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Oracle Applications Release 12

ORACLE GENERAL LEDGER

LEDGER

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INTRODUCTION

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Hello Readers,
I have taken some time to write on one of the key changes made in Release 12, that is
Ledgers. Even though the concept of Ledger is not a new feature, it is only an
enhancement to Set of Books in Release 11 and renamed as Ledger. However that
enhancement has caused many changes, which one must be aware of. In this document
we will be referring to the usage of ledger and newer functionalities it has brought along
with it.
The normal explanation on any concept in Release 12 is often compared with how the
same functionality was used in Release 11. Explanations were not straight to the readers
who are exposed to Release 12 only. There has been a compulsion to know how the
system was performing in Release 11 in order to appreciate concepts in Release 12. I
have taken care to put the explanations in such a way it will act as good reference to
readers who are not exposed to Release 11 also.
Also have taken enough care not to make this document sound like User Guide or
reproduce details stated in the user guide. Therefore majority of the content will be based
on what I have understood from available resources (Metalink, User Guides, Other Blogs
and Forum sites etc.)
This document will contain only conceptual part and clarifications on concepts. I have
not included any setups/screen shots on this document. It is purely a White paper and not
a presentation on how to perform setups. If the setups are required, one can communicate
their willingness to the Author, based on the number of responses, he might write a
presentation on setups alone.
Author is reachable at ivruksha@gmail.com or ivadmin@ivruksha.com
I would request every one who takes time to read this document to point out the
corrections if any on the explanations have been made. Author would be incorporating
the changes at the earliest.

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WHAT IS A LEDGER?

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A Ledger is a container of all accounting related information captured through various

other modules. Oracle General Ledger Module owns ledgers.
One has to design the ledger in an appropriate way keeping in mind what information it
needs to hold. One can have as many ledgers as they want based on their business
requirement and operations point of view. Most of the setups related to ledgers are not
reversible, which means it cannot be corrected it is one time only. Therefore one must
take enough care to draft out their requirements in papers before actually implementing it.
In earlier releases (Before R12), the concept of ledgers was already present however they
were termed as Set of Books. The introduction of Ledger is nothing but an enhanced
functionality of Set of Books.
Transactions entered in various different modules are all saved to their corresponding
ledgers. One can never progress setting up of financials modules or a multi org structure
before deciding on the Ledger setup.
A ledger saves the accounting information in an organized way as directed by the
conditions specified in the accounting options for that ledger.
In a non computerized environment, accountants normally enter their regular/day to day
financial transactions in a manual ledger book (will be looking big in size), and total it up
at end of the day to find out the balances. That manual ledger book has a format in which
the entries are recorded, so the person who is going to fill the ledger should be following
the format and any other additional information which he has is not relevant for making
an entry in ledger.
Oracle ledgers are also perform their operations in the same way. Implementer defines
the format, rules, restrictions for a particular ledger using different setup screens making
the user to only enter the information what is relevant for Oracle General Ledger to
process further. One may collect many additional information in different modules as per
their business requirement, whereas those are of least importance, since they are all only
data which are not subjected to any further processing by oracle.
A well planned/designed ledger saves a lot of time for the company in processing the data
and preparing MIS reports for the management in key decision makings.
One will also be knowing that Business intelligence module does this job of producing
excellent reports on the daily operations of company and points out key areas and red
flags. However, business intelligence can be used to best effect, only when the base
setups, which are in place, are efficient.
Ledger being the foremost setup for any financial modules in E business Suite, one must
understand the power, importance and its usage at later stage in many other areas within e
Business suite.
We will be using the word ledger a lot in the whole discussion, readers might get
confused as to whether it refers to primary ledger or secondary ledger, to resolve the
indecision, whenever author uses the word Ledger it purely represents Primary Ledger
only, in case if an explanation is there for secondary ledger, author will be using the word
secondary ledger for distinction.
We will now discuss in detail about ledgers.

