5.3 Setting Up Subledger Accounting for Payables

The published objective is Set up Subledger Accounting. Payables doesn't post to the general ledger directly. It raises accounting events, and Subledger Accounting (SLA) applies rules to create subledger journal entries, which are then transferred and posted to the general ledger.

The rule hierarchy

Account rule sources

An account rule can return:

• a constant;
• an account or segment from a transaction source, such as the invoice distribution account;
• a mapping set result;
• another account rule.

You can add conditions, and the rule takes the first priority whose condition is true. A common pattern takes the account from the invoice distribution and overrides one segment from a mapping set, for example setting the natural account from the supplier type.

Customizing predefined rules

Predefined methods and rules can't be edited. You copy them (for example, copy Standard Accrual), change the copy, and assign the copied method to the ledger. After changing the journal entry rule set assignments of an accounting method, run the Activate Subledger Journal Entry Rule Set Assignments process so the change takes effect.

Payables event classes and types

Your accounting setup can account for some of these events and not others. The Reconciled Payments class only matters if payments are accounted at clearing (section 7.4).

Transaction Account Definition versus account rules

Transaction Account Definition (TAD) derives default account combinations on transactions before they are accounted. For Payables, it derives the expense account on invoice lines of type Item, Freight and Miscellaneous from transaction attributes. Oracle's example derives the company segment from the legal entity, the cost center from the business unit, and so on, with constants for the remaining segments.

• Assignment. TAD is assigned at the ledger and subledger level.
• Turning it on. In Manage Invoice Options for the business unit, set Account Derivation Method to Transaction Account Definition.
• In the invoice pages. TAD runs when the user selects lines and clicks Derive Account, which overwrites any existing account.
• In bulk processing (import and validation), it fills in accounts only when none exist.

TAD can run alongside Intelligent Account Combination Defaulting (section 5.1). The AI feature works when the user moves into an empty account field, and it doesn't support bulk processing.

SLA account rules, by contrast, decide the accounts on the journal entry. That can differ from the distribution account when a rule replaces it.

Create Accounting

You can account transactions online from the invoice and payment pages, for example with Account in Draft or Account and Post to Ledger. You can also run the Create Accounting process. Its main parameters:

Oracle's period-close guidance (section 8.3) is to run Create Accounting with Transfer to General Ledger set to Yes. Then run Post Journal Entries to General Ledger to transfer anything accounted in Final mode but not yet transferred.

Errors are reported in the Create Accounting output, for example an invalid or end-dated account, or a cross-validation rule violation. Correct the cause and run again.

Multiple representations

A primary ledger and its secondary ledgers can each have their own accounting method. When a Payables event is accounted, SLA creates a journal entry for each ledger, each using that ledger's rules (and chart of accounts, if it differs). For example, a German subsidiary can account under US GAAP in its primary ledger and under HGB in a secondary ledger from the same invoice. Reporting currencies receive converted entries according to their conversion level.

Cash basis. Oracle's 26A guidance is to use Cash Basis for Secondary Ledger only on a secondary ledger. For cash basis in a primary ledger, follow the clearing-account approach in Oracle's Cash Basis Accounting white paper. That method needs the 25D feature Accounting Event Exclusion for Adjustment-Only Accounting Method Representation.