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AR Adjustments : Details,setup, Flow, Accounting and API

Posted on September 5th, 2008by Sanjit Anand| Print This Post| Email This Post

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An Adjustment in AR is an amount added or subtracted from the amount due of an Invoice, Debit Memo, Chargeback, Deposit, or

Guarantee.

Oracle AR lets you create Automatic or Manual Adjustments.

Receivables lets you make either Positive or Negative Adjustments to your Invoices, Debit Memos, Chargebacks, Onaccount Credits,

Deposits, and Guarantees.
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You can approve Adjustments that are within your approval limits and give pending statuses to Adjustments that are outside your

approval limits.

You can also automatically write off debit items that meet your selection criteria.

Business need for Adjustment

Its very similar to write-off. If there is any unapplied balance in invoice after application of receipt in small value for rounding off purpose

, that will be adjusted while making receipt application.

Or sometime, when Invoice amount is wrongly entered you can also add a line by adding or reducing amount.

These are very common across all industry.Telecom, Health care and retail sectors the need is very high for such functionality.

Prerequisites

To enable this Functionality you need to perform these step-up

You need to define adjustment activity

You need to define approval limits

Defining the Approval limits for Adjustments

Setup > Transactions > Approval Limits

You need to define adjustment reason lookups

How AR adjustment works

Lets try to understand how adjustment works in Oracle.

While Creation


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When you create an adjustment activity an accounting segments is required.This is GL account that will be used as the

offset account. The other account used will be the Receivable REC account of the transaction being adjusted.As mention

above, you are allowed to adjust Invoices, Debit Memos and Credit Memos.

AR_ADJUSTMENTS_ALL table contains code_combination_id.

This is the code_combination_id of the Receivable account of the Invoice,Debit Memo, or Credit Memo the adjustment is

against.

The table contains the receivables_trx_id which identifies as adjustment transaction type.

When you create an adjustment the account that exists on the adjustment transaction type, at the moment the transaction is

created, is the one that will be used as the offset account.

Adjustments can be either negative or positive, and there should be always one and only row created on the

ar_adjustments_all table for each adjustment. On posted to GL this one row is used to create two transactions passed to

GL_INTERFACE table.

During Approvals

Approval required for adjustment , as part of pre-requsite setup.

You can create your own approval statuses, and they work as if they were interim approval steps.

The only approval that is recognized is the final one, which results in an 'A' in the status field on this table.

You must assign approval limits to users by currency.The limit should be in the range of negative adjustments amount to

positive adjustments amount on AR_ADJUSTMENTS_ALL table, there is a field named 'postable'. When you set the

status of an adjustment to 'A' for approved, this field should automatically be set to 'Y' for postable.

Once an adjustment is approved, it can be selected for posting to General Ledger.

This would be selected in a normal AR Gl transfer program posting run, providing it met the qualifications of being

approved, with a GL_date within the posting range, and had not been posted before (posting_control_id = -3).

During posting, the Receivable and offset transactions are created and passed to General Ledger table GL_INTERFACE.

On apply with a transaction

When you create an adjustment against a transaction, the customer_trx_id and payment_schedule_id on

AR_ADJUSTMENTS_ALL associates the adjustment with the transaction.

If an adjustment is approved with a status of 'R' for rejected, No impact on invoice balance and cann't proceed for GL

posting .

If an adjustment has not been approved with a status of 'A', it is a pending adjustment. The total of all pending adjustments

is stored in the amount_adjusted_pending on AR_PAYMENT_SCHEDULES_ALL, and is not reflected in a transaction

balance.

If an adjustment has been approved with a status of 'A', it is reflected in the amount_adjusted and the balance on

AR_PAYMENT_SCHEDULES_ALL.

Ways to Create Adjustment in Oracle

Creating Adjustment in Oracle can be performed by 3 options

1. Adjustment via Transaction Window

2. Adjustment via Receipt Application Window

3. Adjustment via API's Call


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Options 2 : Adjustment via Receipt Application Window

You can create customer Receipt and after finishing the Application of Invoice then click (B) Adjustments and system will

show same Adjustment windows and rest is similar to option 1.

Options 3 : ByAPI Call

Public API Exist as third options which allows users to create, approve, update, and reverse adjustments for invoices using

simple calls to PL/SQL functions.

The Adjustment API has the following basic functionality via different API calls:

1. Creating an adjustment (R11i & R12)

2. Modifying an adjustment (R11i & R12)

3. Approving an adjustment (R11i & R12)

4. Reversing an adjustment (R11i & R12)

5. Create line level adjustment (This is only applicable in case of R12)

We will take details of API's in Next Post.

Documents

AR Adjustments _ Details,Setup, Flow, Accounting and API _ OracleApps Epicenter