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R12: CE: Q&A: Clearing, Reconciliation and Accounting (Doc ID 1066768.1)

In this Document

Goal
Solution
GLOSSARY OF TERMS

Q&A Clearing, Auto-reconciliation and Accounting

Question: 1. What is the impact of just ignoring all the unreconciled AP wire and AR receipts from the Bank
Statement and leave them as unreconciled?
Question: 2 Does it create any accounting entries when it reconciles AR Receipts during auto reconciliation?
Question: 3. How do we avoid any misc receipts created during auto reconciliation?
Question: 4. Can the user still continue to do manual Clearing in Cash Management for Receipts and Payments?
Question: 5. How does it affect accounting with respect to Reconciliation and Clearing.
Question: 6. Please let us know whether Leaving the unreconciled transactions (AP Wire and AR Receipts) in
Bank Statement and clear them manually in Cash Management will cause any issue?

Concepts Payable Reconciliation Accounting

Question 1: What Is The Difference Between Reconciliation And Clearing?

Have more questions?

References

APPLIES TO:

Oracle Cash Management - Version 12.0.0 to 12.2 [Release 12 to 12.2]

Information in this document applies to any platform.

GOAL

The goal of this document is to address a number of questions related to Oracle's Cash Management application for
Release 12.....

Question: 1. What is the impact of just ignoring all the unreconciled AP wire and AR receipts from the Bank Statement and
leave them as unreconciled.?
Question: 2. Does it create any accounting entries when it reconciles AR Receipts during auto reconciliation?
Question: 3. How do we avoid any misc receipts created during auto reconciliation?
Question: 4. Can the user still continue to do manual Clearing in Cash Management for Receipts and Payments?
Question: 5. How does it affect accounting with respect to Reconciliation and Clearing.
Question: 6. Please let us know whether Leaving the unreconciled transactions (AP WIRE and AR Receipts) in Bank
Statement and clear them manually in Cash Management will cause any issue?

SOLUTION

Important: The Create Accounting process in Cash Management (CE) is not concerned with the events which are linked
with a subledger, like AP payments and AR receipts reconciliations. These accounting events are handled by the
RESPECTIVE subledger module itself (i.e., Payables application for AP payments reconciliation, or the Receivables
application for AR receipts reconciliation). For GL journal line reconciliation, NO accounting is generated from CE and GL.
In R12 , the accounting which is generated by Cash Management only concerns all events that do not have any
relationship with other subledgers. When you manage to create a bank account transfer and you cleared/reconciled it, the
accounting will be generated by CE, because it is not linked to other subledgers.

GLOSSARY OF TERMS

Cleared:The bank has disbursed funds for the payment, and the payment has been cleared, but not matched to a
bank statement within Oracle Cash Management. Payables uses this status when the Account for Payment When
Payment Clears Payables option is enabled.

Cleared But Unaccounted: The bank has disbursed funds for the payment and the payment has been cleared but
not matched to a bank statement within Oracle Cash Management. Payables uses this status when the Account for
Payment When Payment Clears Payables option is disabled.

Reconciled: The bank has disbursed funds for the payment, and the payment has been reconciled and matched to a
bank statement in Oracle Cash Management. Payables uses this status when the Account for Payment When Payment
Clears Payables option is enabled.

Reconciled But Unaccounted: The bank has disbursed funds for the payment, and the payment has been
reconciled and matched to a bank statement in Oracle Cash Management. Payables uses this status when the Account
for Payment When Payment Clears Payables option is disabled.

===========================================================================

Q&A Clearing, Auto-reconciliation and Accounting

Question: 1. What is the impact of just ignoring all the unreconciled AP wire and AR receipts from the Bank
Statement and leave them as unreconciled?

Answer 1:
a. Unreconciled AP wire

As long as you are Clearing Payments in Cash Management and running accounting in Payable, unreconciled
AP wire payment will not matter for accounting. See concept: (1). 2 below.

b. Unreconciled AR receipts:

When you reconcile receipts with Cash Management, it automatically creates accounting entries to the Cash,
Remittance, Short Term Debts, and Interest Earned accounts, as applicable to the reconciliation transaction.
Cash Management uses the accounts you defined in the Banks window and the Receipt Classes window
(Payment Methods region) in Receivables.

