Oracle Account Receivable

Invoice Adjustment And Receipt Write Off

By Himanshu Madan Evosys

PART I (Adjustments & Approval)

Adjustments
An Adjustment in AR is an amount added or subtracted from the amount due of an Invoice, Debit Memo, Chargeback, Deposit or Guarantee. For example, your customer sends payment of $75 for a $100 invoiceyou apply the receipt to the invoice, then create a adjustment for the balance due. You can create multiple adjustments against each transaction, for positive or negative amounts. You can approve adjustments that are within your approval limits and give pending statuses to adjustments that are outside your approval limits.

Business Need for Adjustment

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

Adjustment & Transaction Type

Receivables uses the transaction type of the transaction you are adjusting to validate the adjustment amount. If the transaction type does not allow over application, you cannot enter an amount that would reverse the sign of the balance of the transaction. Adjustments do not follow the natural application rules. This lets you adjust transactions in either direction, regardless of the Natural Application setting.

Topics covered for Adjustment & Approval

Define Adjustment Activity Define Adjustments Approval Limits Create Adjustments
Manual Adjustments

Automatic Adjustments
API (Application Programming Interface using SQL) (Doc ID 808758.1)

Approve Adjustments Reports FAQs

Adjustment Activity Receivables >> Set up >> Receipts >> Receivable Activity

Revenue Nature Account

Adjustment Approval Limit Account Receivables >> Set Up >> Transactions >> Approval Limits

Approval Limits are defined per user per currency, i.e. separate limit for every currency.

Create Adjustment Manual Adjustments

Transaction

Through Form
Transaction Summary Receipt

Manual Adjustment Transaction Form

Enter Transaction or query through Document No, complete it and select Adjust in Action Tab.

Manual Adjustment Transaction Summary Form Query transaction through Document No and select Adjust

Manual Adjustment Receipt Form

Open Receipt and click on Apply button Click on Adjustment Button

Adjustment Window (With in approval Limit)

The following screen allows you to enter the adjustment details, regardless of the navigation used to get here.

Balance Updated

Choose Activity from List of Values (LOV) defined in precious steps

With in Limit , i.e. between -1000 to 5000 Means can approve

Accounting Entry
Invoice Entry

Adjustment Entry

Adjustment Window (Not in Approval Limit)

Adjustment Date has to be later then Transaction Date Balance not updated as adjustment is not approved

User with Approval Authority will approve Adjustment Account Receivables >> Controls >> Adjustments >> Approval Adjustments Form

Adjustment will get approved

Accounting Entry

Automatic Adjustments
Account Receivables >> Controls >> Adjustments >> Create Auto Adjustments Form

Enter the Low and High range of Remaining Amounts or Percentages, Due Dates, Transaction Types, or Customer Names to adjust only transactions matching that criteria.

Approving Adjustments
Control >> Adjustments >> Approve Auto Adjustments

Related Reports
Adjustment Approval Report To see your transaction adjustments with information about their status, creator, reasons, GL date and amount. Adjustment Register Use the Adjustment Register to review approved adjustments. Adjustment Journal Report Use this report to view Adjustment Journals.

FAQs
While entering an adjustment amount you receive the following error "value entered is not valid for current field please re-enter." What should be done?
Adjustment Limit for that user have not been defined.

FAQs
Invoice Created and Completed Invoice Type Adjustment Created to bring invoice balance to zero. User creating the adjustment doesnt have approval power, thus status becomes Pending Approval. Meanwhile, a receipt or credit memo is created and applied to the Invoice to fully pay/credit it. At this point the balance of the invoice is zero. The adjustment is approved by a user with the proper approval limits and results in error.

 Cause An adjustment of type Invoice indicates that you are adjusting the full balance of the invoice. However, the sequence of events causes the process to try to adjust an invoice for the full amount, when in fact the invoice already has a zero balance, due to a payment that was made to the invoice between the time the adjustment was created in pending status and the time the adjustment was approved.

