This writeup is intended to help clarify the concept of Subledger Accounting Method introduced in R12. We will also understand the significance of the 4th C assignment to the Ledger. Let us also look at some concepts on primary ledger, secondary ledger and the reporting currency, how they all related to the subledger accounting method.
I would like to discuss the above in a question and answer format :
1. What is the significance of the 4th C in a ledger and why is it needed?
2. What is the link between the sub-ledger accounting definition and the ledger
The link between the sub-ledger accounting definition and the ledger is established by using the 4th C in the ledger definition ( Accounting Convention / SLA Method).
3. Is the 4th C mandatory for a ledger. If it is not set, what is the impact?
4th C is not mandatory. If you just plan to use only General Ledger module, then you can leave the 4th C blank. 4th C becomes mandatory if you are using subledger modules like AP, AR, INV etc..
4. If my intention is to continue the accounting logics available in the subledger modules and not configure SLA for accounting, do I still need to assign the SLA method to my ledger?
Yes. If you are planning to use the accounting logics available in the subledger modules ( similiar to 11i), you need not create your own SLA method. Instead you can pick the appropriate standard SLA method for assigning to the ledger. For Example, the SLA method, standard accrual uses the account segments that gets generated by the accounting logics in the subledger module. ( Like the account that gets created in the account distribution screen for an Invoice).
Below are some of the standard accounting methods:
We use secondary ledgers when any of the 4Cs are different in your accounting representation except currency.
For example, You want to use US COA for local reporting but would like to use different COA (Like France COA) for corporate reporting, then we should add secondary ledger to accommodate this requirement. All account balances would get converted to the secondary ledger as well.
6. What are the scenarios where we will have a reporting currency Vs using the translation feature of GL?
Reporting currencies are intended for use by organizations that must regularly and routinely support statutory and legal reporting of both transactions/journals and General Ledger account balances in multiple currencies, other than the ledger currency. If you only need to report account balances in a currency other than your ledger currency, you can use General Ledger translation.
We will use translation instead of setting the currency as a reporting currency, if the intention of the translation is to see period end/quarter end/year end balances in different currency. If we need to have immediate reports as soon as the transaction is done in a different currency, then we use reporting currency.
I would like to discuss the above in a question and answer format :
1. What is the significance of the 4th C in a ledger and why is it needed?
4th C is nothing but the new subledger accounting method introduced in R12. By assigning 4th C to a ledger, we are telling the system what accounting method should be used for the specific ledger. We would really want our system to create accounting in the manner we want. We can have our own logic as per the business requirement for debit and credit entries. For example, if my revenue account to be credited should be based on the DFF defined in the sales order, then I can define that rule in my accounting method. In 11i we did have option only to pick our account from either sales representatives or standard lines or customer site or transaction types. But here, we can have each of our accounting segment values picked based on any field from any forms in any related module. We can define all these rule and give a name to the rules, which is nothing but the subledger accounting method. The name can be any thing like US GAAP or IAS or any other name of your choice. What is more relevant here is your accounting logic that goes behind it.
Once we give a name to our rules, we need to ask our ledger to follow only our rules for accounting. That is exactly what we do, by assigning the subledger accounting method to our ledger which is the 4 th C.
2. What is the link between the sub-ledger accounting definition and the ledger
3. Is the 4th C mandatory for a ledger. If it is not set, what is the impact?
4th C is not mandatory. If you just plan to use only General Ledger module, then you can leave the 4th C blank. 4th C becomes mandatory if you are using subledger modules like AP, AR, INV etc..
4. If my intention is to continue the accounting logics available in the subledger modules and not configure SLA for accounting, do I still need to assign the SLA method to my ledger?
Yes. If you are planning to use the accounting logics available in the subledger modules ( similiar to 11i), you need not create your own SLA method. Instead you can pick the appropriate standard SLA method for assigning to the ledger. For Example, the SLA method, standard accrual uses the account segments that gets generated by the accounting logics in the subledger module. ( Like the account that gets created in the account distribution screen for an Invoice).
Below are some of the standard accounting methods:
- Standard Accrual
- Standard Cash
- China Standard Accrual
- Encumbrance Accrual
- Encumbrance Cash
- United States Federal
We use secondary ledgers when any of the 4Cs are different in your accounting representation except currency.
For example, You want to use US COA for local reporting but would like to use different COA (Like France COA) for corporate reporting, then we should add secondary ledger to accommodate this requirement. All account balances would get converted to the secondary ledger as well.
6. What are the scenarios where we will have a reporting currency Vs using the translation feature of GL?
Reporting currencies are intended for use by organizations that must regularly and routinely support statutory and legal reporting of both transactions/journals and General Ledger account balances in multiple currencies, other than the ledger currency. If you only need to report account balances in a currency other than your ledger currency, you can use General Ledger translation.
We will use translation instead of setting the currency as a reporting currency, if the intention of the translation is to see period end/quarter end/year end balances in different currency. If we need to have immediate reports as soon as the transaction is done in a different currency, then we use reporting currency.
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