You post the accounting entries resulting from Cash Management receipt reconciliation to General Ledger
from Receivables.

Therefore if you do not reconcile receipts in Cash Management then your accounting of Receipts will be
incomplete.

See Concept (2). Receivables Reconciliation Accounting.

Question: 2 Does it create any accounting entries when it reconciles AR Receipts during auto reconciliation?

Answer 2:

Yes.

See Concept (2). Receivables Reconciliation Accounting.

Question: 3. How do we avoid any misc receipts created during auto reconciliation?

Answer 3:
This depends on the Setup you have done for Bank Transaction codes.
 When you set up Bank Transaction codes, you also set up for:

a. Choose whether to Create transactions for any Miscellaneous Payments and Miscellaneous Receipts
reported on the bank statement when no transaction number is provided.

b. If you chose the Create option in the previous field, specify the Receivables Activity type and
Payment Method for any miscellaneous transactions (receipts or payments) you create from within Cash
Management. If you do not setup as above then Misc Receipt or Misc payment will not be created.

Question: 4. Can the user still continue to do manual Clearing in Cash Management for Receipts and Payments?

Answer 4:

Yes

Question: 5. How does it affect accounting with respect to Reconciliation and Clearing.

Answer 5:
This will depend on what setups you have.

(1) Concepts Payable Reconciliation Accounting

(2) Concept Receivables Reconciliation Accounting

Question: 6. Please let us know whether Leaving the unreconciled transactions (AP Wire and AR Receipts) in Bank
Statement and clear them manually in Cash Management will cause any issue?

Answer 6:
As far as the AP Payment accounting is concerned it doesn't cause any issue. However some of the report
keep showing these payments/receipts as not Reconciled. This you will have to take care while reviewing
such reports. But if you do not reconcile receipts in Cash Management then your accounting of Receipts will
be incomplete.

===========================================================================

Concepts Payable Reconciliation Accounting

Question 1: What Is The Difference Between Reconciliation And Clearing?

Answer 1:
CLEARING simply marks a transaction that already exists within the Financial Applications, such as AP Checks
and AR Deposits, as Cleared by the bank.

RECONCILIATION matches a Bank Statement Line that is populated into Cash Management against the
transaction that already exists within the Financial Applications, generates accounting lines if Reconciliation
Accounting is enabled, and then marks the transaction as Cleared by the bank.

Ref:

1. Note 1493914.1: R12: Oracle Cash Management (CE): HOW TO: Reconciliation and Clearing

(1) Accounting Setups: we can define the accounting for payments in 3 ways:

a). Account for payments when Created: In this case the payments are accounted when
created and the accounting for payments will be:

Liability Dr
Cash A/C Cr

b). Account for payments when created and when cleared:In this case when the payment is
created, it will create the following accounting entry:
 Liability Dr
Cash Clearing Cr

When the payment is cleared, following accounting entry will be passed:

Cash Clearing Dr
Cash A/C Cr

c). Accounting for payments when cleared: The accounting for this scenario will be the same as
(a) with the only difference being that the accounting will happen only after the payment is
cleared in cash management.

(2) Concept Receivables Reconciliation Accounting:

Oracle Cash Management enables you to reconcile receipts you entered with Receivables against your bank
statements. When you reconcile receipts with Cash Management, it automatically creates accounting entries
to the Cash, Remittance,Short €“term Debts, and Interest Earned accounts, as applicable to the
reconciliation transaction. Cash Management uses the accounts you defined in the Banks window and the
Receipt Classes window (Payment Methods region) in Receivables.

You post the accounting entries resulting from Cash Management receipt reconciliation to General Ledger
from Receivables.

Have more questions?

Join our growing Oracle Cash Management Community and learn from your peers and Oracle on
how to address your unique issues in CE!

You can access the main Oracle Communities page

at https://communities.oracle.com/portal/server.pt/community/support/219
If you are enrolled,the Cash Management community will be listed on your left. If you're not already enrolled in
the Cash Management community, you can do so by clicking on Profile > Community Subscriptions region > Edit
Subscriptions.

REFERENCES

NOTE:1493914.1 - R12: Oracle Cash Management (CE): HOW TO: Reconciliation and Clearing

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