Oracle General Ledger Closing Journals

Release 11i

July 2001 Jan Godfrey

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Table of Contents

INTRODUCTION 3

RECOMMENDED STEPS TO SET UP AND CREATE CLOSING JOURNALS 3

INCOME STATEMENT CLOSE 4

PREREQUISITES FOR RUNNING THE INCOME STATEMENT CLOSE 5 HOW TO RUN THE PROGRAM 5 INCOME STATEMENT CLOSING EXAMPLE 6 AFTER RUNNING THE INCOME STATEMENT CLOSE 7 INCOME STATEMENT CLOSING JOURNAL ATTRIBUTES 8 ADDITIONAL NOTES FOR MRC 8 ADDITIONAL NOTES FOR AVERAGE BALANCES 8

BALANCE SHEET CLOSE 10

PREREQUISITES FOR RUNNING THE BALANCE SHEET CLOSE 10 HOW TO RUN THE PROGRAM 10 BALANCE SHEET CLOSE EXAMPLE 11 AFTER RUNNING THE BALANCE SHEET CLOSE 12 BALANCE SHEET CLOSING JOURNAL ATTRIBUTES 13 ADDITIONAL NOTES FOR MRC 13 ADDITIONAL NOTES FOR AVERAGE BALANCES 13

Introduction General Ledger can create closing journals for year-end and other closing periods. ��Income Statement Close: This journal closes all of the income statement accounts to

the retained earnings account. ��Balance Sheet Close: This journal posts all asset and liability balances to a closing

account that you specify. This is designed to meet globalization requirements. Oracle General Ledger’s closing journals address global audit and statutory reporting requirements for Greece, Italy, Portugal, Spain, Columbia, Mexico and a few other countries. Other countries, such as the United States, may have the need to create an auditable closing journal at times other than year-end. These journals can fulfill both requirements. This feature is new in Oracle General Ledger Release 11i.

Recommended Steps to Set Up and Create Closing Journals 1. Set up the last day of your fiscal year as an adjusting period. 2. Set up the first day of your new fiscal year as an adjusting period. 3. Ensure the period you are closing is an Open period. 4. Complete your routine accounting before the last day of the year. 5. Post your adjustments and closing entries in the adjusting period. 6. In the last adjusting period of the fiscal year you want to close: a) Run the Create Income Statement Closing Journals process to transfer income statement year–end account balances of your revenue and expense accounts to the retained earnings account. ** This is the audit trail showing how the retained earnings amount was calculated. b) Run the Create Balance Sheet Closing Journals process to close and zero out the year–to–date balances of all balance sheet accounts: assets, liabilities, and owner’s equity.

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7. In the first adjusting period of your new fiscal year: a) Run the Open Period program to open the first Income Statement period of the new year. b) Reverse and post the Balance Sheet closing journals to reopen those balances. Note: You are closing actual balances. You cannot close budget or encumbrance balances. Warning: If you are using Multiple Reporting Currencies, make sure you define a conversion rule to prevent replication of your year–end closing journals from your primary set of books to each of your reporting sets of books. See: Define General Ledger Conversion Rules, Multiple Reporting Currencies User’s Guide.

Income Statement Close In Release 11.5.2 (or after applying Patchset A for 11.5.1 (1339658)), there are two options for the Close Process - Create Income Closing Journals program. Only the first option is available in 11.5.1 (without Patchset A). It appears that at this time (10-NOV-2000), that only the first option is available in 11.0 also. 1) Journal entries are created to reverse debits and credits of ending year-to-date actual balances for the period you want to close. The income statement accounts are zeroed out, and the balance (net of the reversed revenue and expense accounts) is transferred to the closing account you specify. If the account processed has both debit and credit balances, the two balances will not be netted. Instead, that account’s debit balance is posted to the credit column and the credit balance is posted to the debit column in the same journal line. To use this option, do not specify an Income Offset Account when running the program. 2) Income Statement Offset Account Option - Instead of zeroing out each revenue and expense account, you can choose to post the reciprocal of the net income amount to a single income offset account while the net income amount is posted to the retained earnings account. The program will take the net sum of the revenue and expense accounts. This sum includes the balance in the income statement offset account.

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To use the new option (2) , just specify a value for the Income Offset Account parameter whenever you run the Close Process - Create Income Statement Closing Journals program.

Prerequisites for Running the Income Statement Close

• Post all revenue and expense adjustment entries to the appropriate periods. • Review the General Ledger accounting and analysis reports. • Ensure the period you are closing is an open period.

