated

Account balances are calculated when a journal is posted. The following occurs:

• The application updates the general ledger balances table and the balances cubes, which are based on the chart of accounts and hierarchies, known as trees.

• Balances are preaggregated in the balances cubes at every level in the account hierarchy for each chart of accounts segment.

  • Balances cubes store both detail and aggregated balances.

  • For each chart of accounts segment, balances are preaggregated at every level in the account hierarchy.

• Foreign currency journal entries update account balances for both the foreign currency that is entered and the amount in the ledger currency that is accounted for during journal entry.

• If you enable journal or subledger level options for reporting currencies or secondary ledgers, the journal is replicated to the reporting currency or secondary ledger.

Note: You configure these options by deciding on a combination of source and category, and for secondary ledgers, whether or not to automatically post the replicated journal.

• Reporting currencies offer accounting representations that differ by currency from the source ledger, either primary or secondary. Suspense, rounding imbalances, and intracompany balancing lines are generated independently for each reporting currency at the journal and subledger level by the posting process.

• Secondary ledgers are additional accounting representations that differ from primary ledgers in either the chart of accounts, accounting calendar, currency, accounting method, or ledger options. For instance, a secondary ledger may be required for local government compliance and reporting. Suspense, rounding imbalances, and intracompany balancing lines are generated independently for each secondary ledger at journal and subledger level by the posting process.