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COMPONENTS OF LEDGER

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In order to setup a ledger, one must complete defining the components of a ledger. Since
ledger is nothing but a combination of all those components. Without usage of
components, ledger cannot function on its own.
The components of a ledger are:
1) Chart of Accounts 2) Calendar 3) Currency 4) Accounting Method
They are also termed as 4 Cs.
Chart of Accounts
The definition of Chart of Accounts structure is one of the most complex part, there has
to be a brainstorming and many levels of discussions between Client and the
Implementation team to decide on a structure that best suits the business need.
In short, COA decides on what information needs to be collected for every transaction
that is being transacted by the business, considering different parameters and key factors.
Calendar
Calendar presents the period for which the business is carried forward. Calendar here
represents Accounting calendar. One will be deciding on the calendar based on their
statutory requirement. Even though every accounting period is going to have a span of 12
months in it, however there is a greater difference on the start and end date of the
accounting period.
Currency
Currency represents the list of currencies in which the customer is having businesses.
One needs to define/enable the currencies as per their business requirement; there is no
harm in enabling all currencies.
Accounting Method
Every business has to follow an accounting method to record their transactions in order to
comply with the legal commitments. Oracle by default has provided seeded accounting
methods for usage, however if the clients business demands for customization of an
accounting method or creation of new accounting method as per the statutory regulations,
then they can create their own accounting method as well.
All the above-discussed components are mandatory in order to define a primary ledger.
For a secondary ledger, in addition to the above component, one needs to select the
method of Data Conversion Level followed.

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MULTI ORGANIZATION
ENVIRONMENT

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The Multi organization structure starts from Business Group and ends at Inventory
Organization or Sub inventory level.
Below figure represents how the Multi Org is defined:
BUSINESS GROUP
LEDGER
LEGAL ENTITY
OPERATING UNIT
INVENTORY ORGANISATION

Ledgers takes the place of second level in the multi org structure, only based on which
the legal entity and operating units are going to be decided on. Also remember it is not
mandatory for a ledger to have a Legal entity.
Only based on the definition of ledger, the multi org structure is designed/finalized.
Therefore it is very vital to perform the ledger setup keeping in mind that it has a greater
impact on the multi organization structure to be followed by the client and setup by the
implementation team.
Even though Ledgers takes place second level in the above figure, one can say it is the
starting point of Multi org structure, since setting up of a business group or validations /
functionalities related to business group are less complicated when compared to other
elements in the Multi org structure.

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TYPES OF LEDGERS

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In total there are two types of Ledgers available, they are:

Primary Ledger
It is mandatory that every accounting operation must have one primary ledger
It acts as a Primary repository, which records all accounting related information related to
that particular Primary Ledger. One cannot carry out setups without having primary
ledger in place.
Primary ledger replaces the Set of Books used in earlier versions prior to Release 12.
Secondary Ledger
It is not mandatory to have a secondary ledger. One can have one or more secondary
ledgers based on their business requirement. One can never have a secondary ledger
without primary ledger is in place. Since secondary ledger does not perform any new
operation on its own, it only represents the information contain in primary ledger in a
different way. Mostly it is used for satisfying the reporting needs. It is necessary for one
to know when should one have a Secondary ledger. One needs to maintain accounting
records in a way, when there is a difference in any of the parameters below from the
primary ledger:
Chart of Accounts, Currency, Calendar, Accounting Method and Ledger processing
options.
Reporting Currencies (Ledger)
Reporting currencies are purely a representation of transactions saved in the Primary or
Secondary ledger in different currency.
This concept was available in Release 11 in the name of Reporting set of Books; it is
exactly the same in R12, no change apart from the terminology.
Reporting currencies are maintained at different currency conversion levels.
Even though it is not a separate ledger as such, still it can be considered as a different
ledger since it acts as a different container apart from the primary or secondary ledger
information.

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PURPOSE OF LEDGERS

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We have so far seen the meanings of ledgers, and its various types, now we will see what
is the actual purpose of the ledgers, and what they do and when are they required.

LEDGER TYPE

Primary Ledger

Secondary Ledger

Reporting Currencies

PURPOSE
Mandatory for any setup related to Financial modules
Every transaction of the company will be recorded
Acts as a base repository / container of all accounting
information.

When Client wants Multiple Accounting Representations

When Client wants to represent the information in a
different calendar.
When Client wants to represent the information in a
different chart of Accounts.