 Recommended Action Review the applications done to the Invoice and determine if you want to retain them. If the applications are valid, then you can just reject the adjustment. If the applications are not valid, you can unapply them to restore the full balance of the invoice, then you can approve the adjustment. Note, if an adjustment is Pending Approval, you cannot go back to the adjustment and attempt to change the adjustment type, if you do this the form will just raise the error:

FAQs
You can create full adjustments on Invoices but when making partial adjustments you get the error: APP-AR-11503: Invoice type adjustment must make the balance due zero. The Adjustment Type chosen was Invoice, which requires you to adjust for the full balance. To make partial amount adjustments, use the other Adjustment types: Line, Tax, Freight or Charges Recommended Action If you have not yet saved the adjustment, you can just modify the adjustment type. If you already saved the adjustment, the form will not allow you to change the Adjustment type, you will need to create an offsetting adjustment instead.

FAQs
When attempt to assign the Adjustment Receivable Activity to the Document Sequence, the adjustment receivable activity is not appearing in the list of values for the Category field under System Administrator responsibility.

Cause The Document Category for Adjustment Receivable Activity was not created. Solution Under System Administrator responsibility navigate to Application, Document, Categories Create new category for the adjustment receivable activity.

Example - setup Document Category for 'Write-Off' adjustment receivable activity.

Application = Receivables Code = 'Write-Off' (note: must be identical spelling/case of adjustment Receivable Activity name) Name = 'Write-Off' (can be anything you choose) Description = Adjustment Write Off (can be anything you choose) Table Name = AR_RECEIVABLES_TRX_ALL

Navigate to Application, Document, Assign and assign the new Category 'Write-Off' to the Document Sequence you already have setup.

FAQs
Difference between Adjustment & Write off?
Adjustment ( 188070.1 ) Create adjustments to increase or decrease the balance due on an invoice, debit memo, chargeback, or commitment. Write Off (203243.1) Receipt write-off functionality is provided to account for small overpayments that you do not intend to refund or maintain as unapplied amounts. The write-off amount is credited to an account, such as a miscellaneous revenue account, and no longer reflects as an unapplied amount. Receipt write-offs can be processed for standard receipts only. You cannot write off amounts from miscellaneous receipts. You can only write off unapplied amount. In short , Adjustments are related to Invoice component and write offs are related to Receipt component.

PART II (Write Off)

Write Off
Receipt write-off functionality is provided to account for small overpayments that you do not intend to refund or maintain as unapplied amounts. you can choose to write off an unapplied cash receipt amount to a specific general ledger account such as a miscellaneous revenue account, and no longer reflects as an unapplied amount on the receipt or on the customers account. Receipt write-offs do not change receipt amounts nor do they affect customer balances or general ledger Cash account entries. Receipt write-offs can be processed for cash receipts only. You cannot write off amounts from miscellaneous receipts. You can write off individual unapplied receipt amounts during receipt application or later, at any time using the Applications window. You can also write off balances of multiple receipts in mass using the Create Receipt Write-off option.

Topics covered for Adjustment & Approval Receipt Write off Setup Write off Foreign Currency Receipt Receipt Write off Reversing Receipt write off Accounting for Receipt Write off
Manual Write off Mass Write off

Receipt Write off Setup

Receipt Write-off Receivable Activity Define one or more receivable activities with an activity type of Receipt Write-off. Receipt Write-off User Approval Limits Define approval limit ranges for document type Receipt Writeoff for all users who will be allowed to write off unapplied receipt amounts. Receipt Write-off Maximum System Limit Define the system level Maximum Write-off Amount for a single receipt in your functional currency. No users can write off unapplied receipt amounts that are greater than the system maximum even if their user limits allow it.

Receipt Write-off Receivable Activity

Receipt Write-off Receivable Activity

Approval Limits are defined per user per currency, i.e. separate limit for every currency.

