Sunday, March 20, 2016

Oracle Receivables Cross- Currency Receipts

When a receipt is in a non-functional currency and the transaction may be in functional currency / non-functional currency. Below are the few examples:

·         USD is  the functional currency
Transaction (Currency)
Receipt (Currency)
USD
EUR
EUR
CAD

Following are the setup’s to be done for performing ‘Cross-Currency Receipts’
1.      Define Realized Gain / Loss account.
2.      Enter the default exchange rate to be used.
3.      Define Cross-Currency Rounding account.
4.      Define Exchange rates between the currencies.
5.      Define Entered Currency Balancing Account (See metal ink note id: 969260.1).

Note: The Remittance Bank should be enabled for ‘Multiple Currencies’


Define Realized Gain / Loss account
To record any gain / loss while performing Cross- Currency Receipts.

Enter the default exchange rate to be used
Need to specify which default exchange rate to be used for currency conversions.

Define Cross-Currency Rounding  account
To record any rounding errors amounts created during a cross currency receipt.          

Receivables Manager à Set up à System à System Options

Define Exchange rates between the currencies.
General Ledger Super User  à Setup à Currencies à Rates à Daily
Give the conversion between the currencies

Define Entered Currency Balancing Account.
General Ledger Super User à Setup à Financials à Accounting Setup Manager à Accounting Setups
Query your Primary Ledger à Click on ‘Update Accounting Options’

In Step 1 of the options (Ledger Definition)
Define ‘Entered Currency Balancing Account’
If a sub ledger journal entry has lines with different entered currencies, the sub ledger journal entry must be balanced for each currency.  This means that for each entered currency, the sum of the entered debit amounts must be equal the sum of the entered credit amounts.

Now let us see how we can perform ‘Cross- Currency Receipt’
Receivables Manager à Transactions à Transactions

Tools à Create Accounting

Conversion rates
Ø  USD  à EUR   :  5
Ø  USD  à CAD   :  2
Ø  EUR  à CAD   :  4                       

Receivables Manager à Receipts  à Batches
We are going to enter the receipt in ‘CAD’ currency.

As usually receipt is applied to the transaction and follows the usual Receipt application procedure

Now create accounting for the receipt and following is the journal entry created:

We could see, the receipt is created with 18000 CAD. Now the un-applied cash is 17,600 CAD.

Below is the detailed calculation:
18000 CAD   = 9000 USD
18000 CAD = 4500 EUR = 900 USD
As per the conversion rate (EUR à CAD = 4). So 400 CAD will derive 100 USD, which will make the transaction balance zero. (18000 CAD – 400 CAD = 17,600 CAD (Unapplied)).

So now we will see gain / loss:
Primarily Oracle will convert Receipt currency into Functional Currency. So as per the conversion rate (USD à CAD = 2). So 400 CAD will derive 200 USD.
But the Transaction is in EUR. So 400 CAD à 100 EUR à 20 USD
Here we are incurring exchange gain of 180 USD (200USD – 20 USD)

Cash    a/c            Dr                       200 USD
                To Exchange Gain a/c                        180 USD

                To Receivable               a/c                   20 USD    

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