R12 SLA: From Product Accounting to Subledger Accounting

Subledger Accounting (SLA is a Rule-based accounting engine, toolset & repository which is supporting most of Oracle business Suite modules. The requirement for introduction this is to have an option of allowing multiple accounting representations for a single business event, resolving conflicts between corporate and local fiscal accounting requirements. SLA is an intermediate step between subledger products and the Oracle General Ledger Journal entries are created in Subledger Accounting and then transferred to Oracle General Ledger Each subledger transaction that requires accounting is represented by a complete and balanced subledger journal entry stored in a common data model Sub ledger Accounting is a Service, not an Application . The high points of SLA would be:

There are no SLA responsibilities Users do not login to SLA SLA is a service provided to Oracle Applications SLA forms and programs are embedded within standard Oracle Application responsibilities SLA provides the following services to Oracle Applications o Generation and storage of detailed accounting entries o Storage of subledger balances (e.g. third party control account balances) o Subledger accounting entries o Subledger reporting (e.g. Subledger journal reports, open account balances listing)

What oracle application Module taking services for SLA? Most of modules which need accounting entry with finance uses service of SLA Modules. This new Product has these many new functionality such as:

Journal Entry Setup and sequencing Multiple Accounting Representation Multi-period Accounting Summarization Options Draft and online accounting Transaction account Builder Accrual Reversal Accounting Accounted and Gain/Loss Amount calculations Application Accounting Definition Loader

GL Flow with Subledger-Level Secondary Ledger Lets take a case , with a scenario with basic Finance module, you can find how tightly accounting model is separated with transaction model in release 12.

This is the typical flow within one product with SLA can be best described as:

Subledger & General Ledger Those who are not having accounting background should understand , every accounting system will have a number of subsidiary ledgers (called subledgers) for items such as cash, accounts receivable, accounts payable, inventory , purchasing like wise. All the entries that are entered (called posted or booked) to these subledgers will transact through the general ledger account. For example, when a credit sale posted in the account receivable subledger turns into cash due to a payment, the transaction will be posted to the general ledger and the two (cash and accounts receivable) subledgers as well. There are instances when items will go directly to the general ledger without any subledger. These items will be linked to your balance sheet but not to your profit and loss statement. The Concept is more or less addressed same in newly R12 SLA accounting , therefore you should note:

A transactional application that generates accounting impact. Used to store detailed information not needed for a general ledger Subledgers post summarized activity to a general ledger periodically to maintain centralized account balances for the company

R12 SLA: Transaction Account Builder

In R12 apart from AMB, there is yet another toolset which is called Transaction Account Builder aka TAB which normally used to derive default accounts for a particular transactions using sources , which is defined in the Accounting Methods Builder (AMB). Normally this derives accounting codes from the TAB which internally drives the AMB setup attributes. This is used to derive default accounts for transactions before they are accounted and then it is used the AMB to generate the accounts that appear in the accounting. TAB only derives default accounts for transactions. These accounts may not be the ones that appear on the subledger journal entries since these are generated by the Create Accounting program based on the application accounting definitions. What are key components The TAB Components figure below shows the components

Moreover you can see the source and account derivation rules(ADD) are shared with the AMB which was discussed in one of the last post. Will discuss some more details for this utility in some another post and we will try to compare how its different from Autoaccounting

R12 SLA: Accounting Methods Builder

In Subledger Accounting, have you heard something called Accounting Methods Builder, which is sort of toolset to define journal entry rules for the transactions and events of a subledger application . This allows us defining multiple sets of rules to be used concurrently for different requirements. How AMB work? Lets try to understand on the basis of Journal entry. Normally a journal are split into three main components:

Descriptions Line Types Account Derivation rules

A particular Journal can be best described as figure 1.0(adopted) as below.

Description : Description can be on the entry or its individual lines. You set up descriptions, as many as you want, by using pieces of data from the transaction and constant values. Purposely it identify the journal line types, descriptions, and account derivation rules that will be used to create a journal entry for a particular event type Type :The Line Type is another component, actually one of the two main components of the entry. The line type defines whether this is a debit or a credit, what the accounting class is, where the amount should come from etc. Again, you set up as many as you need of these for a particular entry. You can have a single invoice line or distribution create as many debits or credits as needed. Under type you can identify the natural side of entry like Debit,Credit,Gain/Loss This will determine the accounting class You can set under which conditions the rule will create a line This can be tighten by defining the values needed for entry line generation, such as amount, currency, conversion rate information

Account derivation rule : This determines to which GL account a line should be booked. You can have lot of flexibility around the account derivation rules. You can also set up a rule for each flexfield to be used, or you can make it more complex and build each flexfield segment by segment by combining multiple rules. Normally these rules can be setup to derive the accounts or segment values from transactional data, including conditions of when to use a particular rule versus another. You can also note, this will:

Determine which rule will be generic or specific for a given chart of accounts

This will identify what will be derived like Accounting flexfield or there respective segment or qualifier value or Value from a value set This will also have a provision to define how the value will be derived for defaulting some Constant values or any Source value or any mapping set

Accounting Methods Builder The transaction objects and the sources carry transaction information into the rules defined for each component of an entry. These components, for example, journal line type, account derivation rule, journal entry descriptions, are attached together as a journal line definition for a particular event.

Take a case if you set up a Journal line description for an invoice validation event, another one for a payment creation, another one for payment clearing. The set of such rules for a particular sub ledger application is called the application accounting definition. And the set of application accounting definition for multiple applications is called the sub ledger accounting method. In reality this accounting methods is assigned to each ledger, which determines which rules are applied when accounting is being generated for a particular ledger. If you have a setup with a primary and a secondary ledger, you could have different accounting methods attached to and used for each.

R12 SLA vis--vis AX of 11i

We have seen Oracle Sub ledger Accounting replaces the Global Accounting Engine, which normally used for European & Regional Localizations need in earlier versions. SLA itself extends the AX engine functionality by providing customizable accounting rules via a flexible Is SLA a clone of AX? Yes, almost the functionality was derived from there itself, lets see vis--vis to uptake some of the functionality in these two products.

Not only functionality, some of the reports replaces the corresponding reports of the Global Accounting Engine.

The good is that both the Global Accounting Engine(AX) and Oracle Subledger Accounting(SLA) generate accounting from a compiled definition of accounting rules defined by users. Oracle Subledger Accounting further maintains version control on the rules enabling users to modify the rules while maintaining auditability.