How To Run the Program 1) Navigate to the Standard Report Submission Window. Navigation = Reports�Request�Standard 2) Select Single Request, then ‘Close Process - Create Income Closing Journals’. 3) Enter the Parameters:

• Period: The latest open period will be defaulted here. Typically, you specify an adjustment period that represents the last day of your fiscal year.

• Account From/To: Enter the starting and ending account ranges. The range can span multiple balancing segments and include the entire chart of accounts. General Ledger only extracts balances of revenue and expense accounts within the range you specify.

• Closing Account: This is typically the retained earnings account. You may specify any account that is valid and enabled. If you are closing multiple balancing segments, General Ledger creates separate closing accounts for each balancing segment.

• Category: Income Closing Statement is defaulted for the journal category. • Source: Closing Journals is defaulted. • Income Offset Account (optional): Available if Patchset A (1339658) has been

applied. Instead of zeroing out each revenue and expense account, you can choose to post the reciprocal of the net income amount to a single income offset account while the net income amount is posted to the retained earnings account.

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Income Statement Closing Example Balances of Income Statement accounts before running the Income Statement Close Program, and posting the journal:

Parameters for running the program ‘Close Process - Income Statement Close’:

- close2-99 is an adjusting period that contains the last day of the year. This is the last period of the year. - 3300 is the retained earnings account.

Jan sob Date: 03-NOV-00 09:20:21 All Income Statement Accounts Page: 1 Current Period: close2-99 currency USD No specific Company requested YTD-Actual Company Account Cost Center close2-99 ----------------------------------------- -------------------- 01 4400 001 <500.00> 01 4400 002 <3,000.00> 00 6100 000 <100.00> 01 7111 001 125.00 00 9999 001 100.00

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Income Closing Journal created:

After Running the Income Statement Close - Post the journal entry created by the Income Statement Close program. - Run the Open Period program to open the first period of the new fiscal year. The Open Period program closes out all revenue and expense accounts to the Retained Earnings account. However, because posting of the closing journals has already zeroed out the revenue and expense accounts to the Retained Earnings account, there are no balances to transfer and no further effect on Retained Earnings. The retained earnings balance is carried forward from the prior period.

Jan sob Unposted Journals Report Date: 01-NOV-2000 13:12 For close2-99 Page: 1 of 1 Posting Status: Unposted Currency: USD Source: Closing Journal Batch Name: Income Statement Close: Request 463955 close Batch Effective Date: 31-DEC-99 Balance: Actual Posted Date: Journal Entry Name: Income Statement Close: USD Category: Income Statement Close Journal Reference: Currency: USD Line Accounting Flexfield Trans Date Description Line Item Debits Credits Units --------------------------------------------------------------------------------------------------------------------------------------------- 10 01.7111.001 31-DEC-99 Income Statement 0.00 125.00 0.00 20 01.4400.001 31-DEC-99 Income Statement 500.00 0.00 0.00 30 01.4400.002 31-DEC-99 Income Statement 3,000.00 0.00 0.00 40 00.6100.000 31-DEC-99 Income Statement 100.00 0.00 0.00 50 00.9999.001 31-DEC-99 Income Statement 0.00 100.00 0.00 60 00.3300.000 31-DEC-99 Income Statement 100.00 100.00 0.00 70 01.3300.000 31-DEC-99 Income Statement 125.00 3,500.00 0.00 ------------------------------------------------- Header Total: 3,825.00 3,825.00 0.00 --------------------------------------------------- Batch Total: 3,825.00 3,825.00 0.00 --------------------------------------------------- Closing Journal Total: 3,825.00 3,825.00 0.00 --------------------------------------------------- Grand Total: 3,825.00 3,825.00 0.00

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- If revenue and expense adjustments need to be made after opening the new fiscal year, posting those back–dated adjustments will automatically update the beginning balances of the Retained Earnings account for all open periods in the new year. However, amounts in the closing journal will not reflect the adjustments. For accuracy, you must reverse the closing journals, post, enter your adjustments, run the Create Income Statement Closing Journals, and post.

Income Statement Closing Journal Attributes • General Ledger automatically creates a separate closing account for each balancing

segment if you specify an account range that includes multiple balancing segments. • The effective date of your closing journal entries is the last day of the period you

specify in the parameters window, typically the adjusting period on the last day of your fiscal year.

