Scribd
Upload
82 views

COGS1 Example

This document outlines the steps to set up and demonstrate revenue and cost of goods sold (COGS) matching for a sales order using the accounting rule of deferring revenue and COGS over 3 months. Key steps include: 1) defining inventory items and receiving inventory; 2) setting the accounting rule to defer revenue and COGS over 3 months; 3) entering a sales order and shipping/invoicing it; 4) running concurrent processes to record transactions and recognize revenue and COGS over the 3 month period according to the accounting rule.

Uploaded by

Pritesh Mogane
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
82 views

COGS1 Example

This document outlines the steps to set up and demonstrate revenue and cost of goods sold (COGS) matching for a sales order using the accounting rule of deferring revenue and COGS over 3 months. Key steps include: 1) defining inventory items and receiving inventory; 2) setting the accounting rule to defer revenue and COGS over 3 months; 3) entering a sales order and shipping/invoicing it; 4) running concurrent processes to record transactions and recognize revenue and COGS over the 3 month period according to the accounting rule.

Uploaded by

Pritesh Mogane
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 30

The following scenario illustrate a short example of a Revenue / COGS matching for a sales order where

Accounting rule used is: 3 Months, Deferred

Navigation
1. 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 Rules
There are two Predefined Accounting rules
a-3 Months , Deferred
b-Immediately

Figure 5

Figure 6

7. Enter a SO (eg 63849)

Figure 7

8. SO 63849 booked with


Ordered item MM-ITEM65/qty=5/ price=15/ Accounting rule=3 Months, Deferred
Shipping 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 issue


When 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, Deferred
50% August
25%September
25%October
For August 50% of the revenue has been recognized

22. Now we run a set of concurrent processes to record sales order and revenue
recognition transactions and to create and cost COGS recognition transactions.
These COGS recognition transactions adjust deferred and earned COGS in an
amount that synchronizes the % of earned COGS to earned revenue on sales
order shipment lines.

23. Record Order Management Transactions: records new sales order transaction
activity such as shipments and RMA returns in Oracle Order Management.

24. Collect Revenue Recognition Information: determines the percentage of


recognized or earned revenue related to invoiced sales order shipment lines
in Oracle Receivables.

25. Generate COGS Recognition Events: creates and costs COGS recognition
events for new sales order shipments/returns and changes in revenue
recognition and credits for invoiced sales order shipment lines.

26. A non-physical transaction has been generated


Transaction 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.

You might also like