Accounting for Tax on Receivables Transactions

Accounting for taxes applicable to Receivables transactions is based on the tax and Receivables AutoAccounting configuration. This generates interim accounting while the subledger accounting configuration derives the final accounting.

You can control the derivation of values for each segment in the tax accounts that apply to the transaction with the AutoAccounting process. Set the value of the segment to a constant to post taxes for all transactions in a business unit to the same account. You can also base it on one of the source tables:

• Bill-to site: The tax account specified at the bill-to business purpose of each address defined within the customer account

• Sales representative: There is no tax account defined for the sales representative. However, the revenue account is used to pick the corresponding segment for the tax general ledger account

• Transaction types: The tax account specified for the transaction type

• Taxes: The tax recoverable or liability account specified for the tax rate

  If the tax has a tax accounting creation method option of Use accounts from an existing tax then use the tax accounting configuration for the source tax as the basis.

Each segment within a tax general ledger account is derived from any of the given sources. The application validates the derived code combination before stamping a transaction.

Tax accounting for all the Oracle Fusion Receivables invoice transactions remains the same. The tax liability is credited to the tax liability account when the tax point basis for tax is not Payment. If you set tax point basis to Payment, the tax amount is credited to the interim account. The tax liability is accounted when the invoice is paid, for example, when a receipt is applied to the invoice.

Accounting for Tax on Applied Credit Memos

For applied credit memos, accounting is based on the Receivables profile option of AR: Use Invoice Accounting for Credit Memos. When you set this to:

• Yes, Receivables uses the account references given on the original invoice for the credit memo.

• No, Receivables references the AutoAccounting options.

Accounting for Tax on Receivables Adjustments and Miscellaneous Receipts

The tax rate code source you specify for the Receivables activity determines whether Receivables calculates and accounts for tax on adjustments, discounts, and miscellaneous receipts assigned to this activity.

If you specify a tax rate code source of Invoice, then Receivables uses the tax accounting information defined for the invoice tax rate codes to automatically account for the tax. Specify one of the following Tax Rate Code Sources:

• None: Allocate the entire tax amount according to the general ledger account source specified. Choose this option if you don't want to separately account for tax.

• Activity: Allocate the tax amount to the asset or liability tax accounts that you define for this Receivables activity. This source is available if the Receivables Activity Type is Miscellaneous cash.

  The asset tax rate code is your collected tax account or tax received. Use this tax rate code to account for tax on miscellaneous receipts.

  The liability tax rate code is your deductible account or tax paid. Use this tax rate code to account for tax on miscellaneous payments.

• Invoice: Distribute the tax amount to the tax accounts specified by the tax rate code on the invoice. You can't choose this option if the Activity Type is Miscellaneous cash or Late charges.

  In the event of a tax adjustment to an invoice with zero amount tax distributions, don't set the adjustment activity's tax rate code source to Invoice.