• The closing journals you generate are marked for reversal in the same period the journals were generated. The reversal method defaults to Change Sign.

• General Ledger closes functional and foreign currency balances with different journal entries:

- Functional Currency: Journal entries reflect only entered amounts. Journal entries do not address foreign converted or account for amounts.

- Foreign Currency: Journal entries reflect both foreign entered amounts as well as the converted amounts.

Additional Notes for MRC MRC Sets of Books: You should run the Create Income Statement Closing Journals separately for the MRC primary set of books, and then for each of the reporting sets of books. Post your generated closing journals separately as well.

Additional Notes for Average Balances Average Balance Sets of Books: Create Income Statement Closing Journals only creates standard closing journal entries for any set of books with average balance processing enabled. Non–Consolidating Set of Books: The effective date of the closing journal entries is the last day of the specified period unless you assign effective date rules for the journal source called Closing Journals in the Journal sources window. See: Journal Sources When the closing journals are posted, the standard and average balances are both updated.

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If the closing account is specified as an income statement account, the revenue and expense account balances are transferred to this closing account. There is no effect on average balances. If the closing account is specified as a balance sheet account, and the defined period is the last period of the fiscal year, the average balance of the closing account is updated. The average balance of the Net Income account and the net average of all income statement accounts is also updated. Consolidating Set of Books: The Create Income Statement Closing Journals will only create closing journals for standard account balances, not average account balances.

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Balance Sheet Close When you run Create Balance Sheet Closing Journals, journal entries are created to reverse debits and credits of ending year–to–date actual balances for the period you want to close. The balance, net of the reversed asset and liability accounts, is transferred to the closing account you specify. Note: Your balance sheet should be balanced if you completed the Close Process: Create Income Statement Closing Journals to update the retained earnings account. If the range of balance sheet accounts is balanced, then there is no transfer of balances.

Prerequisites for Running the Balance Sheet Close • Post any adjustment entries to the appropriate periods. • Print General Ledger accounting and analysis reports. • Ensure the period you are closing is an Open period.

How To Run the Program 1) Navigate to the Standard Report Submission Window.

Navigation = Reports�Request�Standard 2) Select Single Request, then ‘Close Process - Create Balance Sheet Closing

Journals’. 3) Enter the Parameters:

• Period: The latest open period will be defaulted here. Typically, you specify an adjustment period that represents the last day of your fiscal year.

• Account From/To: Enter the starting and ending account ranges. The range can span multiple balancing segments and include the entire chart of accounts. General Ledger only extracts balance sheet account balances within the range you specify.

• Closing Account: You may specify any account that is valid and enabled. If you are closing multiple balancing segments, General Ledger creates separate closing accounts for each balancing segment.

• Category: Balance Sheet Close is defaulted for the journal category. NOTE: If the balance sheet closing account is within the range you specified, General Ledger ignores this account when extracting balances.

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Balance Sheet Close Example Balances of Balance Sheet accounts before running the Balance Sheet Statement Close Program, and posting the journal:

Parameters for running the Balance Sheet Closing Program:

Jan sob Date: 03-NOV-00 13:12:24 All Balance Sheet Accounts Page: 1 Current Period: close2-99 currency USD No specific Company requested YTD-Actual Company Account Cost Center close2-99 ------------------------------------------ ----------------- 01 2111 001 <125.00> 01 2111 100 3,000.00 01 1001 001 500.00

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Journal created by the Balance Sheet Closing program:

After Running the Balance Sheet Close - Post the balance sheet closing journals to zero–out balance sheet account balances. Note: Should you need to make adjustments after the balance sheet closing journals are posted, reverse and post the original closing entries, make your adjustments, then run the closing process to capture the new adjustments. - In the first adjusting period of the new fiscal year, reverse the balance sheet closing journals to repopulate the balance sheet accounts.

