The following scenario illustrate a short example of a Revenue / COGS matching for a sales order where Accounting rule used is: 3 Months, Deferred

Navigation1. Inventory>Item Master>Define item MM-ITEM65 (Purchase Item)

Figure 1

2. Miscellaneous Receipt Navigation: Miscellaneous Transactions>Receive MM-ITEM65 in Subinventory Store.Qty 100@15USD

3.View Material Transactions

Figure 2

4.View Material Distribution

Figure 3

5. Review the Item cost : Costs>Item Cost

Figure 4

6. Define Accounting Rules in Account Receivables

Account Receivables>Setup>Transactions>Accounting RulesThere are two Predefined Accounting rulesa-3 Months , Deferredb-Immediately

Figure 5

Figure 67. Enter a SO (eg 63849)

Figure 7

8. SO 63849 booked with Ordered item MM-ITEM65/qty=5/ price=15/ Accounting rule=3 Months, DeferredShipping warehouse=M3

Figure 8

9. Pick Release the SO

Figure 9

10. Ship Confirm the SO

Figure 10

11.Item is shipped

12. Line is closed

13. Review the Material Transactions form

14. Distribution of the SO issueWhen a Sales order is shipped the following accounting takes place:

Inventory Valuation Account: Credit. Deferred COGS account: Debit

15. Run the Workflow Background Process request

16 . Create the Invoice with the Autoinvoice request Sales Order Accounts Receivables>Interfaces>Autoinvoice

17.Check the Invoice in AR Accounts Receivables>Control>Accounting

18. Invoice generated:Invoice= 10033708

19. Recognize the revenue in AR

20. After recognizing the revenue. We need to accept it.

Manage Revenue:

21. Now the revenue has been recognized according to our accounting rule: 3 Months, Deferred50% August25%September25%October

For August 50% of the revenue has been recognized

22. Now we run a set of concurrent processes to record sales order and revenuerecognition transactions and to create and cost COGS recognition transactions.These COGS recognition transactions adjust deferred and earned COGS in anamount that synchronizes the % of earned COGS to earned revenue on salesorder shipment lines.

23. Record Order Management Transactions: records new sales order transactionactivity such as shipments and RMA returns in Oracle Order Management.

24. Collect Revenue Recognition Information: determines the percentage ofrecognized or earned revenue related to invoiced sales order shipment linesin Oracle Receivables.

25. Generate COGS Recognition Events: creates and costs COGS recognitionevents for new sales order shipments/returns and changes in revenuerecognition and credits for invoiced sales order shipment lines.

26. A non-physical transaction has been generatedTransaction Type= COGS Recognition

The distribution for the COGS Recognition transaction associated with the Sales Order transaction now would be as follows:

Deffered COGS : Debit y revenue percentage COGS : Credit (Actual revenue percentage )

Thus, essentially the recognized COGS balance is to move the value from Deferred COGS to COGS.

This particular COGS recognition transaction actually corresponds to a revenue recognition percentage change.