When the Client wants to report their information in

different currency

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HOW TO DECIDE ON A PERFECT

LEDGER STRUCTURE

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Now that we know the types and purposes of the ledgers available, we should know how,
where and when to use it. I would explain the usage of the ledgers with a Business
scenario.
Business Scenario is:
Company USELESS is implementing Oracle Financials for their business. The summary
of their business operations is as follows:
USELESS, which is based in India, is having their business operation in three countries:
1) Division I - India
2) Division II - Japan
3) Division III - China
And the accounting and reporting requirements are:
Division
Division I
Division II
Division III

Accounting Method
Accrual
Cash
Accrual

Chart of Accounts
As per Indian Statute
As per Japan Statute
As per China Statute

Accounting Period
April to March
January to December
October to September

Please advice on the ideal Ledger structure to be designed for the company USELESS?

Now from the above lets us see how many primary ledgers can be created?
One cannot use the same primary ledger if one of its components are different.
Division
Division I
Division II
Division III

Chart Of
Accounts
Indian Statute
Japan Statute
China Statute

Currency

Calendar

INR
JPY
CNY

Apr Mar
Jan Dec
Oct - Sep

Accounting
Method
Accrual
Cash
Accrual

From the above table, it is clear that none of the Divisions have all 4 components as
similar; therefore we need to have 3 Primary ledgers defined for it.
Now apart from that, we need to think of the following practical scenario as well,
Even though Division II is located in Japan, it has to finally consolidate all its operations
to INDIA at a later stage, therefore it must also follow the rules of accounting and
statutory regulations in India, so as Division III.

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Therefore,
Division II Should have a secondary ledger, which will represent the transactions as per
the Indian Statute.
Division III Should have a secondary ledger, which will represent the transactions as
per the Indian Statute.
However it is not necessary for Division I to have secondary ledgers, since the company
is based in INDIA, therefore it need not have multiple accounting representations.
If the client insists on it, we can have 2 secondary ledgers for Division I, to comply with
Japanese and Chinese statute.
Now the Divisions situated in China and Japan, must be reporting to the company in
INDIA on a daily basis, for which they need to convert their business transactions values
in to Indian currencies and then report it to the management.
For performing this operation, we require two Reporting currencies as well.
As discussed earlier, reporting currencies are part of primary ledger setup. Therefore
Japan and China primary ledger should have defined INR as its Reporting currencies.
To sum up, the ideal ledger structure would be as follows:
Division
Division I
Division II
Division III
TOTAL

Primary Ledger
1
1
1
3

Secondary Ledger
Not Necessary
1
1
2

Reporting Currencies
Not Necessary
1
1
2

Also there can be one more primary ledger created to consolidate the data between
Division I, II and III,

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QUESTION AND ANSWER

SECTION

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Is it mandatory that every ledger must have a legal entity attached to it?
One can have a ledger with no legal entity as per their business requirement. It is not
mandatory that every ledger must have a legal entity attached to it. There could be
ledgers, which have been created for consolidation purposes alone.
Can there be a Secondary ledger without a Primary ledger?
No, it cannot be.
Can we have one secondary ledger associated with more than one primary ledger?
No, it is not possible.
Can we have more than one secondary ledger for a primary ledger?
Yes, you can, user guide states you can have one or more secondary ledgers also there is
no restriction imposed any where on number of primary ledgers one can create.
Is it possible to convert a Primary Ledger to Secondary Ledger or Vice versa?
No, not possible.

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SOURCES OF INFORMATION

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Oracle User Guide

Oracle releases documentation (Technical and Functional) as manuals, user guides etc,
they are available in the oracle site, downloadable at free of cost. User guides tells you
about the intended functionality and architecture on which it is built. Depends on the
complexity of the product, some may have implementation guide, user guide and
reference guide as well.
Follow the below instructions as to how to download/ View the user guides from the site:
Step 1 - Visit http://www.oracle.com/technology/index.html
Step 2 - Navigate to Oracle Technology Network (OTN) >> Documentation >>
Applications >> click of EBS Documentation R12+
Step 3 - The Oracle R12 Documentation Library page is displayed.
Step 4 - Select the Documentation tab
Step 5 - Search for the documentation for your product.
For Technical related information,
that is information related to tables, packages, etc can be obtained from Technical
Reference Manuals. However for referring this details one needs to hold an Metalink
login. Follow the below steps on how to view the eTRMs:
Step 1 Login to https://metalink.oracle.com
Step 2 Click on Knowledge Tab
Step 3 In the left side, that is under Knowledge Browser, Scroll down to the Online
Documentation section
Step 4 Click Applications Electronic Technical Reference Manuals (eTRM)

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