Jan sob Unposted Journals Report Date: 03-NOV-2000 12:43 For close2-99 Page: 1 of 1 Posting Status: Unposted Currency: USD Source: Closing Journal Batch Name: Balance Sheet Close: Request 463981 close2-9 Batch Effective Date: 31-DEC-99 Balance: Actual Posted Date: Journal Entry Name: Balance Sheet Close: USD Category: Balance Sheet Close Journal Reference: Currency: USD Line Accounting Flexfield Trans Date Description Line Item Debits Credits Units --------------------------------------------------------------------------------------------------------------------------------------------------- 10 01.2111.001 31-DEC-99 Balance Sheet Clo 125.00 0.00 0.00 20 01.1001.001 31-DEC-99 Balance Sheet Clo 0.00 500.00 0.00 30 01.2111.100 31-DEC-99 Balance Sheet Clo 0.00 3,000.00 0.00 40 01.9800.000 31-DEC-99 Balance Sheet Clo 3,500.00 125.00 0.00 ---------------- ---------------- ---------------- Header Total: 3,625.00 3,625.00 0.00 ---------------- ---------------- ---------------- Batch Total: 3,625.00 3,625.00 0.00 ---------------- ---------------- ---------------- Closing Journal Total: 3,625.00 3,625.00 0.00 ---------------- ---------------- ---------------- Grand Total: 3,625.00 3,625.00 0.00

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Balance Sheet Closing Journal Attributes - The effective date of your closing entries is the last day of the period you select in the Parameters window, typically an adjusting period representing the last day of the fiscal year. - General Ledger automatically creates a separate closing account for each balancing segment if you specify an account range that includes multiple balancing segments. - Closing journals are marked for reversal in the period following the period the closing journals were generated. To change the reversal method default, see Changing The Default Reversal Method, below. - General Ledger closes functional currency balances only. Foreign currency balances are ignored.

Additional Notes for MRC MRC Sets of Books: You should run the Create Balance Sheet Closing Journals program separately for the MRC primary set of books, and then for each of the reporting sets of books. Post your generated closing journals separately as well.

Additional Notes for Average Balances The Create Balance Sheet Closing Journals program creates journal entries for standard account balances for sets of books with average balancing enabled. Companies using average balance processing should create an accounting calendar with two adjusting periods at the end of the fiscal year. Assign the last day of the year to both adjusting periods. The first adjusting period is used to generate the Closing Journals. The second adjusting period is used to reverse the closing journal. This ensures that average balance calculation is unaffected. Technical Information Program Name: GLYCCJ Short Name: ��GLYCCJ1 - Close Process - Create Balance Sheet Closing Journals ��GLYCCJ2 - Close Process - Create Income Statement Closing Journals Forms: FNDRSRUN - Submit Request Tables: ��GL_YEAR_END_BAL_INT_XX ��GL_YEAR_END_ACCT_INT_XX

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Indexes: ��GL_YEAR_END_BAL_INT_N1 ��GL_YEAR_END_BAL_INT_N2 ��GL_YEAR_END_BAL_INT_N3 ��GL_YEAR_END_ACCT_INT_N1 ��GL_YEAR_END_ACCT_INT_U1 Related Bugs/Patches 1339658 - GL Patchset A for 11i, includes Income Offset Account Enhancement. 1288388 - Income Offset Enhancement. 857853 - Document Sequencing doesn’t work for closing journals. Module glycje.lpc was fixed and included in patches 1288388 and 1339658 for 11I, and 757064 and 1178837 for 11.0. 757064 - Backport the Yearend Closing feature to 11.0. (This is also included in Patchset E - 1178837.)

Glossary of Terms Income Statement Account - Revenue and Expense accounts. Balance Sheet Account - Asset, Liability and Owner’s Equity/Retained Earnings accounts. Frequently Asked Questions Question: Will this feature be backported to 10.7 and 11? Yes, this feature is backported to Release 11.0.3 with patchset E - 1178837. It is not backported to release 10.7. As of 10-NOV-2000, the Income Statement Offset option has not been backported to 11.0. Question: Is running the Income Statement Closing Journals and Balance Sheet Closing Journals programs a requirement? No, these are both optional programs. However, running the Income Statement Closing Journals program will give you the audit trail for the Retained Earnings calculation. Question: How do you size the year end tables that are used with the closing journals

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programs? The recommended sizes for the tables and indexes are already pre-seeded and can be found in the Storage Parameters form (Setup -> System -> Storage). You can update the values here as you see fit. See Note 141226.1 for more detailed information. Question: You ran the closing journals program(s) and now you see zeros in your FSG Income Statement for the last period of the year. You may see zero balances in other periods, depending on which period you ran the program in. You need to reverse the journal you posted that was created by the Income Statement and/or Balance Sheet Closing Journals programs. See Note 141110.1 for more information.

Sources • Oracle General Ledger Release 11i New Features Class Book • Oracle General Ledger User’s Guide Release 11I • Oracle General Ledger Closing Journals Income Statement Offset Option Release

11.5.2 - MetaLink General Ledger Product Documentation