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COGS example
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The following scenario illustrate a short example of a Revenue / COGS matching for a sales order where Accounting rule used is: 3 Months, Deferred
Navigation1. Inventory>Item Master>Define item MM-ITEM65 (Purchase Item)
Figure 1
2. Miscellaneous Receipt Navigation: Miscellaneous Transactions>Receive MM-ITEM65 in Subinventory Store.Qty 100@15USD
3.View Material Transactions
Figure 2
4.View Material Distribution
Figure 3
5. Review the Item cost : Costs>Item Cost
Figure 4
6. Define Accounting Rules in Account Receivables
Account Receivables>Setup>Transactions>Accounting RulesThere are two Predefined Accounting rulesa-3 Months , Deferredb-Immediately
Figure 5
Figure 67. Enter a SO (eg 63849)
Figure 7
8. SO 63849 booked with Ordered item MM-ITEM65/qty=5/ price=15/ Accounting rule=3 Months, DeferredShipping warehouse=M3
Figure 8
9. Pick Release the SO
Figure 9
10. Ship Confirm the SO
Figure 10
11.Item is shipped
12. Line is closed
13. Review the Material Transactions form
14. Distribution of the SO issueWhen a Sales order is shipped the following accounting takes place:
Inventory Valuation Account: Credit. Deferred COGS account: Debit
15. Run the Workflow Background Process request
16 . Create the Invoice with the Autoinvoice request Sales Order Accounts Receivables>Interfaces>Autoinvoice
17.Check the Invoice in AR Accounts Receivables>Control>Accounting
18. Invoice generated:Invoice= 10033708
19. Recognize the revenue in AR
20. After recognizing the revenue. We need to accept it.
Manage Revenue:
21. Now the revenue has been recognized according to our accounting rule: 3 Months, Deferred50% August25%September25%October
For August 50% of the revenue has been recognized
22. Now we run a set of concurrent processes to record sales order and revenuerecognition transactions and to create and cost COGS recognition transactions.These COGS recognition transactions adjust deferred and earned COGS in anamount that synchronizes the % of earned COGS to earned revenue on salesorder shipment lines.
23. Record Order Management Transactions: records new sales order transactionactivity such as shipments and RMA returns in Oracle Order Management.
24. Collect Revenue Recognition Information: determines the percentage ofrecognized or earned revenue related to invoiced sales order shipment linesin Oracle Receivables.
25. Generate COGS Recognition Events: creates and costs COGS recognitionevents for new sales order shipments/returns and changes in revenuerecognition and credits for invoiced sales order shipment lines.
26. A non-physical transaction has been generatedTransaction Type= COGS Recognition
The distribution for the COGS Recognition transaction associated with the Sales Order transaction now would be as follows:
Deffered COGS : Debit y revenue percentage COGS : Credit (Actual revenue percentage )
Thus, essentially the recognized COGS balance is to move the value from Deferred COGS to COGS.
This particular COGS recognition transaction actually corresponds to a revenue recognition percentage change.