Receipt Write-off Maximum System Limit

Write off Foreign Currency Amount

At the time of write off an unapplied amount on a foreign currency receipt, Receivables uses the same exchange rate as used for original receipt. If you adjust the exchange rate of a foreign currency receipt, Receivables reverses the write-off with the original exchange rate and then applies the new exchange rate to a new writeoff application record. Receivables completes this process only if the converted amount does not exceed the user approval limit for receipt write-offs or the system Maximum Write-off Amount. If the converted amount exceeds either of these limits, then the write-off amount is left as an unapplied amount.

Manually Write off Receipt Amounts You can write off unapplied amounts when you enter and apply a receipt, or later at any time. You can enter multiple Receipt write-off lines in the Applications window for a single receipt provided that the write off amount is with in your approval limit and system maximum write off amount.

Manually Write off Receipt Amounts

Receivables >> Receipts >> Receipts Form

Select Receipt Write Off Select Activity Defined in previous steps

Manually Write off Receipt Amounts

Mass Write off Receipt Amounts

you can write-off multiple unapplied receipt amounts with minimal manual intervention to individual receipt records. Always use the Generate Report Only option to preview the receipt amounts you want to write off before submitting the update. You can only reverse write-off receipt amounts by manually unapplying each receipt write off from the Applications window.

Mass Write off Receipt Amounts Control>Create Receipt Write-off

Enter Search Criteria System will select all unapplied Receipts which are <= 10,000

Error comes if Amount entered is not in approval limit of the user

Pre Write off Report

Write off Report

Reversing Receipt write off Receipt write-off amounts can be reversed at any time and the write-off amount will be added to the Unapplied total for the receipt. To reverse a receipt write-off, unapply the original write-off application by unchecking the Apply check box on the Applications window for the write-off amount.

Reversing Receipt write off

Receivables >> Receipts >> Receipts Form Query Existing Applied Receipt

Untick this check box and save your work

Accounting for Receipt Write off

Entry for General Receipt of GBP 8000

GBP 7800 Applied to transaction and GBP 200 Write off

FAQs
How to setup an AR responsibility with disabled "Reverse " button in the receipts form? Solution Navigate to System Administrator Responsibility Security>Responsibility>define Query your responsibility name In Menu exclusion tab, select functions Receipt Reversal Standard Receipt Reversal Debit Memo

FAQs
When creating Receipt write-off activities against a receipt, noted that the Balancing Segment for the GL account does not match the original setup value?
Solution [ID 1068133.1] Setup > Receipts > Receivables Activities (Original Set up) Review the settings for Type = Receipt write-off Activity GL Account 01-000-4150-0000-000 Set ups >> Receipts >> Receipt Classes >> Bank Account Button Unapplied Receipt Account for Receipt Method 05-000-1240-0000-000 The value 05 from this setup is used to replace the balancing segment value default from activity GL account When Create accounting run for Write off the account shows GL account write off 05-000-4150-0000-000

The existing behavior is intended functionality and is not a bug. It is a predefined workflow as described in Oracle Receivables Implementation Guide-Deriving Balancing Segment Values, which says For transaction-related activities such as adjustments and discounts, Receivables derives the balancing segment value from the receivable account that is associated with the transaction. For receipt-related activities such as receipt write-off activity, Receivables derives the balancing segment from the Unapplied Cash account that is associated with the receipt method bank account. Disable Balancing Segment Substitution Process for Activities Profile Option AR: Disable Receivable Activity Balancing Segment Substitution. (Read Oracle Receivables Implementation Guide -

Disabling the Balancing Segment Substitution Process for Activities)

FAQs
How To Write-Off Prepayments Amount in case of Excess Amounts? Prepayment Received 100 Invoice Amount 98.5

When Prepayment Matching program is run, the Receipts get applied to Invoice. Due to this Receipt remain open and appear in Unapplied and Unresolved Receipts Register. Need to write off this Small pending Amount.

Solution If we directly Write Off Prepayment, it won't work. First Unapply the Prepayment Amount. Then Apply to "Receipt Write-Off The Receipt won't appear in Unapplied and Unresolved Receipts Register. Also the Receipt's Balance will be Closed.