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COGS

The document describes changes to the cost of goods sold (COGS) accounting process between Oracle R11i and R12. In R11i, when a sales order is shipped the COGS account is credited for $250 and the inventory valuation account is debited. In R12, the deferred COGS account is credited for $250 and the inventory valuation account is debited. After an accounts receivable invoice is generated and revenue recognized, a COGS recognition transaction is created to match the revenue recognition percentage to the COGS recognition percentage by crediting the deferred COGS account and debiting the COGS account. The document notes some key aspects of the new COGS recognition process in R12

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Ateet Gupta
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122 views

COGS

The document describes changes to the cost of goods sold (COGS) accounting process between Oracle R11i and R12. In R11i, when a sales order is shipped the COGS account is credited for $250 and the inventory valuation account is debited. In R12, the deferred COGS account is credited for $250 and the inventory valuation account is debited. After an accounts receivable invoice is generated and revenue recognized, a COGS recognition transaction is created to match the revenue recognition percentage to the COGS recognition percentage by crediting the deferred COGS account and debiting the COGS account. The document notes some key aspects of the new COGS recognition process in R12

Uploaded by

Ateet Gupta
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Business Process: In R11i When a Sales order is shipped and interface trip stop is completed.

This make a call to COGS workflow to generate the COGS account. This then generate following accounting. Cr Dr Inventory Valuation account $250 COGS Account $250

In R12 when a sales order is shipped and interface trip stop is completed the following accounting entries gets generated. Cr Dr Inventory Valuation account Deferred COGS Account $250 $250

After the AR invoice is generated and the revenue is recognised (Considering you dont have revenue recognition policies or specific accounting rules), following program will create COGS recognition transaction. This will reflect a change in the revenue recognition percentage for a sales order line. 1. Collect Revenue Recognition Information program: This program will collect the change in revenue recognition percentage based on AR events within the user specified date range. It collects invoice information of the sale order line from RA_CUST_TRX_LINES_ALL and RA_CUST_TRX_LINE_GL_DIST_ALL after the revenue is recognized and check the percentage revenue recognized. It then insert information in CST_REVENUE_RECOGNITION_LINE. Navigation: Cost > COGS Recognition > Collect Revenue Recognition Information 2. Generate COGS Recognition Events: This program will create the COGS recognition transaction for each sales order line where there is a mismatch between the latest revenue recognition percentage and the current COGS recognition percentage. This is the program which also makes the transactions costed by creating these accounting entries. So cost manager is not used to make these transactions as costed in R12.The COGS account in this entry is taken from the distribution_account in mtl_material_transactions table (which was generated earlier by COGS workflow).

Cr Dr

Deferred account COGS Account

$250 (Actual Revenue %) $250 (Actual Revenue %)

Navigation: Cost > COGS Recognition > Generate COGS Recognition Events This particular COGS recognition transaction actually correspond to a revenue recognition percentage change. As we have seen above this new feature does help in resolving some of the key accounting issues but we need to be aware of the following also 1. With this feature the COGS recognition now requires few extra concurrent requests to be submitted.

2. AR revenue need to be recognized to have COGS recognized 3. This functionality is not optional as it is mandatory to be used in R12 4. To make the complete set of transactions visible in the Material Transaction screen, Include Logical Transaction checkbox need to be checked. This concludes our discussion about Deferred COGS. Now I am planning to pick some topic from procurement as we have not touched that area till date.

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