Cash Management enables you to reconcile payments you created in Payables against your bank statements. When you use Cash
Management you can:
• Automatically account for the delay in bank clearing of
payments by crediting a cash clearing account when you issue a payment, and clear the balance with a cash account when you clear or reconcile the payment.
• Automatically account for differences between the amount cleared and the original payment amount, whether they are due to exchange rate fluctuations, bank charges, or bank errors.
When you reconcile Payables payments in Cash Management, the payments are first matched to bank statement lines and then cleared.
You can also manually clear the payments prior to reconciliation. After you clear or reconcile your payments, in Payables you can create accounting entries for the Cash, Cash Clearing, Bank Charges, Bank Errors, Realized Gain and Realized Loss accounts that you specified in the Oracle Payables Bank Accounts window and the Payment
Documents window. You then transfer the accounting entries to your general ledger.
Creating Accounting Entries in Payables
Payables can create accounting entries for the cleared payments if Payables is set up to account for payments at clearing time. The Account for Payment option in the Payables Options window controls when Payables accounts for payments. One or both of the following can be enabled for the Account for Payment option.
• When Payment is Issued
• When Payment Clears
To account for payments you have cleared or reconciled using Oracle Cash Management, the When Payment Clears option must be enabled.
Payables creates the following accounting entries, depending on how the Account for Payment option is set. This accounting assumes you use accrual basis accounting. You specify the accounts when you define the payment document.
• Both (When Payment is Issued, and When Payment Clears):
Payables accounts for each payment you issue twice—once as an uncleared payment and once again as a cleared payment. If you
select both options you have the same functionality as the Allow Reconciliation Accounting option provided in previous releases.
Payables creates the following accounting entries after payment issue:
– uncleared payment: debit the AP Liability account and credit the Cash Clearing account
For future dated payments, debit the AP Liability account and credit the Future Dated Payment Account. Then, at payment maturity, debit the Future Dated Payment account and credit the Cash Clearing account.
Payables then creates the following accounting entries after payment clearing in Cash Management:
– cleared payment: debit the Cash Clearing account and credit the Cash (asset) account
– bank charges: debit the Bank Charges account and credit the Cash account
– bank errors: account in Cash account and Bank Errors account. Debits and credits depend on whether the bank error was a positive or negative amount
• When Payment is Issued: Payables accounts for each payment once, after payment issue. After you issue the payment, you can create the following accounting entries in Payables:
– uncleared payment: debit the AP Liability account and credit the Cash (asset) account
For future dated payments, debit the AP Liability account and credit the Future Dated Payment Account. Then, at payment maturity, debit the Future Dated Payment account and credit the Cash account.
– bank errors: account in Cash account and Bank Errors account. Debits and credits depend on whether the bank error was a positive or negative amount
In Payables, you can view the accounting entries online. See your Oracle Payables User’s Guide for more information.
Accounting for Gains and Losses
Any accounting entries for gains and losses are controlled by the Payables Option: Account for Gain/Loss. For this option, you can select When Payment is Issued, When Payment Clears, or both.
However, if you account for payments at clearing time, you must account for gains and losses at clearing time.
If you use future dated payments, and if you choose to account for gains and losses at payment issue, then Payables also accounts for gains and losses between payment issue and payment maturity.
In Payables, you can view the accounting entries online. See your Oracle Payables User’s Guide for more information.
You must specify exchange rates for foreign currency payments that you want to clear or reconcile.
Miscellaneous Transactions
When you reconcile a bank statement line that has no corresponding payment in Payables, such as bank charges, you can create a
miscellaneous payment in Cash Management, and reconcile the bank statement line to the miscellaneous payment. However, miscellaneous payments are actually created as negative receipts in Receivables. See:
Receivables Reconciliation Accounting: page 1 – 21
Unclearing or Unreconciling a Payment
When you unclear or unreconcile a payment in Cash Management, the payment status reverts to Negotiable and, if you use a Cash Clearing account, the entry that debited the Cash Clearing account and credited the Cash account is reversed. This is called an Unclearing event in Payables, and it is recorded when you account for payments at clearing time.
Transferring Accounting Entries to General Ledger
After you create accounting entries in Payables, you can submit the Payables Transfer to General Ledger process to transfer them to the General Ledger Interface tables.
If you have installed Oracle General Ledger, you can then use Journal Import to transfer the accounting entries to Oracle General Ledger.
See Also
Oracle Payables Reconciliation Examples: page 1 – 18
Using Cash Management with Automatic Clearing: page 1 – 24 Banks (Oracle Payables User’s Guide)
Posting (Oracle Payables User’s Guide)