The Create Accounting Process flow begins with subledgers. Starting with entering and then completing all of our transactions, we will then run the Create Accounting process to get that information into the General Ledger Application.
The Create Accounting process will look for eligible transactions and send the financial information into the Oracle Subledger Accounting, it is also called SLA, which is our accounting engine.
The Accounting Engine is going to transform and validate the transactional financial data into a journal with balance, debits, and credits based on the ledger’s accounting method. These newly created journals are then transferred into the general ledger interface table. And then the import process moves the journals to the Oracle General Subledger journal entry tables which are the GL journal entry batches, headers, and lines.
We then post those transactions to update our GL balances table and our GL balances cube. And then your financial reports are generated from the account balances within the GL balances cube.
Now we will talk about Accounting Methods.
Accounting Method is made up of a few components that hold the rules for how you want to represent your subledger data into the ledgers. The Accounting Method is utilized in the subledger accounting engine.
You must have an accounting method in your primary, as well as the secondary ledgers. And then it creates that final accounting for you with the journal entries by running the Create Accounting process.
We need to provide three different subledger accounting methods that are predefined and delivered by Oracle:
- Standard Accrual
- Standard Accrual with Encumbrances
- Standard Accrual for China
The Standard Accrual method can be used by companies which are commercial companies, and have Primary Ledgers.
This is the most common accounting method, used for accrual-based accounting. It recognizes revenue and expenses when they are incurred, regardless of when cash transactions occur. The Standard Accrual method is ideal for organizations that need to record financial transactions as they happen, providing a clear picture of assets and liabilities.
The Standard Accrual with Encumbrances will be used if you are using the encumbrance accounting.
This method is often used in public sector or government organizations that need to track commitments (encumbrances) alongside actual expenses. It records budgetary commitments to help organizations manage their financial obligations and ensure they don’t exceed budget limits.
The Standard Accrual for China, it is exclusively used by companies that are operating in China.
In Oracle Fusion, the Standard Accrual for China is a specialized subledger accounting method tailored to meet Chinese accounting standards and regulatory requirements. This accrual method is designed to comply with the China Generally Accepted Accounting Principles (China GAAP), providing organizations operating in China with a framework that aligns with local statutory reporting requirements.
Here you see the entire process of Payables. So, when we are recording Accounting for Payables, we already have entered the invoices at this time, then we validate the invoices.
After validating invoices, we send those transactions over to the General Ledger by running the Create Accounting process. This process will transfer our data to GL, and then they will transform into journal entries.